2017 (7) TMI 42 - Tri - Insolvency and Bankruptcy

Arbitration proceedings - Held that - Any and all disputes arising from or related to the Agreement will be settled amicably and promptly upon consultation between the parties, If the parties do not succeed in reaching such amicable resolution, then all such disputes shall be settled by arbitration without submission to ordinary courts of law. The board will also decide upon the charging of the parties with the costs resulting from the dispute. In case of arbitration, all disputes arising in connection with the present Agreement including the question of its validity shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce in Paris by three arbitrators appointed in accordance with the said Rules. The arbitrators shall base their decisions on the provisions of this Agreement. The arbitration shall be conducted in Zurich/Switzerland. This Agreement shall be subject to Swiss law. The arbitration award shall be final and binding upon the parties hereto. The award shall also indicate, how to distribute arbitrator s fee and arbitration expenses between the parties. Disputes leading to arbitration shall not entitle any Party to suspend or retain any supplies and services. This is no reason to accept the contention that the respondent has not raised the dispute, as is evident from the contents of the reply to the notice. There being a notice of dispute raised by the petitioner and also on account of the defect, as discussed above, the instant petition is rejected

Summary

Issues Involved:
1. Jurisdiction and authority to institute proceedings.
2. Existence and validity of the debt.
3. Compliance with procedural requirements.
4. Validity of the dispute raised by the corporate debtor.
5. Arbitration clause and its implications.

Issue-wise Detailed Analysis:

1. Jurisdiction and authority to institute proceedings:
The petition was filed by the Operational Creditor to initiate the Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016. The respondent, a company incorporated with a registered office in Haryana, falls within the territorial jurisdiction of the Chandigarh Bench of NCLT. The petitioner, a company incorporated in Germany, authorized Mr. Pankaj Sachdeva to institute the proceedings through a power of attorney.

2. Existence and validity of the debt:
The petitioner claimed that the respondent approached them for the purchase of a hot rolling mill, leading to a sale and purchase agreement dated 23.12.2014. The total debt claimed was Euro 4,472,638.99, with invoices dated between 02.06.2015 and 23.06.2016. The petitioner sent statutory notices under Sections 433 and 434 of the Companies Act, 1956, and a demand notice under Section 8 of the Code, to which the respondent did not reply within the stipulated 10 days.

3. Compliance with procedural requirements:
The application was initially incomplete as it did not include the statement of the bank account of the operational creditor. The petitioner later complied by submitting a bank certificate, packing list, and bill of lading. Despite these submissions, the Tribunal observed that the information was still incomplete, particularly regarding the last payment made by the respondent.

4. Validity of the dispute raised by the corporate debtor:
The respondent raised several issues in their reply dated 28.03.2017, including delays in delivery, non-compliance with pre-inspection requirements, and routing of the consignment through Germany. The Tribunal found these issues to constitute a valid dispute under Section 5(6) of the Code, which includes disputes related to the existence of debt, quality of goods, or breach of representation or warranty.

5. Arbitration clause and its implications:
The sale and purchase agreement included an arbitration clause stating that disputes should be settled by arbitration under the Rules of Arbitration of the International Chamber of Commerce in Paris. The Tribunal noted that the petitioner could seek remedy through arbitration, but the respondent had not invoked this clause despite the expiry of about one year since the last delivery.

Conclusion:
The Tribunal concluded that the respondent had raised a bona fide dispute regarding the delay in delivery and non-compliance with pre-inspection requirements. Additionally, the petitioner failed to comply with the mandatory requirement of submitting a certificate from the financial institution confirming non-payment of the debt. Consequently, the petition was rejected, and the order was communicated to both parties.