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2021 (9) TMI 581 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Operational Debt in terms of Section 5(21) of IBC, 2016 - any dispute exists between the parties that exist before the issuance of the Demand Notice by the Operational Creditor - foreign Award has become legal enforceable in India or not. Whether the debt of the Petitioner qualify to be an operational debt in terms of Section 5(21) of IBC, 2016 and as such the Petitioner would qualify to be an Operational Creditor in respect of the Corporate Debtor under the provisions of the IBC, 2016? - HELD THAT - As to the facts of the present case, the right to claim money from the Corporate Debtor emanates from a SPA dated 19.09.2012, pursuant to which the Corporate Debtor had acquired the shares from the Operational Creditor. The transaction as transpired between the parties could have been treated as an 'operational debt' had it occurred in the 'ordinary course of business' of trading in shares by one seller and another purchaser, in which context the expression 'shares' would partake the characteristics of 'goods' as envisaged under the Sale of Goods Act, 1930. However, it is not so in the present case and the parties to the present proceedings are governed by a 'Share Purchase Agreement', and non - adherence/violation of the said terms and conditions envisaged thereunder, cannot be, under any circumstances, be treated as a claim in respect of the 'provision of goods' as defined under Section 5(21) of IBC, 2016 - the alleged 'debt' as claimed by the Operational Creditor in the present Application does not fall within the definition of the expression 'operational debt' as defined under Section 5(21) of the IBC, 2016. Whether there is any dispute exists between the parties that exist before the issuance of the Demand Notice by the Operational Creditor - HELD THAT - There exists a 'dispute' between the parties before the issuance of the Demand Notice itself and the defence raised by the Corporate Debtor on the grounds of existence of a dispute cannot be considered as spurious, hypothetical, illusory or misconceived. Further this Tribunal in exercise of summary jurisdiction cannot adjudicate upon the dispute between the parties. Whether the Award passed by the Arbitral Tribunal, which is a foreign Award has become legal enforceable in India and if so what would be the consequences? - HELD THAT - The Supreme Court in the matter of GOVERNMENT OF INDIA VERSUS VEDANTA LIMITED AND ORS. 2020 (9) TMI 1178 - SUPREME COURT has held that a petition for enforcement and execution of a foreign award by way of a petition is required to be filed under Section 47 and a foreign award does not become a decree until and unless it passes the muster of Section 47 to 49, only after which it acquires the status of a decree. Only after the Court adjudicates on the enforceability of the foreign award under Section 47 to 49, the foreign award would deem to be a decree of the Court - However, in relation to the enforcement of 'Domestic' award that is not the case; in respect of the 'Foreign' Award, a further declaration is required to be made in respect of its enforcement and admittedly the award in the present case is yet to be enforceable under Section 47 to 49 of the Act, 1996. While this being the fact, and also by taking into consideration the divergent views expressed in this regard by NCLT Hyderabad Bench and Bombay Bench, this Tribunal does not wish to render its finding in relation to the said Issue. Issue decided in favour of the Corporate Debtor and against the Operational Creditor and that there exists dispute between the parties and also the 'debt' as claimed in the Application does not partake to the character of an operational debt - application dismissed.
Issues Involved:
1. Whether the debt qualifies as an "operational debt" under Section 5(21) of IBC, 2016. 2. Whether there is any pre-existing dispute between the parties before the issuance of the Demand Notice. 3. Whether the foreign Arbitral Award has become legally enforceable in India. Issue-wise Detailed Analysis: Issue No. (i): Whether the debt qualifies as an "operational debt" under Section 5(21) of IBC, 2016. The tribunal examined the definitions of "operational creditor" and "operational debt" under Section 5(20) and (21) of IBC, 2016. The definition of "operational debt" includes a claim in respect of the provision of goods or services. The tribunal noted that the dispute arose from a Securities Purchase Agreement (SPA) dated 19.09.2012, where the Corporate Debtor agreed to purchase shares from the Operational Creditor. The tribunal highlighted that the term "provision" was not defined under IBC, 2016 but referred to the Oxford Dictionary definition, which means "the act of supplying someone with something they need or want." The tribunal concluded that the transaction did not involve the provision of goods or services but rather the purchase of shares, which does not qualify as an "operational debt" under Section 5(21) of IBC, 2016. Issue No. (ii): Whether there is any pre-existing dispute between the parties before the issuance of the Demand Notice. The tribunal noted that one of the essential components for admitting an application under Section 9 of IBC, 2016 is that the "operational debt" should be undisputed. The Operational Creditor issued a Demand Notice on 22.02.2019, to which the Corporate Debtor responded on 05.03.2019, disputing the amount claimed. The tribunal referred to the Supreme Court's decision in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited, which held that the existence of a dispute must be pre-existing before the receipt of the demand notice. The tribunal found that there were pre-existing disputes between the parties, as evidenced by the correspondence and legal proceedings before the issuance of the Demand Notice. The tribunal concluded that the dispute was not spurious, hypothetical, illusory, or misconceived, and therefore, the application should be rejected. Issue No. (iii): Whether the foreign Arbitral Award has become legally enforceable in India. The tribunal examined the enforceability of the foreign Arbitral Award under the Arbitration and Conciliation Act, 1996. Part II of the Act deals with the enforcement of foreign awards, and Section 48 outlines the conditions for enforcement. The tribunal referred to the Supreme Court's decision in Government of India -Vs- Vedanta Limited and 2 Ors, which held that a foreign award does not become a decree until it passes the muster of Sections 47 to 49 of the Act. The tribunal noted that the award in the present case had not yet been declared enforceable under these sections. Given the divergent views expressed by different NCLT benches on this issue, the tribunal chose not to render a finding on this issue and kept it open. Conclusion: The tribunal concluded that the debt claimed by the Operational Creditor does not qualify as an "operational debt" under Section 5(21) of IBC, 2016. Additionally, there was a pre-existing dispute between the parties before the issuance of the Demand Notice. Consequently, the application filed by the Operational Creditor was dismissed.
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