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Legal Case Shots

Court judgements broken down into the case type, how the decision played out, and the lesson worth remembering, with the full judgement available as a PDF.

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Legal Case Shots is a searchable database of Supreme Court of India judgments, each broken down into the case type, the court's key holding, and a practical lesson learnt, with the full judgment available as a PDF for citation or deeper reading.

Company & Insolvency LawSupreme Court of India

Tata Consultancy Services Limited v. Vishal Ghisulal Jain

Civil Appeal · 2021 INSC 780Decided 23 Nov 2021
Civil Appeal No. 3045 of 2020
Dr. Justice D.Y. Chandrachud · Justice A.S. Bopanna

Background

TCS had a Facilities Agreement with SK Wheels Private Limited (the "Corporate Debtor") to provide exam-centre premises. After alleging repeated contractual breaches by SK Wheels, TCS terminated the agreement in June 2019. By then, insolvency resolution proceedings (CIRP) had already begun against SK Wheels, and the Resolution Professional challenged the termination before the NCLT, which stayed it; the NCLAT upheld that stay. TCS appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that the NCLT's power under Section 60(5)(c) of the IBC to intervene in contractual disputes of a corporate debtor is not unlimited: it should be used only in the narrow category of cases (as laid down in its earlier Gujarat Urja ruling) where allowing a termination would certainly push the corporate debtor to its "corporate death," not merely because a contract is commercially significant. The NCLT had stayed the termination largely on a technical notice-period objection, without examining whether losing this particular contract threatened SK Wheels' survival as a going concern. Finding no such threat was shown, the Court set aside the NCLAT's judgment and held that the NCLT had no jurisdiction to restrain the termination; the proceedings against TCS were dismissed.

Lesson Learnt

Insolvency tribunals cannot force a company's counterparties to keep honouring a commercial contract just because insolvency proceedings are underway: that extraordinary power is reserved for the rare case where ending the contract would doom the insolvent company's survival, not ordinary breach-of-contract disputes.

Tata Consultancy Services Limited v. Vishal Ghisulal Jain – Legal Case Shots | LegalAware