2023 (6) TMI 504 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Recovery proceedings - Execution of Ex-parte order, passed in arbitration proceedings - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - A Dispute, in existence, means and includes raising a Dispute, before a Court of Law or an Arbitral Tribunal, before receipt of Notice, under Section 8 of the I B Code, 2016. Further, Dispute, continues at stage, where challenge to an Arbitral Award, in an Appeal, is projected by a Party, as opined by this Tribunal - So long as a Dispute, truly exists in fact and it is not spurious or an imaginary, and not a hypothetical one, an Adjudicating Authority / Tribunal, is to reject, the Petition / Application, filed under the I B Code, 2016 - an Arbitration Proceedings, and I B Code Proceedings, cannot go on together, in the considered opinion of this Tribunal. By virtue of the Arbitration Clause, as per Agreement, the Appellant, had secured the Ex-parte Award, and as against the same, the Respondent / Corporate Debtor, filed an Appeal, in terms of Section 34 of the Act. The very fact that an Appeal, was filed against the Ex-parte Award, by the Respondent, Prima Facie, there exists a Pre-existing Dispute - It cannot be gainsaid that, for initiating a Corporate Insolvency Resolution Process, against the Corporate Debtor, there ought to be no real dispute, existing between the respective Parties, to the Debt, owed in question. So long as the Arbitration Award, was challenged under the relevant Section of the Arbitration and Conciliation Act, 1996, the Operational Debt, in the instant Appeal, is considered to be under Dispute, as opined by this Tribunal. In so far as the amount awarded in Award, is not Disputed, and in reality, due to efflux of time, the Interest, gets added on the Award Due Amount. As such, the difference in the Amount, mentioned in the Demand Notice, dated 21.02.2019, in the main Petition, and in service Record of Default, with the Information Utility, produced by the Appellant with Affidavit, dated 09.03.2021, will not exhibit any incompatibility, so as to be of any assistance, to the Respondent / Corporate Debtor. This Tribunal, comes to an inescapable, inevitable and irresistible conclusion that the view arrived at by the Adjudicating Authority ( National Company Law Tribunal , Bengaluru Bench), in dismissing the main CP (IB) No. 276 / BB / 2019 (filed by the Appellant / Petitioner / Operational Creditor, for recovering the Sum, awarded in Arbitration Proceedings), is free from any Legal Errors - appeal dismissed.

Summary

Issues Involved:
1. Maintainability of the Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of a pre-existing dispute.
3. Discrepancies in the amount claimed by the Petitioner.

Summary:

1. Maintainability of the Petition:
The Appellant, an Operational Creditor, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to recover an amount awarded in an arbitration proceeding. The Adjudicating Authority, National Company Law Tribunal (NCLT), Bengaluru Bench, dismissed the petition, stating that invoking the provisions of the Code for the implementation of an arbitral award is against the object of the Code. The Tribunal emphasized that the Code is meant for genuine cases of insolvency and not for the execution of arbitral awards.

2. Existence of a Pre-existing Dispute:
The Respondent contended that the operational debt claimed was disputed and not an undisputed liability. The Respondent had filed an appeal under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the ex-parte arbitral award, which was still pending. The Tribunal referred to the Supreme Court's judgment in K. Kishan v. Vijay Nirman Co. (P) Ltd., which held that an operational dispute cannot be considered undisputed as long as an arbitral award is under challenge. The Tribunal concluded that the operational debt in question was deemed to be a dispute due to the pending appeal.

3. Discrepancies in the Amount Claimed:
The Respondent pointed out discrepancies in the amount claimed by the Petitioner in the demand notice, the petition, and the record of default with the Information Utility. The Tribunal found these discrepancies untenable as the awarded amount was not in dispute, and the interest accrued over time.

Evaluation and Conclusion:
The Tribunal determined that the petition was filed on a misconception of fact and law, solely for the recovery of the amount awarded in arbitration. The Tribunal noted that the Appellant had not taken appropriate legal steps for the implementation of the award and had not shown that the Respondent had become insolvent. The Tribunal upheld the Adjudicating Authority's decision to dismiss the petition, concluding that the appeal lacked merit. Consequently, the appeal was dismissed, and the connected pending interlocutory applications were closed.