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2021 (5) TMI 647 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Lease agreement - Arbitration Clause in the agreement - ex-parte award - whether the Petition is maintainable for execution of Award in question? - HELD THAT - The basic facts with reference to leasing of premises, default arise out of Lease Agreement, not paying awarded amount, etc. are prima facie are not in dispute. The Award was passed out of rental dispute, and in the normal circumstances, such disputes have to be settled by approaching Rent controller Courts/Authorities constituted for said purpose. However, they have invoked Arbitration Clause available in their Agreement and got ex parte Award in question. Aggrieved by the said Award, the Respondent is stated to have filed an Appeal, which is stated to be pending before the Hon'ble Delhi High Court. Both the Learned Counsels relying on the same judgement in support of their case, viz., K. KISHAN VERSUS M/S VIJAY NIRMAN COMPANY PVT. LTD. 2018 (9) TMI 1533 - SUPREME COURT . By reading of this judgement, what we understand is that operational dispute in question cannot be called un-disputed as long as Arbitration Award is under challenged U/s 34 of Arbitration and Conciliation Act, 1996. Wherein it is inter alia held that the object of Code, in so far as Operational Creditors are concerned, to put the insolvency process against Corporate Debtor only in clear cases where a real dispute between the parties to debt owed does not exist.. Further filing of S. 34 of Act against an arbitral award shows that a pre-existing dispute which culminates at the first stage of proceedings in an award, continues even after the award at least till the final adjudicatory process U/s 34 37 of Act has taken place. Therefore, the operational debt in question deemed to be a dispute, as the Respondent stated to have filed Appeal against the Award in question. Filing of the instant Petition is filed on misconception of fact and law, and it is solely filed for recovery of amount awarded in Arbitration - Petition dismissed.
Issues:
- Maintainability of the petition under Section 9 of the IBC for execution of an award - Discrepancy in the amount claimed in the demand notice and the petition - Jurisdiction of NCLT in insolvency matters Analysis: Issue 1: Maintainability of the petition under Section 9 of the IBC for execution of an award The petition was filed to initiate the Corporate Insolvency Resolution Process (CIRP) against the respondent for defaulting on a lease agreement. The operational creditor sought to recover an awarded amount through the IBC. The respondent challenged the petition, arguing that the arbitral award was disputed and under appeal, making the petition premature. The respondent contended that the NCLT's jurisdiction should not be used to execute awards from non-insolvency disputes. The NCLT noted that the respondent had appealed the award, which was pending in the Delhi High Court. Referring to a Supreme Court judgment, the NCLT emphasized that the insolvency process should only be initiated in clear cases without real disputes. The NCLT found the petition misconceived and dismissed it, as the respondent had taken steps to challenge the award through appropriate legal channels. Issue 2: Discrepancy in the amount claimed in the demand notice and the petition The respondent raised concerns about discrepancies in the amount claimed in the demand notice and the petition. The respondent argued that the operational debt claimed exceeded the amount specified in the demand notice, rendering the petition defective. The NCLT found these contentions untenable as the amount awarded in the arbitral award was not in dispute. The NCLT noted that interest accrued on the award amount due to the passage of time. Ultimately, the NCLT held that the discrepancies in the amounts claimed did not affect the validity of the petition, as the core issue was the recovery of the awarded amount. Issue 3: Jurisdiction of NCLT in insolvency matters The NCLT discussed the broader issue of its jurisdiction in insolvency matters. Referring to a recent Supreme Court judgment, the NCLT clarified that its jurisdiction is limited to disputes arising solely from or relating to the insolvency of the corporate debtor. The NCLT cautioned against encroaching on the jurisdiction of other courts, tribunals, or fora when the dispute does not directly stem from the insolvency. In this case, the NCLT emphasized that the petition solely aimed at recovering the awarded amount through the IBC, which was not aligned with the objectives of the Code. The NCLT highlighted that the petitioner failed to demonstrate the respondent's insolvency, making the petition inappropriate for invoking the insolvency process. In conclusion, the NCLT dismissed the petition, citing misconceptions of fact and law, and the petition's sole purpose of recovering the awarded amount through the IBC. The NCLT found the petition premature and lacking justification for invoking the insolvency process, especially when the respondent had pursued legal remedies to challenge the arbitral award.
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