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TMI Blog2021 (9) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... trading in shares by one seller and another purchaser, in which context the expression 'shares' would partake the characteristics of 'goods' as envisaged under the Sale of Goods Act, 1930. However, it is not so in the present case and the parties to the present proceedings are governed by a 'Share Purchase Agreement', and non - adherence/violation of the said terms and conditions envisaged thereunder, cannot be, under any circumstances, be treated as a claim in respect of the 'provision of goods' as defined under Section 5(21) of IBC, 2016 - the alleged 'debt' as claimed by the Operational Creditor in the present Application does not fall within the definition of the expression 'operational debt' as defined under Section 5(21) of the IBC, 2016. Whether there is any dispute exists between the parties that exist before the issuance of the Demand Notice by the Operational Creditor - HELD THAT:- There exists a 'dispute' between the parties before the issuance of the Demand Notice itself and the defence raised by the Corporate Debtor on the grounds of existence of a dispute cannot be considered as spurious, hypothetical, illu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) A Company by name M/s. Himachal Sorang Power Limited (HSPL) was set up as a Special Purpose Vehicle (SPV) in order to carry out the project viz. Sorang Tributary Hydro Electric Power with a generation capacity of 100 MW and the said project was awarded to HSPL by the Government of Himachal Pradesh. (ii) The shares of the HSPL are held in the following pattern; (a) By the Operational Creditor - 94.92% (b) NCC Limited - 0.08% (c) IL FS Energy Development Company Ltd. - 5% (iii) Subsequent to the same, HSPL has commenced the work relating to the project by entering into the contracts with several contractors between the year 2007 and 2010. (iv) In or around the year end 2011, when the Corporate Debtor was exploring the possibility of making further investment in power generation in India and was in touch with the various institutions, M/s. IL FS approached the Corporate Debtor with a proposal to invest in the project. At that point of time, HSPL had run out of funds and the Corporate Debtor was cash-constrained to inject more funds into HSPL. and the project. However, since the project was only months away from completion and there were at least ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Operational Creditor pursuant to Clause 6.4.1(b)(ii) and then the Corporate Debtor would pay the withheld sum of ₹ 24 crore within seven days from the execution of a Supplementary Implementation Agreement. Thereafter, the Corporate Debtor released to the Operational Creditor a sum of ₹ 15 crore from and out of the aforesaid withheld amount of ₹ 24 crore, while continuing to withhold the balance amount of ₹ 9 crore. (vii) Subsequently, the Supplementary Implementation Agreement was entered into between the Government of Himachal Pradesh and HSPL on 23.05.2016 which accorded permission for the transfer of balance shares to HSPL, in and by which, it was alleged by the Operational Creditor that a sum of ₹ 9 crore was withheld by the Corporate Debtor, which has become due payable to the Operational Creditor. (viii) In the meantime, on 31.12.2014, arbitration proceedings were invoked jointly by the Corporate Debtor and HSPL as Claimants against the Operational Creditor and NCC Limited, on account of several alleged breaches by the Operational Creditor NCC Limited. In the said arbitration proceedings, the Corporate Debtor and HSPL have cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce shareholdings to HSPL (that is, the 'subsequent share sales'), the balance consideration of INR 9 crores withheld by TAQA has to be released to NCCIHL. When NCCIHL demanded the payment of the said sum of INR 9 crores by letter dated 22 June 2016, TAQA sent a reply dated 27 June 2016 contending that it is entitled to set off and adjust the said sum of INR 9 crores against losses and damages suffered by TAQA on account of breaches committed by NCCIHL. A claim for damages is not a claim for an ascertained sum due and damages claimed become payable only when the claim is adjudicated by a competent court or arbitral tribunal. The claim by TAQA for damages is separately considered earlier in this award. The sum of INR 9 crores (which was a part of INR 24 crores) was withheld pending permission from GoHP for transfer of the entire shareholding of NCCIHL in HSPL to TAQA. It is not in dispute that such permission has been received and there is now no impediment for release of the said INR 9 crores by TAQA to NCCIHL. Therefore, the said counterclaim (g) for payment of the withheld part of the sale consideration INR 9 crores is allowed and TAQA is directed to release the said amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny moveable property including stocks and shares and as per the SPA, the Operational Creditor has provided shares and FCD's in HSPL to the Corporate Debtor and the consideration payable to the Operational Creditor for the transaction is very much an operational debt . 7. The Learned Senior Counsel for the Corporate Debtor contended that the present Application is thoroughly motivated and without any basis in law or facts and has been filed only to pressurize and arm-twist the Corporate Debtor to gain an undue advantage in an ongoing dispute between the parties. It was submitted that the claim amount by the Operational Creditor admittedly forms part of the consideration for the transfer of shares from the Operational Creditor to the Corporate Debtor and there are serious and substantial dispute existing between the parties which have arisen subsequent to the Arbitral award and these disputes are in existence even before the issuance of the Demand Notice. The disputes as per the Learned Senior Counsel for the Corporate Debtor, which exist between the parties are summarized herein below; (a) The claim amount forms part of the consideration agreed to be paid by the Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under the Arbitration and Conciliation Act, 1996 in relation to the finality of awards are complete, the present Application under Section 9 of IBC, 2016 cannot be entertained. 