2020 (10) TMI 220 - Tri - Insolvency and Bankruptcy

Implementation of award passed by Sole Arbitrator - HELD THAT - This Adjudicating Authority observes that the R1 itself undertook not to implement the Award passed by the Sole Arbitrator till the end of moratorium as imposed under section 14 of the IB Code, 2016 by admission order dated 25.02.2019 issued by this Adjudicating Authority. The undertaking given by way of an affidavit dated 22.11.2019 is taken on record. Since R1 itself has undertaken not to implement the Award as aforesaid, the prayers made in the instant Application have become infructuous. Application dismissed.

Summary

Issues:
1. Stay against the arbitration award.
2. Setting aside the arbitration award.
3. Effect of moratorium on arbitration proceedings.
4. Compliance with arbitration proceedings during insolvency resolution process.

Stay against the arbitration award:
The case involved an interlocutory Application seeking a stay against an arbitration award passed in a construction contract dispute. The Applicant, the Interim Resolution Professional (IRP), sought to set aside the award due to the Corporate Insolvency Resolution Process (CIRP) commencement. The IRP argued that the arbitration award passed after the CIRP initiation was non-est in law, citing a Supreme Court order emphasizing the moratorium's impact on legal proceedings against Corporate Debtors. The IRP prayed for the Application to be allowed.

Setting aside the arbitration award:
The Respondent countered the Application, denying the Applicant's contentions. The Respondent claimed that the Applicant failed to perform as per the contract, leading to its cancellation by the Respondent. The Respondent appointed a new arbitrator to adjudicate claims for extra costs incurred. The Respondent stated that the arbitral proceedings had concluded before the CIRP order, and only the award was pending publication. The Respondent highlighted the lack of communication from the Applicant regarding the CIRP and stamp paper submission for award publication. The Respondent emphasized that the award was sealed and not opened until instructed by the Adjudicating Authority.

Effect of moratorium on arbitration proceedings:
The Adjudicating Authority considered the impact of the moratorium under the Insolvency and Bankruptcy Code, 2016, on the arbitration proceedings. The Respondent undertook not to implement the arbitration award until the moratorium's end, acknowledging the authority's order. The Authority noted the Respondent's commitment and deemed the Application infructuous, closing the matter due to the Respondent's undertaking not to execute the award during the moratorium period.

Compliance with arbitration proceedings during insolvency resolution process:
The case highlighted the complex interaction between arbitration proceedings and insolvency resolution processes. It underscored the importance of communication and compliance with legal requirements during such situations. The Respondent's decision not to implement the award during the moratorium demonstrated adherence to the legal framework governing insolvency proceedings. The Authority's acknowledgment of the Respondent's undertaking signified a resolution to the dispute without further legal intervention.

This detailed analysis of the judgment from the National Company Law Tribunal, Hyderabad Bench, provides insights into the legal complexities surrounding arbitration awards during insolvency resolution processes and the significance of complying with the moratorium provisions under the Insolvency and Bankruptcy Code, 2016.