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TMI Blog2017 (8) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... ication is 'complete or not' and if not complete may grant seven days' time to the appellants to complete the record as per the proviso to Sec. 9 of the I&B Code. The appeal is allowed with aforesaid observations. We make it clear that we have not expressed any opinion in regard to other questions such as whether the 1st appellant is an operational creditor and whether the application preferred under Sec. 9 is complete or not, which is to be decided by the Adjudicating Authority after notice to the parties uninfluenced by any observation made in the impugned order. - Company Appeal (AT) (Insolvency) No. 32 of 2017 - - - Dated:- 29-8-2017 - Balvinder Singh Member (Technical) and Justice S. J. Mukhopadhaya (Chairperson) For the Appellant : Shri Vijay Nair, Shri Prashant Jain, Ms. Aparna Malhotra and Ms. Sanyogita Jain, Advocates. For the Respondent : Shri Chetan Sharma, Shri Abhishek Swaroop and Shri Rudreshwar Singh, Advocates. JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. This appeal has been preferred by the appellants against order dated 24th March, 2017 passed by the Learned Adjudicating Authority (National Company Law Tribunal), Principal Bench, New ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the award dated 9th September, 2016 have also been initiated and are pending consideration before the Honble Delhi High Court. 7. Learned counsel for the appellants submitted that the 1 st appellant is to be regarded as an operational creditor within the meaning of Sec. 9 r/ w sub- sections (20) and (21) of Section 5 of the I B Code. A reference has also been invited to the definition of the words 'debt' and 'default' as defined in Section 3(11) and Section 3(12) of the Code. 8. According to learned counsel for the appellants the award passed by the learned Arbitrator had attained finality as the application under Section 34 of the Arbitration Act has been dismissed on 19th December, 2016. It was further contended that expression arbitration proceedings used in Sec. 8(2)(a) of the I B Code cannot be deemed to be pending because under Sec. 21 of the Arbitration Act, arbitration proceedings commenced on the date on which request for referring such a dispute to arbitration was received by the respondent. The said proceeding came to an end in terms of Sec. 32 on the date of announcing the final award or by an order of the Arbitral Tribunal in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me within the meaning of 'operational creditor', rejected the submission that the 'arbitration proceedings' stand concluded by virtue of Section 32 of the Arbitration Act. 14. Learned Adjudicating Authority while held that the application is not maintainable, observed as follows: 27. We are further of the view that already proceedings for execution of the award have been initiated. An effective remedy has been availed by the applicant. We have not been able to accept that a party can invoke more than one remedy simultaneously. It is in fact against the fundamental principles of judicial administration to allow a party to avail more than one remedies. Ordinarily only one remedy at one time could be availed as is evident from the fundamental principles laid down in section 10 CPC. It would promote forum shopping which is wholly impermissible in law. . 15. We have heard learned counsel for the parties and perused the record. 16. The questions arise for determination in this appeal are:- (i) Whether there is an 'existence of dispute' between the parties, the award passed by Arbitral Tribunal having affirmed by the Court under Sec. 34 of the Arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udice to any other rights or remedies available to our client under contract and in law. ' 23. A close examination of the aforesaid reply would show that the respondents have disputed the existence of 'Operational Debt' by disclosing that its application under section 34 of the Arbitration Act was dismissed and the appeal under section 37 of the Arbitration Act bearing No. FAO (OS) (COMM) 20 of 2017 was pending adjudication. It is also pertinent to mention that the applicant has filed a caveat for issuance of notice to it before passing any order. Therefore the applicants are contesting the litigation tooth nail before this forum. In this backdrop respondent has claimed no default within the meaning section 8(1) read with section 3(12) of the Code is deemed to have occurred. It is also pertinent to notice that execution proceedings for enforcement of the award have also been initiated and are pending for consideration of the Hon ble Delhi High Court on 12.5.2017. 24. In the face of the aforesaid facts we find that there is complete answer to the claim made by the applicant in terms of section 8(2)(a) read with section 9(1) of the 'Code' which bars initiati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty; 21. Clause (a) of sub-section (2) of Sec. 8 relates to an existence of dispute, as quoted herein: 8 (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor- (a) existence of a dispute, if any, and record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute; (b) the repayment of unpaid operational debt- (i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor. Explanation.- For the purposes of this section, a demand notice means a notice served by an operational creditor to the corporate debtor demanding repayment of the operational debt in respect of which the default has occurred. 22. From clause (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispute, apart from other disputes decree and award of Tribunal has been shown as record of default. 