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TMI Blog2021 (8) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... L 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 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 37 of the Act is pending, then insolvency proceedings cannot be initiated. In this case, on the date of filing of this Application under Section 9 of Insolvency and Bankruptcy Code, 2016 i.e. on 29.02.2020, no proceeding under Section 34 or Appeal under Section 37 of the Act was then pending against the Operational Creditor (although restoration application of Appeal was pending). So on the facts, we hold that above ruling is in favour of the Operational Creditor rather than the Corporate Debtor. In short, Operational Debt become due and payable on 29.02.2012 i.e. on the date of which the Learned District Judge confirmed the award under Section 34 of A C Act. The Corporate Debtor filed Appeal under Section 37 of the Act. It was dismissed in default. 90 days thereafter, on 14.02.2020, Operational Creditor gave the Corporate Debtor notice under Section 9 of the Insolvency and Bankruptcy Code, 2016. On 28.02.2020. 11. What we gathered from the above facts is that the operational creditor sent a Demand Notice three months after the corporate debtor s appeal was dismissed by Hon ble High Court. As soon as the Corporate Debtor received the Demand Notice, its officers swun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 under Sections 34 and 37 has taken place. It is contended that the Adjudicating Authority has ignored the fact that the steps taken for the challenge of the Arbitral Award would indicate that the Operational Debt , is a disputed one. It is submitted that the Section 9 Application was affirmed on 29.02.2020 and was filed only on 02.03.2020; on which date the Appeals stood restored; the finding of the Adjudicating Authority that there was no dispute pending on the date on which the Application was filed, is factually incorrect; the Appeal under Section 37 stood restored and since upon restoration it relates back to the date of filing i.e. August 2012, there was a Pre-Existing ongoing Dispute pending Adjudication when the Demand Notice under Section 8 of the Code was issued on 14.02.2020 and also on 02.03.2020. The Learned Counsel placed reliance on the Judgment of the three Judge Bench of the Hon ble Supreme Court in the case of Vareed Jacob Vs. Sosamma Geevarghese Ors. repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... default was 22.11.2019 i.e. date of dismissal of the Appeal under Section 37 of the A C Act, 1996. It is submitted that the date of default would be the date when the Learned District Judge confirmed the Award under Section 34 of the A C Act, 1996 i.e. 29.02.2012. It is correctly mentioned by the Operational Creditor that the Operational Debt became due and payable on 11.05.2010 but has purposely mentioned a wrong date of default as 22.11.2019. Hence, the Application is clearly time barred as the same ought to have been filed on 11.05.2013 or on 01.03.2015 i.e. three years from the date when the Operational Debt became due and payable by the Corporate Debtor i.e. 11.05.2010 (date of Award) 29.02.2012 (date of dismissal of Section 34 of the A C Act, 1996). The Learned Counsel placed reliance on the Judgment of the Hon ble Supreme Court in Vashdeo R. Bhojwani Vs. Abhyudaya Co-operative Bank limited and Anr. (2019) 9 SCC 158 , and in the Judgement of V. Padmakuamr Vs. Stressed Assets Stabilisation Fund Anr. CA (AT) (Insolvency) No. 57 of 2020. 3. Submissions of the Learned Counsel appearing for the Operational Creditor: Since the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the aforestated arguments, the point which arises for determination is: whether there is automatic revival of interlocutory orders with the restoration of the suit unless the circumstances occurring during the interregnum or the orders passed by the court speak to the contrary. It is submitted that the Judgement does not deal with the doctrine of relation back and is only limited to the effect of the Interim Orders upon the restoration proceedings. The majority view of (Hon ble Justice V.N. Khare and Hon ble Justice S.H. Kapadia) opined that upon restoration, Interlocutory Orders would stand revived, unless the Court expressly directs to the contrary. It is submitted by the Learned Counsel that, while differing with the majority s conclusion regarding automatic revival of Interlocutory Orders, Hon ble Justice S.B. Sinha had given a separate view and had importantly discussed below the aspects with respect to which no views were expressed by the majority: 62. It is also of some importance that there exists a view that an order of dismissal of a suit does not render an order of attachment void ab initio as a sale of property under order of attachment would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 11 years in calculating the period of prescriptive title claimed to have been earned by the defendant The Learned Counsel based on the above legal discussions, submitted that four Principles emerge from the doctrine of relation back which are detailed as here under: (i) The said doctrine is not an absolute one and has been consistently applied with applicable limitations in law and fact. (ii) There is no uniformity and straight- jacket formula on the applicability of this doctrine as the same is required to be construed on a case-to-case basis. (iii) This doctrine does not impact the rights accrued in the interregnum period. (iv) No statutorily accrued/vested rights can be disturbed by the use of this doctrine. It is strenuously argued that Section 238 of the Code has an overriding affect and the only defence available with the Corporate Debtor is that the dispute needs to be pre-existing on the date of issuance of Demand Notice. The Learned Counsel also further submitted that filing of an Execution Petition for a decree and filing of an Application under Section 9 of the Code are alternate legal remedies and can proceed concurrently. It is an accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding of the OMDC for setting aside the Award, particularly when the application for restoration filed within time is