2019 (12) TMI 1377 - Tri - Insolvency and Bankruptcy

Termination of tender - imposition of penalties - forfeiture of performance of bank guarantee, security amount, and penalty towards risk and purchase cost - Section 42 of the Insolvency and Bankruptcy Code, 2016 (Code) read with Rule 11 of the NCLT Rules, 2016 - HELD THAT - Admittedly, the CIRP proceedings in respect of the respondent company were initiated and moratorium was declared by an order of this Tribunal passed on 06.07.2017. As on the said date, the common award dated 29.06.2015 passed by the Sole Arbitrator Mr. Yad Ram Meena holding that the applicant is liable to pay an amount of ₹ 7,72,86,109/- with 18% interest per annum on the said amount w.e.f. the date of filing of the arbitration till actual payment was in force as the objections filed by both the sides were dismissed and the said common award was upheld by the Commercial Court, Jaipur vide its common order dated 28.09.2016, though two separate appeals were filed by the applicant, which were pending before the Hon'ble High Court of Rajasthan. Further, admittedly on 10.05.2018, on which date the Hon'ble Rajasthan High Court, Jaipur Bench passed a judgment in the appeals preferred by the applicant, quashing the judgment of the Commercial Court, Jaipur as well as the arbitration award, the moratorium declared under Section 14 of the Code was very much in operation and the said moratorium finally came to an end only on 17.05.2018 on which date, this Tribunal passed the order of liquidation of the respondent company. It is the settled principle of law that any order passed or any action taken in respect of any of the issues covered under Section 14 of the Code, during the period of moratorium are non-est in the eye of law. Since the order dated 10.05.2018 passed in the appeals filed by the applicant, was admittedly passed during the moratorium period, the applicant's claim which was based on the said order dated 10.05.2018, is inadmissible - Appeal dismissed.

Summary

Issues:
- Challenge to the decision of the Liquidator rejecting a claim under the Insolvency and Bankruptcy Code, 2016.

Analysis:
1. The case involved a challenge by Rajasthan Medical Services Corporation Limited against M/s. Shivek Labs Limited under the Insolvency and Bankruptcy Code, 2016. The dispute arose from tender notices issued for procuring medicines, leading to termination of a contract and imposition of penalties. The respondent claimed an amount for drug supplies and challenged the termination, leading to arbitration and subsequent court proceedings.

2. The respondent invoked the arbitration clause, resulting in the appointment of a Sole Arbitrator who allowed the respondent's claim partially. The Commercial Court upheld the arbitration award, which was challenged by the applicant in the High Court. The High Court, in its judgment, quashed the arbitration award and held the applicant's actions were within contractual rights.

3. Subsequently, the applicant received a letter from the Liquidator of the respondent company demanding a refund. The Liquidator rejected the applicant's claim based on a High Court judgment passed during the moratorium period. The Tribunal noted that any action during the moratorium period, as per Section 14 of the Code, is non-est in the eye of the law.

4. Citing legal precedents, the Tribunal emphasized that actions taken during the moratorium period are invalid. The Supreme Court's rulings in various cases highlighted the importance of upholding the moratorium provisions. The Tribunal dismissed the applicant's claim based on the High Court judgment passed during the moratorium, stating it lacked merit due to being inadmissible.

5. The judgment reinforced the significance of the moratorium period under the Insolvency and Bankruptcy Code, emphasizing that any actions or orders during this period are legally void. The dismissal of the applicant's claim based on a judgment passed during the moratorium period showcases the strict adherence to the Code's provisions and the legal consequences of actions taken in contravention of the moratorium.