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2020 (4) TMI 677 - Tri - Insolvency and BankruptcyArbitral award - Enforcing of the Award passed by the Learned Arbitrator - section 14 (1) (a) of the I B Code, 2016 - main crux of the submissions/contentions on behalf of the Learned IRP seems to be that by virtue of the reliefs as sought for, the Applicant is trying to enforce the Award passed by the Learned Arbitrator which cannot be done taking into consideration the provisions of section 14 (1) (a) of the I B Code, 2016. HELD THAT - As per clause 5 (e) (x), the payment to be effected by the Corporate Debtor to the Applicant on the date fixed as per the schedule of payments, the rights provided for clause (d) in favour of the Corporate Debtor will come into operation. So, the rights of the Corporate Debtor in relation to what has been mentioned in clause 5 (d) comes to the effect only after the payment which is required to be made by the Corporate Debtor to the Applicant. That is, the right that can be exercised in relation to the property which is subject matter to the dispute as between the parties and several agreements which has been entered into from time to time and Power of Attorney in relation to which the Award has been passed - the Corporate Debtor cannot also include in its assets any of the assets owned by the 3rd party in possession of the Corporate Debtor held under Trust or under contractual arrangements including bailment. From the reading of the above provisions as well as taking in tandem from the Award passed by the Learned Arbitrator, it is seen that even though the Corporate Debtor might have a legal right of beneficial interest in relation to the assets which according to the Ld. IRP to be treated as the stock-in-trade, but, however, subject to the conditions as imposed by the Learned Arbitrator and as against which no material has been brought forth by the IRP as to whether the same is under challenge under section 34 of the Arbitration and Conciliation Act, 1996 as amended and as to whether any stay has been granted in relation to the enforcement of the same. By virtue of reading section 14 (1) (b) restricts on the part of the Corporate Debtor in transferring or otherwise dealing with the property including its own during the period of CIR Process. No evidence has been placed by the IRP that the assets which are sought to be alienated are stock-in-trade with adequate evidence and not to be treated as an asset. In any case in relation to accounting parlance Stock-in-Trade is also part of Current Assets of the Corporate Debtor and cannot be divorced from it - taking into consideration the provisions of the I B Code, 2016, in relation to the property which is the subject matter of Arbitration Award as well as in the interest of justice, a status quo order is granted and the IRP is directed not to deal with the said property.
Issues Involved:
1. Setting aside sale deeds executed after the commencement of CIRP. 2. Restraining the respondent from alienating property under the Power of Attorneys. 3. Enforcing the Arbitration Award and its implications under the moratorium. Issue-wise Detailed Analysis: 1. Setting Aside Sale Deeds Executed After Commencement of CIRP: The Applicant sought an interim order to set aside the Sale Deeds dated 21-11-2019 and 02-12-2019 executed under the Power of Attorney after the commencement of the Corporate Insolvency Resolution Process (CIRP). The Tribunal noted that these sales were conducted post-initiation of CIRP, which raised concerns about their validity under the moratorium imposed by Section 14 of the Insolvency and Bankruptcy Code, 2016 (I&B Code, 2016). 2. Restraining the Respondent from Alienating Property under Power of Attorneys: The Applicant requested an interim order to restrain the Respondent from alienating or disposing of any property by exercising rights under three Power of Attorneys dated 29-6-2011, 10-10-2018, and 10-10-2018. The Tribunal examined the validity of these Power of Attorneys, particularly in light of the Arbitration Award dated 27-9-2018, which rendered the third Power of Attorney unenforceable. The Tribunal considered the implications of the moratorium under Section 14(1)(b) of the I&B Code, 2016, which prohibits transferring, encumbering, alienating, or disposing of any assets of the corporate debtor during the CIRP. 3. Enforcing the Arbitration Award and Its Implications Under the Moratorium: The Tribunal addressed the Applicant's contention that the Corporate Debtor had not adhered to the payment schedule outlined in the Arbitration Award. The Award required the Corporate Debtor to pay a sum of ?8,85,95,989/- to the Applicant, with specific conditions for the transfer of property rights. The Tribunal highlighted that the moratorium under Section 14(1)(a) of the I&B Code, 2016, prohibits the institution or continuation of suits or proceedings against the corporate debtor, including the execution of any judgment, decree, or order. However, the Tribunal also noted that the moratorium does not extend to assets held under trust or contractual arrangements, as explained in Section 18 of the I&B Code, 2016. Conclusion: The Tribunal concluded that the Corporate Debtor's rights to the property under dispute would only come into effect upon fulfilling the payment conditions stipulated in the Arbitration Award. Given the moratorium's restrictions and the lack of evidence from the Interim Resolution Professional (IRP) regarding the nature of the assets as stock-in-trade, the Tribunal granted a status quo order. The IRP was directed not to deal with the disputed property during the CIRP, with liberty for the parties to seek modifications through suitable applications. Significant Phrases and Legal Terminology: - "Setting aside the Sale Deed dated 21-11-2019 and Sale Deed dated 02-12-2019 executed in exercise of right under the Power of Attorney." - "Restraining the Respondent from alienating, selling or disposing off any manner any property of the Applicant." - "Enforcing the Award passed by the Learned Arbitrator." - "Moratorium under Section 14 of the I&B Code, 2016." - "Corporate Insolvency Resolution Process (CIRP)." - "Joint Development Agreement (JDA)." - "Power of Attorney (PoA)." - "Arbitration Award dated 27-9-2018." - "Section 14(1)(b) of the I&B Code, 2016." - "Stock-in-trade." - "Status quo order." The Tribunal's decision emphasized the importance of adhering to the moratorium provisions under the I&B Code, 2016, and the need for clarity on the nature of assets during the CIRP.
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