2021 (6) TMI 739 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - dispute of contractual nature or not - arbitration proceedings justified or not - HELD THAT - In the present matter, it is an admitted fact that at the end of each invoice issued by the Operational Creditor there is an Arbitration Clause. Against these invoices Corporate Debtor had issued debit note. When the debit notes were issued, the corporate Debtor also received emails from Operational Creditor seeking clarification and contesting the issuance of Debit Note, hence, a dispute had come into existence by admitting the fact that valid invoice was existing between the parties. Subsequently, after the exchange of emails the parties have met multiple times to settle the dispute between them with respect to the invoice amount and supply involved. At this stage we are not going into the merits of existence of per-existing dispute as defined in I B Code, 2016 but to test whether the dispute if any needs to be sent to arbitration as per section 8 of Arbitration and Conciliation Act (as amended). Since the disputes are purely contractual in nature, the invocation of arbitration is justified. Once the parties are sent to arbitration, nothing survives in the insolvency application as the issues between the parties after arbitration, will decide the rights of the parties. Hence at this stage, the insolvency application in view of the parties being sent to the arbitration, has become infructuous - Application allowed.

Summary

Issues:
Application under Section 8 of the Arbitration and Conciliation Act, 1996 for disposing off the Section 9 Application.

Analysis:
The application was filed by the corporate debtor against the operational creditor under Section 8 of the Arbitration and Conciliation Act, 1996. The corporate debtor invoked the Arbitration Clause contained in the Invoices, stating that any dispute regarding the bill shall be referred to arbitration as per the terms and conditions mentioned in the invoices. The corporate debtor argued that the operational creditor had filed the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, without disclosing the presence of the arbitration clause in the invoices, which was intentionally hidden. Citing relevant judgments, the corporate debtor contended that the operational creditor's application was mischievous and filed to avoid arbitration, despite having entered into an arbitration agreement.

The corporate debtor further argued that the dispute was arbitrable in nature, as per the judgment in 'Booz Allen and Hamilton Inc vs SBI Home Finance Limited & others,' which outlined the criteria for arbitrability. The corporate debtor emphasized that the alleged disputed amount claimed by the operational creditor was related to the invoices and fell within the scope of the valid arbitration agreement. Referring to various judgments by the Hon'ble Supreme Court, the corporate debtor highlighted the mandatory duty of the court to refer disputes to arbitration when an arbitration clause exists between the parties. The corporate debtor also pointed out that the dispute in question was contractual in nature, justifying the invocation of arbitration.

The Tribunal acknowledged the presence of the arbitration clause in the invoices and the exchange of communications between the parties regarding the disputed invoices. Considering the contractual nature of the disputes, the Tribunal held that the invocation of arbitration was justified. Therefore, the Tribunal allowed the application, making the insolvency application infructuous and disposed of the matter accordingly.