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2017 (11) TMI 1640 - AT - Companies LawMaintainability of petition - main plea taken by the Appellant- Corporate Debtor is that there is an existence of a dispute and therefore the petition under Section 9 of the I & B Code was not maintainable - whether pendency of a case before a Court u/s 34 of the Arbitration and Conciliation Act 1996 can be termed to be dispute in existence for the purpose of sub-section (6) of Section 5 of the I & B Code ? - Held that - for the purpose of Arbitration and Conciliation Act 1996 an Arbitral Award reaches its finality after expiry of enforcement time or if the application under Section 34 is filed and rejected. However for the purpose of I & B Code no reliance can be placed on Section 34 of the Arbitration and Conciliation Act 1996. The I & B Code being a Complete Code will prevail over all other Acts including Arbitration and Conciliation Act 1996. From the provisions made in the Form-5 if read with sub-section (6) of Section 5 and Section 9 of the I & B Code it is clear that while pendency of the suit or Arbitral Proceeding has been termed to be an existence of dispute an order of a Court Tribunal or Arbitral Panel adjudicating on the default (commonly known as Award) has been treated to be a record of Operational Debt . No person can take advantage of pendency of a case under Section 34 of the Arbitration and Conciliation Act 1996 to stall Corporate Insolvency Resolution Process under Section 9 of the I & B Code - appeal dismissed.
Issues:
1. Existence of a dispute in the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. 2. Consideration of pendency of a case under Section 34 of the Arbitration and Conciliation Act, 1996 as a dispute in existence for the purpose of the Insolvency and Bankruptcy Code. 3. Interpretation of the provisions of the Insolvency and Bankruptcy Code regarding finality of an Arbitral Award for the initiation of Corporate Insolvency Resolution Process. Analysis: Issue 1: The Respondent, an Operational Creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code against the Appellant, a Corporate Debtor. The Appellant contended that there was an existence of a dispute, rendering the application under Section 9 of the Code not maintainable. The Appellant argued that the Corporate Insolvency Resolution Process cannot proceed when a notice of dispute is issued to the Operational Creditor under Section 8(2)(a) of the Code, highlighting the existence of a dispute or pendency of arbitration proceedings. The Appellant raised a counterclaim of ?19 crores before the Arbitral Tribunal, indicating an existence of dispute, as per the Appellant's submission. The Adjudicating Authority's failure to consider this fact was contested by the Appellant. The Appellant relied on a Supreme Court judgment in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., emphasizing the importance of a plausible contention requiring further investigation when a dispute is raised. Issue 2: The question arose whether the pendency of a case under Section 34 of the Arbitration and Conciliation Act, 1996 could be considered a dispute in existence for the purpose of the Insolvency and Bankruptcy Code. The judgment clarified that an Arbitral Award reaches finality only after the enforcement time expires or if the application under Section 34 is rejected. However, for the Insolvency and Bankruptcy Code, reliance on Section 34 of the Arbitration and Conciliation Act was deemed inappropriate. The Code being a Complete Code, it prevails over other Acts, including the Arbitration Act. The judgment highlighted that the provision under the Insolvency and Bankruptcy Code regarding the finality of an Arbitral Award for initiating Corporate Insolvency Resolution Process supersedes the provisions of the Arbitration and Conciliation Act, 1996. Issue 3: The interpretation of the provisions of the Insolvency and Bankruptcy Code regarding the finality of an Arbitral Award for the initiation of Corporate Insolvency Resolution Process was crucial. The judgment emphasized that no person can use the pendency of a case under Section 34 of the Arbitration and Conciliation Act, 1996 to obstruct the Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code. The judgment concluded that interference against the impugned order was unwarranted, and the appeal was dismissed without costs.
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