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2022 (12) TMI 1060 - HC - Insolvency and BankruptcySeeking appointment of a sole arbitrator for the resolution of disputes between the parties - Section 11 of the Arbitration and Conciliation Act, 1996 - HELD THAT - To answer this issue, it is necessary to go into the effect of the said order staying the institution or continuation of suits or other proceedings by any party or person or bank or company against IL FS and its 348 Group Companies in any Court of law, tribunal, arbitration panel or arbitration authority. In this regard the plea of Mr. Mehta is that during the resolution process of a company, its creditor is obligated to necessarily lodge claims before a resolution professional, as a successful resolution applicant cannot suddenly be faced with undecided claims after the resolution plan submitted by him has been accepted. This would amount to a hydra-head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully takes over the business of the corporate debtor. The purpose and rationale behind granting a moratorium is to ensure that the assets of the corporate debtor are protected, with an intention to keep the company a going concern and to use the period to strengthen its financial position. It means, the intent of the order of the NCLAT is to protect the assets of IL FS and its group companies in order to make the resolution process effective/purposeful. In any case, the legality of the order dated March 12, 2020 confirming the order dated October 15, 2018 has been challenged before the Supreme Court. Since, the matter is pending before the Supreme Court and there is no stay of the NCLAT order, the petitioner has to await adjudication of the proceedings before the Supreme Court. Petition dismissed.
Issues Involved:
1. Appointment of a sole arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. 2. Impact of NCLAT's moratorium order on arbitration proceedings. 3. Whether claims post the cut-off date of October 15, 2018, can be referred to arbitration. Detailed Analysis: 1. Appointment of a Sole Arbitrator: The petitioner sought the appointment of a sole arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, for resolving disputes arising from a contract dated June 21, 2012. The contract included a Dispute Resolution Procedure mandating arbitration if mutual discussions failed. Despite the petitioner's invocation of arbitration, the respondent objected, citing the NCLAT's moratorium order dated October 15, 2018, which stayed all proceedings against IL&FS and its 348 Group Companies. 2. Impact of NCLAT's Moratorium Order: The NCLAT's order dated October 15, 2018, and confirmed on March 12, 2020, stayed the institution or continuation of suits or any other proceedings against IL&FS and its 348 Group Companies. The petitioner argued that this moratorium was not a statutory moratorium under Section 14 of the IBC but under Sections 241 and 242 of the Companies Act, 2013. However, the court held that the NCLAT's order, akin to a statutory moratorium, restrained the initiation of any proceedings, including arbitration, regardless of the period to which the claims pertain. 3. Claims Post Cut-off Date of October 15, 2018: The petitioner contended that claims arising after October 15, 2018, should be referred to arbitration as they lie outside the resolution framework of IL&FS. The court, however, noted that the NCLAT's order did not distinguish between claims before and after the cut-off date. It restrained the initiation of any proceedings to protect the assets of IL&FS and its group companies, ensuring the effectiveness of the resolution process. Accepting the petitioner's plea would contradict the intent of the NCLAT's order, potentially leading to further liabilities for the company. Conclusion: The petition was dismissed, with the court holding that the NCLAT's moratorium order effectively restrained the initiation of arbitration proceedings. The petitioner was advised to await the Supreme Court's adjudication on the NCLAT's order and was granted liberty to apprise the Claims Management Advisor (CMA) of this decision for consideration of claims already submitted.
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