2017 (3) TMI 1552 - Tri - Insolvency and Bankruptcy

Arbitration proceedings - proceedings for execution of the award - Appeal under section 37 of the Arbitration Act is pending - Held that - Where an issue is already pending adjudication between the same parties, in a Court having jurisdiction to adjudicate upon the same, a subsequently instituted suit on the same issue between the same parties, cannot be allowed to proceed. A similar question arises for consideration before this Court, in the present controversy. If the respondents in their capacity as any person interested , had filed a revocation petition before the institution of an infringement suit , they cannot be permitted to file a counter-claim on the same cause of action. The natural conclusion in the above situation would be, the validity of the grant of the patent would have to be determined in the revocation petition . Therefore, in the above situation, while the revocation petition will have to be permitted to be pursued, the counter-claim cannot be permitted to be continued. Therefore, in the above eventuality, it is apparent that the situation would be resolved, in the same manner, as it would have been resolved in cross-suits filed by the rival parties, before different jurisdictional courts. In our considered view, the above conclusion is imperative for a harmonious interpretation of the relevant provisions of the Patents Act. In view of the above we do not feel the necessity of expressing our views on the other issues which are left open. Accordingly we hold that application does not warrant admission and the same is dismissed with cost of ₹ 1,00,000/- (Rs. One Lac).

Issues Involved:

1. Whether the applicant qualifies as an 'Operational Creditor' under the Insolvency and Bankruptcy Code, 2016.
2. Whether the existence of a dispute regarding the operational debt bars the initiation of the Corporate Insolvency Resolution Process (CIRP).
3. Whether the arbitration proceedings have attained finality.
4. Whether simultaneous remedies can be pursued by the applicant.

Issue-wise Detailed Analysis:

1. Qualification as an 'Operational Creditor':

The applicant argued that they should be regarded as an 'Operational Creditor' under Section 9 read with Section 5(20) and 5(21) of the Insolvency and Bankruptcy Code, 2016. They contended that the obligation to pay rent falls under the definition of 'Operational Creditors' as per the Bankruptcy Law Reforms Committee report. The applicant further argued that the definition of 'Operational Creditor' is illustrative and not exhaustive, allowing room for interpretation.

The respondent countered by stating that the applicant does not qualify as an 'Operational Creditor' since the operational debt must arise in respect of the provision of goods or services, including employment, or dues payable to the government. They argued that rent does not fall within this definition.

2. Existence of a Dispute:

The respondent highlighted that the existence of a dispute regarding the operational debt was communicated through a reply dated 27.01.2017, which mentioned the pendency of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996. According to Section 8(2)(a) of the Insolvency and Bankruptcy Code, the existence of a dispute bars the initiation of the CIRP.

The tribunal noted that the definition of 'dispute' under Section 5(6) includes arbitration proceedings relating to the existence of the amount of debt, quality of goods or service, or breach of representation or warranty. The tribunal found that the respondent had effectively disputed the operational debt, thus barring the initiation of the insolvency process.

3. Finality of Arbitration Proceedings:

The applicant argued that the arbitration proceedings had attained finality since the application under Section 34 of the Arbitration Act was dismissed on 19.12.2016, and no appeal was pending on the date of service of the demand notice. They contended that the subsequent filing of an appeal under Section 37 on 20.01.2017 was immaterial.

The tribunal disagreed, stating that arbitration proceedings do not come to an end merely upon the dismissal of an application under Section 34. The proceedings attain finality only after the exhaustion of all available remedies, including appeals under Section 37. The tribunal cited judgments from the Bombay High Court to support this view.

4. Simultaneous Remedies:

The tribunal observed that the applicant had already initiated execution proceedings for the enforcement of the arbitral award. They stated that it is against the fundamental principles of judicial administration to allow a party to pursue more than one remedy simultaneously. The tribunal referred to the Supreme Court's judgment in Dr. Aloys Wobben and Another v. Yogesh Mehta & Ors., which emphasized that a party cannot avail multiple remedies for the same purpose simultaneously.

Conclusion:

The tribunal concluded that the application for initiating the Corporate Insolvency Resolution Process did not warrant admission due to the existence of a dispute, the lack of finality in arbitration proceedings, and the simultaneous pursuit of multiple remedies. The application was dismissed with a cost of ?1,00,000 (Rs. One Lac).

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