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2023 (6) TMI 330 - HC - Insolvency and BankruptcySeeking appointment of an Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - respondent has approached the NCLT under the provisions of the IB Code - time limitation - whether the provisions of the IB Code interdict the appointment of an arbitrator by invoking Section 11(6) of the A C Act? - HELD THAT - At the outset, it is necessary to note that there is no provision in the A C Act, giving the provisions of the Act an overriding effect as is contemplated by Section 238 of the I B Code. However, it is equally trite that the A C Act, is a special Statute, governing the field of Arbitration, and all other Statutes governing the filed earlier thereto, stood repealed in view of Section 85 of the A C Act. Whether there is anything inconsistent in the A C Act, to what has been provided for in Section 7 to 9 of the IB Code, so that it can be said that Section 7 to 9 of the I B Code would prevail? - HELD THAT - The admission of an application after recording its satisfaction as contemplated by Section 7(5) of the IB Code would be the starting point where the bar under Section 238 of the IB Code can be said to be capable of being invoked and the mere filing of an application under Section 7(1) of the IB Code cannot be said to be enough to invoke the bar - What is also material to note is that Section 7(5)(b) of the IB Code permits the Adjudicating Authority to reject the application where it is of the opinion that default has not occurred, thereby indicating that the mere filing of an application under Section 7(1) of the I B Code, would not act as a bar to any proceedings under other statutes, until and unless the satisfaction as contemplated by Section 7(4) r/w Section 7(5)(a) of the IB Code is recorded by the Adjudicating Authority and the application is admitted. It would also be material to note that there does not appear to be anything inconsistent between the provisions of the A C Act and the IB Code, inasmuch as the provisions of Section 238 of the IB Code would come into play only upon an order having been passed by the Adjudicating Authority under Section 7(5) of the IB Code and therefore an application under Section 11(6) of the A C Act, till such time cannot be said to be not maintainable - In case the Adjudicating Authority comes to a conclusion that there was a default then the position would squarely be governed by Section 238 of the IB Code, however, till such time it is so done, the entertaining of an application under Section 11 (6) of the A C Act, would not stand prevented. Time Limitation - HELD THAT - The arbitration clause was invoked only in the reply dated 15/09/2020 by the applicant, in pursuance to which, the present application has been filed on 23/10/2020, considering which, it cannot be said that the application is beyond time. A plea that the dispute/claim itself would be beyond time, is one which will have to be considered by the Arbitrator. In view of what has been held in Indus Biotech (supra) that, the triggering of a petition under Section 7 of the IB Code to consider the same as a proceeding in rem, it is necessary that the Adjudicating Authority ought to have applied its mind, recorded a finding of default and admitted the petition, GUJARAT URJA VIKAS NIGAM LIMITED VERSUS MR. AMIT GUPTA AND ORS. 2021 (3) TMI 340 - SUPREME COURT are of no assistance, for a contrary argument, to be acceptable. The application is, therefore, allowed and Mr. Justice Z. A. Haq, Former Judge of this Court, is hereby appointed as an Arbitrator, to adjudicate the disputes between the parties hereto. The parties shall appear before him on 12/06/2023 at 11 00 a.m. The processing charges shall be paid as a condition precedent.
Issues Involved:
1. Applicability of Section 11(6) of the Arbitration and Conciliation Act, 1996 in light of ongoing proceedings under the Insolvency and Bankruptcy Code, 2016. 2. Existence of a dispute between the parties. 3. Limitation period for invoking arbitration. Summary: 1. Applicability of Section 11(6) of the Arbitration and Conciliation Act, 1996: The primary issue was whether the provisions of the Insolvency and Bankruptcy Code (IB Code) interdict the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A & C Act). The court noted that mere initiation of proceedings under the IB Code does not prevent the court from entertaining an application under Section 11(6) of the A & C Act. The court emphasized that the bar under Section 238 of the IB Code applies only after the Adjudicating Authority has admitted the application under Section 7(5) of the IB Code. The court referred to the decision in Indus Biotech Private Limited Vs. Kotak India Venture (Offshore) Fund and concluded that the mere filing of an application under Section 7(1) of the IB Code is not sufficient to invoke the bar. 2. Existence of a dispute between the parties: The respondent argued that there was no dispute as the applicant had admitted liability in an email dated 23/10/2019. However, the court noted that the existence of a dispute must be considered in totality and not based on a singular communication. The court found that the quality of goods supplied was questioned by the applicant, indicating a dispute. The court held that the arbitrator would consider the effect of the email and other communications between the parties. 3. Limitation period for invoking arbitration: The respondent contended that the application was beyond the limitation period as per Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority. However, the court observed that the arbitration clause was invoked on 15/09/2020, and the application was filed on 23/10/2020. Therefore, the application was within the limitation period. Any plea regarding the dispute/claim being beyond time would be considered by the arbitrator. Conclusion: The court allowed the application and appointed Mr. Justice Z. A. Haq, Former Judge of the Bombay High Court, as the arbitrator to adjudicate the disputes between the parties. The parties were directed to appear before the arbitrator on 12/06/2023 at 11:00 a.m., and the processing charges were to be paid as a condition precedent. The rule was made absolute with no order as to costs.
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