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2020 (10) TMI 1337 - HC - Companies LawMaintainability of application - Seeking stay on further proceedings of the Arbitral Tribunal consisting of 2nd, 3rd and 4th Respondents with regard to the dispute between the Applicant and the 1st Respondent - section 9 of the Arbitration and Conciliation Act - whether or not leave is required to continue the Arbitral Proceedings? HELD THAT - Though the Eleventh Schedule of IBC was amended, Section 279 of the Companies Act 2013, which is correspondent to Section 446 of the Companies Act, 1956 has not been deleted or amended. As per sub-Section 2 Clause (94A) the definition of the term winding up means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable. The word applicable indicates that the Eleventh Schedule not confined to Insolvency and Bankruptcy alone and also applicable to winding up took place under the Companies Act - Section 238 of the Insolvency and Bankruptcy Code, 2016 states that the provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law , the provision is exhaustive. Thus, whenever a special law gives out a specific provision which is clear and unambiguous and on the same subject there is a different provision in the general law and there is an inconsistency between the two, the special law will prevail and the principles of harmonious construction will have no role to play. The time frame in winding up on just and equitable grounds is not an important condition. The very object of introducing the IBC 2016 and restricting its operation to solvency of the Company alone and provision for revival of the company within time fixed and keeping the liquidation as last resort makes it clear that time frame is important under the Code while it is not so under Section 279 of the Companies 2013 Act - An Adjudicating Authority that commences exercising of its power by entertaining a petition by a creditor on account of default by the Corporate Debtor enters into the sphere of resolution process which again deals with money and money alone ends up under liquidation. If there is a suit for title pending before the civil court. Adjudicating Authority normally would not be able to reject the leave in such cases. It is to be noted that the tribunals of limited tribunals of limited jurisdiction do not have power to issue declaratory decrees. The definition of the word claim is found in Section 3(6), Section 3(11) defines Debt , Section 3(12) defined default and Sections 3(13) to 3(18) of the Insolvency and Bankruptcy Code 2016 deals with financial aspects. Therefore the very word claim' is relatable to a right of payment. Such right of payment may arise on account of debt or on account of any breach of contract provided such breach gives right to a payment. In such circumstances the provisions of Companies Act which deals with cases of winding up generally cannot be read harmoniously with IBC which is a Special Law. Section 33(5) of the IBC Code has to be interpretted on its own language. Further, as discussed, when there is no inconsistency IBC would prevail over. Such view of the fact no leave is required to continue of pending proceedings - Any order passed under Section 9 of the Arbitration and Conciliation Act upsetting the view of the tribunal taken, amounts to sitting over the order of the Tribunal ruling same amount to its jurisdiction. The purpose of Section 9 of the Arbitration and Conciliation Act is not to upset any order passed by the Tribunal. When the Tribunal has passed an order rejecting the contention of the claimant questioning the jurisdiction to continue the proceedings. Such order is amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996, while challenging the Award. This Court is of the view that interim orders cannot be granted. The Court is also aware of the limitation to intervene the arbitral proceedings. Section 5 of the Arbitration and Conciliation Act also indicated that no judicial authority shall intervene in the arbitral proceedings except where provided in this part - Application dismissed.
Issues Involved:
1. Whether leave from the NCLT is required to continue arbitral proceedings under Section 279 of the Companies Act. 2. Applicability and interpretation of Section 33(5) of the Insolvency and Bankruptcy Code (IBC) in the context of ongoing arbitration. 3. Maintainability of an application under Section 9 of the Arbitration and Conciliation Act for interim relief to stay arbitral proceedings. Issue-wise Detailed Analysis: 1. Requirement of Leave from NCLT: The primary issue was whether leave from the National Company Law Tribunal (NCLT) is required to continue arbitral proceedings under Section 279 of the Companies Act, 2013. The applicant argued that without such leave, any award passed would be unenforceable. The respondent countered that under Section 33(5) of the Insolvency and Bankruptcy Code (IBC), no such leave is required for continuing pending proceedings, and Section 238 of the IBC would override any conflicting provisions in other laws, including the Companies Act. The court concluded that Section 33(5) of the IBC does not require leave from the NCLT for continuing pending proceedings, and thus, the IBC provisions prevail over Section 279 of the Companies Act. 2. Applicability and Interpretation of Section 33(5) of IBC: The court examined whether Section 33(5) of the IBC, which states that no new suit or legal proceeding shall be instituted by or against the corporate debtor without the prior approval of the Adjudicating Authority, applies to ongoing arbitration. The court noted that the word "continuance" is absent in Section 33(5), implying that the continuation of pending proceedings does not require such approval. The court also emphasized that Section 238 of the IBC, which provides that the IBC will override other laws in case of inconsistency, supports this interpretation. The court referenced various judgments, including Alchemist Asset Reconstruction Company Ltd. v. Hotel Gaudavan Pvt. Ltd. and Innoventive Industries Limited vs. ICICI Bank, to reinforce the primacy of the IBC over other laws. 3. Maintainability of Application under Section 9 of the Arbitration and Conciliation Act: The applicant sought an interim injunction under Section 9 of the Arbitration and Conciliation Act to restrain the arbitral proceedings until leave from the NCLT was obtained. The court examined whether such an application was maintainable, given that the arbitral tribunal had already ruled that no leave was required. The court concluded that Section 9 is typically used for interim measures to protect the subject matter of the arbitration and not to overturn decisions made by the arbitral tribunal. The court emphasized that any challenge to the tribunal's jurisdiction should be made under Section 34 of the Arbitration and Conciliation Act, not through an interim application under Section 9. Consequently, the application was deemed not maintainable. Conclusion: The court dismissed the application, holding that: - Leave from the NCLT is not required to continue pending arbitral proceedings under Section 33(5) of the IBC. - The IBC provisions, being a special law, prevail over the Companies Act in case of any inconsistency. - An application under Section 9 of the Arbitration and Conciliation Act for interim relief to stay arbitral proceedings is not maintainable when it seeks to challenge the tribunal's jurisdiction, which should be addressed under Section 34.
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