NCLT Mumbai: Damages for Contractual Breach Cannot Be a Ground to Initiate Insolvency

The NCLT Mumbai has held that claims based on liquidated or unliquidated damages arising from contractual breaches cannot be used to initiate insolvency proceedings.

Dismissing Goodrich Logistics’ Section 9 plea against Transrail Lighting, the Tribunal said such damages must first be adjudicated by a civil court or arbitral tribunal.

It found that detention charges and depreciated value of unreturned containers were not part of the original service order and constituted contractual damages outside the Code’s summary jurisdiction.

The Bench also noted pre-existing disputes and Goodrich’s failure to provide supporting records.

Holding that no crystallised operational debt existed, the application was rejected.