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2024 (6) TMI 962 - HC - Insolvency and BankruptcyIssues Involved: 1. Validity of the arbitrator's order to keep proceedings in abeyance due to moratorium u/s 95 of the IB Code. 2. Applicability of the moratorium to all parties involved in the arbitration. 3. Maintainability of the petition under Article 226 of the Constitution. Summary: 1. Validity of the Arbitrator's Order: The petition challenges the arbitrator's orders dated 07.10.2022 and 20.03.2023, which kept the arbitration proceedings in abeyance due to a moratorium u/s 95 of the IB Code. The petitioner, a finance company, had initiated arbitration against Sterling Motor Company (SMC) and its guarantors, including Mr. Tarun Kapoor. The arbitrator granted a moratorium to Mr. Tarun Kapoor and Smt. Pavan Kapoor, staying proceedings against them but continuing against other respondents. The NCLT granted an interim moratorium u/s 96 of the IB Code, staying all legal actions in respect of the debts of the personal guarantor. 2. Applicability of the Moratorium: The petitioner argued that the moratorium should only apply to Mr. Tarun Kapoor and Smt. Pavan Kapoor, and not to other parties. The court noted that the term "debt" u/s 3(11) of the IB Code includes any liability from any person, and the moratorium u/s 96 applies to the entire debt. The court held that the moratorium affects the entire debt, not just the debtor, and thus, the arbitration proceedings must be stayed in their entirety. 3. Maintainability of the Petition: The respondent raised a preliminary objection on the maintainability of the petition, arguing that orders of the arbitrator should be challenged u/s 34 or 37 of the Arbitration & Conciliation Act, 1996. The court agreed, citing several precedents that restrict the use of writ jurisdiction to cases of patent illegality or perversity. The court found no such illegality or perversity in the arbitrator's orders and emphasized that arbitration proceedings should not be split between parties. Conclusion: The court dismissed the petition, holding that the arbitrator's decision to stay the proceedings due to the moratorium u/s 95 of the IB Code was not perverse or patently illegal. The petition was deemed not maintainable under Article 226 of the Constitution.
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