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ARTICLE · 06 MARCH 2020

Liquidated Damages Cannot Trigger Insolvency Proceedings

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Proceedings under the Code are not for ascertaining or crystallizing the quantum of damages.

IndiaInsolvency/Bankruptcy/Re-Structuring
Swet Shikha
Swet Shikha
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Judgment: Gujarat Urja Vikas Nigam Limited vs Nitash Co-generation Private Limited

Forum: National Company Law Tribunal, Mumbai Bench ("NCLT").

Act/Law: The Insolvency and Bankruptcy Code, 2016 ("Code").

Ratio: Claim for "Liquidated Damages" cannot trigger insolvency proceedings, unless adjudicated upon by a court of law. Proceedings under the Code are not for ascertaining or crystallizing the quantum of damages.

Factual Matrix:

  • Gujarat Urja Vikas Nigam Limited ("Gujrat Urja/Petitioner") and Nitash Co-generation Private Limited ("Nitash/Corporate Debtor") entered into a power purchase agreement ("Agreement") in terms of which Nitash was to arrange for inter connection facilities and supply electricity/power to Gujrat Urja. The Scheduled Commercial Operation Date ("SCOD") was agreed to be upon conclusion of 48 months from the date of execution of the Agreement i.e. 06.06.2011.

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