25. In Kirusa Software Private Ltd. Vs. Mobilox Innovations Private Limited - Company Appeal (AT) (Insolvency) 6 of 2017, this Appellate Tribunal by judgment dated 24th May, 2017 while deciding the meaning of 'dispute' and existence of dispute' held: 32. There may be other cases such as a suit relating to existence of amount of debt stands decided and decree is pending for execution. Similarly, existence of amount of debt or quality of goods or service for which a suit have been filed and decreed; award an has been passed by Arbitral Panel, though petition under Section 34 of Arbitration and Reconciliation Act, 1996 may be pending. In such case the question will arise whether a petition under Section 9 will be maintainable particularly when it was a suit or arbitration proceeding is not pending, but stand decided? Though one may argue that Insolvency resolution process cannot be misused for execution of a judgement and decree passed in a suit or award passed by an arbitration Tribunal, but such submission cannot be accepted in view of Form 5 of Insolvency Bankru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The words 'such application' refer to the application contemplated in the first situation which is clear from the use of the expression 'such' which in the context is used to describe something which has been referred to earlier. On the plain language the refusal contemplated in the section is the refusal by the Court where the application is filed and not by the appellate Court. Section 37(1)(b) of the Act provides for appeal against an order 'setting aside or refusing to set aside an arbitral award under Section 34'. The reference in the expression 'refusing to set aside an arbitral award' is obviously to the order of refusal of the application under Section 34 by the Court of first instance because Section 34 refers to an application made before the Court of first instance. From the scheme of Sections 34, 36 and 37 it is clear that the refusal of the application referred to in Section 36 for setting aside the award is the application filed under Section 34. An interpretation that Section 36 refers to the refusal of the application at the stage of the appeal is not possible without straining the language of Section 36 and adding the word 'final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e term award should generally be reserved for decisions that finally determine the substantive issues with which they deal. This involves distinguishing between awards, which are concerned with substantive issues, and procedural orders and directions, which are concerned with the conduct of the arbitration. Procedural orders and directions help to move the arbitration forward; they deal with such matters as the exchange of written evidence, the production of documents, and the arrangements for the conduct of the hearing. They do not have the status of awards and they may perhaps be called into question after the final award has been made (for example as evidence of 'bias', or 'lack of due process'). 11. In International Commercial Arbitration the general characteristics of an award are stated. In Para 1353 it is stated as follows: 1353.-An arbitral award can be defined as a final decision by the arbitrators on all or part of the dispute submitted to them, whether it concerns the merits of the dispute, jurisdiction, or a procedural issue leading them to end the proceedings. This is subsequently elucidated through four aspects of an award, namely: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time bound manner for maximisation of the value of assets of such person and to promote the entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of the Government dues. ' Insolvency resolution process is not a money suit for recovery nor a suit for execution for any decree or award as distinct from Section 35 of the Arbitration Act, which relates to execution of an award. For the reasons aforesaid, while we hold that Corporate Insolvency Resolution Process can be initiated for default of debt, as awarded under the Arbitration Act, we further hold that the finding of the learned Adjudicating Authority that it is an executable matter is against the essence of the I B Code. The question of availing any effective remedy or alternative remedy, in case of default of debt for an 'operational creditor', as held by the learned Adjudicatory Authority, is not based on any sound principle of law. For the reasons aforesaid, the Impugned order passed by the learned Adjudicating Authority cannot be sustained. 34. The issues Nos. 1 and 2 as framed and noticed above are, thereby answered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to imply many other things as the definition is not exclusive. ' 39. However, we find that the aforesaid issue has not been decided by the learned Adjudicating Authority, having not entertained the application under Sec. 9, on other ground of 'existence of dispute'. 40. For the reason aforesaid, while we hold that the finding of the learned Adjudicating Authority insofar as it relates to 'award', 'default of debt' and the 'alternative remedy', are not based on sound principle and against the provisions of law, we refrain to decide the question as to whether the 1 st appellant is an 'operational creditor' or not which is first required to be decided by learned Adjudicating Authority. 41. For the aforesaid reasons, we set aside the impugned order dated 24th March, 2017 and remit the case to the learned Adjudicating Authority, Principal Bench, New Delhi to decide as to whether the 1st appellant is an 'operational creditor' and if so, whether the application under Sec. 9 preferred by the appellants is complete for admitting and initiation of corporate insolvency resolution process. If the first question relating to status o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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