Foreign Travel in Bankruptcy Denied After Contract Expiry: NCLAT Clarifies Infructuous Relief Principle
- 17 hours ago
- 2 min read
The Appellate Tribunal clarified that permission to travel abroad during bankruptcy proceedings cannot be granted where the underlying contractual basis has expired, and the relief sought has become infructuous due to the passage of time. The ruling reinforces that judicial discretion in granting such permissions must be anchored in a subsisting cause of action.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising the Chairperson Justice Ashok Bhushan and a Technical Member, Mr. Indevar Pandey, upheld the rejection of the application, holding that the contractual arrangement relied upon had already lapsed and that the “parallel run” clause operated concurrently rather than extending the duration. The Tribunal further observed that while appellate forums may consider subsequent developments, relief cannot be granted in the absence of a continuing legal foundation, though liberty to file a fresh application was preserved.
The Appellate Tribunal considered an appeal filed by a bankrupt individual challenging the rejection of his application seeking permission to travel abroad for business purposes during the pendency of bankruptcy proceedings. The application before the Adjudicating Authority sought periodic travel permission over several months based on a contractual engagement with a foreign entity.
The Tribunal noted that the relief originally sought had become infructuous as the time period for which travel was requested had already expired. Although it acknowledged the legal position that appellate courts may consider subsequent events and mould relief accordingly, it emphasised that such discretion must be grounded in an existing and subsisting cause of action.
On interpretation of the underlying purchase order, the Tribunal held that the contractual duration was limited to 13 months, with the additional six-month component being a “parallel run” and not an extension beyond the primary term. The Tribunal rejected the argument that the six-month period would commence after expiry of the initial term, holding that both obligations were intended to operate simultaneously.
Since the contractual basis for travel had ceased to exist, the Tribunal held that no effective relief could be granted. However, preserving procedural fairness, it granted liberty to the Appellant to approach the Adjudicating Authority afresh in the event of any new circumstances justifying travel.
Accordingly, the appeal was disposed of without granting the requested relief.
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