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2021 (8) TMI 956 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Pre-Existing Dispute or not - invocation of Arbitration Clause by Operational Creditors - time limitation - HELD THAT - The contention of the Learned Solicitor General that the Application under Section 9 is barred by Limitation cannot be sustained as the Pre-Existing Dispute was an ongoing one continuing from the date when the Arbitration Clause was invoked by the Operational Creditor themselves. Additionally, the fact remains that the Appeals under Section 37 were dismissed for default only on 29.11.2019. Hence, the Appeal cannot be stated to be barred by Limitation. Whether pendency of a proceeding for execution of an Award or a Judgement/decree bar an Operational Creditor to prefer a Petition under the Code. The Judgement of M/S. ANNAPURNA INFRASTRUCTURE PVT. LTD. AND ANR. VERSUS M/S. SORIL INFRA RESOURCES LTD. 2017 (8) TMI 1330 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI relied upon by the Learned Counsel is not applicable to the facts of this case as the Dispute in this instant case is still pending as Arbitration under Section 37 Appeal is still pending till date. If the Appeal under Section 37 had been decided, then Execution comes into the picture. Money Recovery and Triggering of Insolvency are not parallel proceedings. Section 8(2)(a) provides that Existence of a Dispute, if any, or record of the pendency of the suit or Arbitration Proceedings filed before the receipt of such Notice or invoice in relation to such Dispute. At the outset, what has to be seen is whether there is any Existence of Dispute , if any or record of the pendency of the suit or Arbitration Proceedings - In the instant case, it is an admitted fact by both the parties that disputes arose way back in the year 2003 and 2004, and based on the terms of MoU entered into, the Operational Creditor themselves invoked the Arbitration Proceedings. Both the Arbitral Awards were assailed by the Corporate Debtor under Section 34 of A C Act, 1996 and were dismissed by separate Orders dated 27.02.2012 and 29.02.2012 respectively - the Demand Notice was issued on 14.02.2020. The Application was filed on 02.03.2020. Upon restoration, the Appeal relates back to the original date of filing and therefore we note that there was a Pre-Existing Dispute prior to the date of issuance of the Demand Notice. There is a possibility that the Corporate Debtor may succeed on any claim or part of the claim. Hence, it is apposite to observe that the Operational Debt herein, could not be said to be an undisputed debt . Following the ratio in Mobilox Innovations Pvt. Ltd. 2017 (9) TMI 1270 - SUPREME COURT wherein it was inter alia held that so long as a dispute truly exists in fact and is not spurious, the Adjudicating Authority ought to have dismissed the Application. Appeals are allowed and the Impugned Order is set aside.
Issues Involved:
1. Whether the Adjudicating Authority erred in initiating Insolvency Proceedings despite a pre-existing dispute under Section 37 of the Arbitration & Conciliation Act, 1996. 2. Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) was time-barred. 3. Whether the operational creditor's filing of parallel proceedings for execution of the Arbitral Award constituted an abuse of the process of law. 4. Whether the restoration of the appeal under Section 37 relates back to the original date of filing, thereby indicating a pre-existing dispute. 5. Whether the pendency of proceedings for execution of an award bars an operational creditor from preferring a petition under the IBC. Detailed Analysis: 1. Pre-existing Dispute under Section 37 of the A&C Act, 1996: The Adjudicating Authority admitted the Section 9 application, observing that no proceeding under Section 34 or appeal under Section 37 of the A&C Act was pending at the time of filing the application. However, the Corporate Debtor argued that the Adjudicating Authority failed to appreciate the law laid down in 'Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd.' which holds that any application under Section 9 cannot be admitted if there is a dispute between the parties. The Corporate Debtor contended that the restoration of the appeal under Section 37 relates back to the original date of filing, thus indicating a pre-existing dispute. 2. Time-barred Application under Section 9 of IBC: The Corporate Debtor argued that the application under Section 9 was barred by limitation, as the operational debt became due and payable on 11.05.2010, and the application should have been filed within three years from that date. The Operational Creditor, however, contended that the date of default was 22.11.2019, when the appeals under Section 37 were dismissed for non-prosecution, and thus the application was within the limitation period. 3. Parallel Proceedings for Execution of Arbitral Award: The Corporate Debtor argued that the Operational Creditor was abusing the process of law by filing parallel proceedings for execution of the Arbitral Award. The Operational Creditor countered that filing an execution petition and an application under Section 9 of the IBC are alternate legal remedies and can proceed concurrently. 4. Restoration of Appeal under Section 37: The Tribunal considered whether the restoration of the appeal under Section 37 relates back to the original date of filing. The Tribunal relied on the majority view in 'Vareed Jacob Vs. Sosamma Geevarghese & Ors.', which held that upon restoration, the appellant is restored to the position when the court initially dismissed the appeal for default. Thus, the restoration of the appeal under Section 37 indicated a pre-existing dispute. 5. Pendency of Execution Proceedings and IBC Petition: The Tribunal noted that the pendency of a proceeding for execution of an award does not bar an operational creditor from preferring a petition under the IBC. The Tribunal emphasized that the IBC is not a recovery proceeding but a mechanism to resolve insolvency. Conclusion: The Tribunal concluded that there was a pre-existing dispute between the parties as the appeal under Section 37 was restored to its original number, relating back to the original date of filing. The Tribunal also held that the application under Section 9 was not time-barred as the pre-existing dispute was ongoing. The Tribunal allowed the appeals, set aside the impugned order, and directed the Adjudicating Authority to close the proceedings. The Corporate Debtor was released from all the rigours of law and allowed to function independently through its Board of Directors. The IRP fees were to be paid by the Operational Creditor.
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