still pending for disposal. (h) Even on 24th February 2020 the appellant OMDC Ltd. mentioned the said restoration application before the Hon ble Appeal Court upon notice to Advocate for the Jai Balaji Industries Ltd. and the Hon ble Appeal Court has been pleased to direct that the said application will appear in the list on 25.02.2020 and thus the whole matter is sub Judice before the Hon ble Appeal Court of the Hon ble High Court at Calcutta. (i) It is also a fact that Jai Balaji Industries Ltd. even filed a Money Execution Case bearing No. 61 of 2010 before the learned 2nd Court of the Civil Judge, Senior Division at Barasat, North 24- Parganas and during pendency of the appeal the said Execution Application remains stand still as per the provisions contained in section 36 of the Arbitration and Conciliation Act 1996 as it originally stood when the appeal was filed. (j) Jai Balaji Industries Ltd. cannot proceed with multifarious proceeding in different proceedings for executing the same award. 6. Subsequently, the Application for restoration, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said conditions is lacking, the application would have to be rejected (Emphasis Supplied) 8. The Appeal under Section 37 of the A C Act, 1996, was restored on 02.03.2020. The majority view of the three Judge Bench in Vareed Jacob (Supra) reads as follows:- 17. In the case of Shivaraya v. Sharnappa it has been held that the question whether the restoration of the suit revives ancillary orders passed before the dismissal of the suit depends upon the terms in which the order of dismissal is passed and the terms in which the suit is restored. If the court dismisses the suit for default, without any reference to the ancillary orders passed earlier, then the interim orders shall revive as and when the suit is restored. However, if the court dismisses the suit specifically vacating the ancillary orders, then restoration will not revive such ancillary orders. This was a case under Order 39. 18. In the case of Saranatha Ayyangar v. Muthiah Moopanar it has been held that on restoration of the suit dismissed for default all interlocutory matters shall stand restored, unless the order of restoration says to the contrary. That as a matter of general rule on restoration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number, the Appellant is restored to the position when the Court has initially dismissed the Appeal for default, unless the Court expressly or by implication excludes the operation of any Orders passed during the period between the dismissal of the restoration. 10. The minority view relied upon by the Learned Counsel appearing for Operational Creditor is not applicable to this case. The binding Judicial Precedent is the view taken by the majority. That constitutes the Rule of the Court. Having regard to the interpretation of the ratio laid down in the aforenoted Judgement that once an Appeal is restored to its original number, the fact that Interlocutory Orders would stand revived unless otherwise directed, further strengthens the case of the Appellant herein. We are of the considered view that the ratio of majority view of Vareed Jacob (Supra) is applicable to the facts of this case and hence, we hold that once an Appeal under Section 37 of the A C Act, 1996, is restored it relates back to the original date of filing. 11. Having observed so, we are of the view that the contention of the Learned Solicitor General that the Application under Section 9 is barred by Limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk 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 [payment] of the Operational Debt in respect of which the default has occurred. (Emphasis Supplied) 15. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an arbitral award for a small amount of say, two lakhs of rupees, cannot possibly jeopardise an otherwise solvent company worth several crores of rupees. Such a company would be well within its rights to state that it is challenging the arbitral award passed against it, and the mere factum of challenge would be sufficient to state that it disputes the award. The code cannot be used in terrorem to extract this sum of money of rupees two lakhs even though it may not be finally payable as adjudication proceedings in respect thereto are still pending. The object of the Code, at least insofar as operational creditors are concerned, is to put the insolvency process against a corporate debtor only in clear cases where a real dispute between the parties as to the debt owed does not exist. Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353 : (2018) 1 SCC (Civ) 311, followed LKM Investment Holdings (Pte Ltd. v. Cathay Theatres Pte Ltd., 2000 SGHC 13, distinguished Ramsay Health Care Australia Pty Ltd. v. Adrian John Compton, 2017 HCA 28 (Aust), disapproved Victory House General Partner Ltd. v. RGB P C Ltd., 2018 EWHC 1143 (Ch); Lim Poh Yeoh v. TS Ong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. The ratio in the aforenoted Judgement is squarely applicable to the fact of the instant case as it can be seen from the record that the entire basis for the Section 8 Notice is that the Appeals preferred by the Corporate Debtor under Section 37 of the A C Act, 1996 were dismissed for default on 22.11.2019. The issue that was determined in the aforenoted Judgement K. Kishan (Supra) is that the Code cannot be invoked in respect of an Operational Debt where an Arbitral Award has been passed against the Corporate Debtor but which has not yet been finally adjudicated upon. Further, the filing of the Sections 34 37 of A C Act, 1996 against an Arbitral Award shows that a Pre-Existing Dispute which culminates at the first stage of proceeding in an Award, continues even after the Award, at least till the final adjudicatory process under Sections 34 37 is completed. In the instant case, the Corporate Debtor filed an Application for restoration on 17.12.2019, the Demand Notice was issued on 14.02.2020 and the Section 37 Appeal has been restored to its original number on 02.03.2020. We observe that the Arbitration Proceedings are still pending before the Hon ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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