10. In order to countenance the said arguments made by the Corporate Debtor, the Learned Senior Counsel for the Operational Creditor submitted that none of the principles contained in the Arbitration Act in respect of enforcement of a foreign award would be applicable in the context of IBC. It was contended that Section 5(6) of IBC, 2016 defines the term dispute and as per the said definition, there is no distinction between an international and domestic arbitration proceedings and consequently no distinction can be drawn between the awards rendered through international and domestic arbitration proceedings. Further, it was submitted that as per the provisions of IBC, 2016 it is immaterial if such arbitration proceedings were held under Part I or Part II of the Arbitration and Conciliation Act, 1996 as amended. In this context, it was also submitted that IBC, 2016 has specifically provided for an order of an Arbitral Tribunal adjudication on the default as being such a record of default and by placi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Pvt. Ltd. in order to say that a domestic award cannot form the basis of an operational debt, since challenge proceedings constitute a 'dispute'. (iv) Usha Holdings LLC Anr. -Vs- Francorp Advisory P. Ltd.; Company Appeal (AT)(Insolvency) No. 44 of 2018, wherein it has been held that the Adjudicating Authority not being a Court, it has no jurisdiction to decide whether a foreign decree is legal or illegal. 12. Heard the submissions made by the Learned Senior Counsel for both the parties and perused the records including the pleadings and the written submission placed on record. From the elaborate submissions made by the Learned Senior Counsel for both the parties, the following issues arise for consideration before this Adjudicating Authority in order to render a finding in the present Application; i. Whether the debt of the Petitioner qualify to be an operational debt in terms of Section 5(21) of IBC, 2016 and as such the Petitioner would qualify to be an Operational Creditor in respect of the Corporate Debtor under the provisions of the IBC, 2016; ii. Whether there is any dispute exists between the parties that exist before the issuance of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in exchange of the shares being transferred by the Operational Creditor. In the present case, as per the SPA, it is the Corporate Debtor who has agreed to buy the shares by paying the money to the Operational Creditor and that the Operational Creditor has not provided any goods to the Corporate Debtor but in turn it is the Corporate Debtor who has agreed to pay the money for the shares held by the Operational Creditor. 17. Further, viewed from another perspective, as to the facts of the present case, the right to claim money from the Corporate Debtor emanates from a SPA dated 19.09.2012, pursuant to which the Corporate Debtor had acquired the shares from the Operational Creditor. The transaction as transpired between the parties could have been treated as an 'operational debt' had it occurred in the 'ordinary course of business' of trading in shares by one seller and another purchaser, in which context the expression 'shares' would partake the characteristics of 'goods' as envisaged under the Sale of Goods Act, 1930. However, it is not so in the present case and the parties to the present proceedings are governed by a 'Share Purchase Agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HL's obligation to transfer the said Subsequent Sale Shares of HSPPL to TAQA India. It is stated that at the material time the no-claim undertaking from NCCIHL referred to above was crucial for TAQA India if it was to transfer its rights and interest in HSPPL and the Subsequent Sale Shares of NCCIHL and the other shares and securities in the form of Fully Convertible Debentures to Greenko for no monetary consideration. TAQA India's letter dated 30 May 2017 clearly noted that the Subsequent Sale Shares (which were originally agreed to be transferred to TAQA India under the SPA) be transferred to Greenko only pursuant to the CAP. TAQA India also stated that if the terms of the CAP were not adhered to, then TAQA India would be entitled to seek return of the Bank Guarantees that had been provided by NCCIHL. 11. As noted hereinabove, in order to implement the CAP, and proceed with the transfer of the Subsequent Sale Shares and other securities to Greenko, the Project Lenders required that NCCIHL and NCC Limited confirm and undertake that NCCIHL and NCC Limited will make no further claims against HSPPL. By way of a letter dated 30 May 2017 to the lenders and HSPPL, NCCIHL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the Hon'ble Court in respect of the treatment of the Bank Guarantees. The Interpleader Suit has been filed to adjudicate rival claims between NCCIHL and TAQA India over possession of the original Bank Guarantees. As has been (and shall be) contended by TAQA India in the Interpleader Suit, TAQA India is entitled to seek return of the Bank Guarantees in view of NCCIHL's breach of its undertaking as set out above. A copy of the order passed by the Hon'ble Bombay High Court in the Interpleader Suit on 29 January 2019 is enclosed with this Reply as Annexure B. Further, as a party to the said Interpleader Suit NCCIHL is already in possession of the relevant documents on the record therein. 20. Perusal of the aforesaid reply which was given by the Corporate Debtor, would prove the fact that certain civil suits were filed by the parties before the Hon'ble High Court of Bombay even before the issuance of the Demand Notice. In any case, it is evident from the documents placed on record that there is pre-existing dispute between the parties. The Supreme Court in the matter of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited; held that the 'existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not adjudicate upon the dispute between the parties. Issue No. (III) 22. In relation to Issue No. iii, an argument was put forth by the Learned Senior Counsel for the Corporate Debtor that the Award being a foreign Award is not enforceable as per the provisions of the Arbitration and Conciliation Act, 1996. Part - II of the Act, 1996 deals with the Enforcement of Certain Foreign Awards . Section 48 of the Act, 1996 postulates certain conditions for Enforcement of Foreign Award, which is extracted hereunder; 48. Conditions for enforcement of foreign awards.- (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that- (a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cution of a foreign award by way of a petition is required to be filed under Section 47 and a foreign award does not become a decree until and unless it passes the muster of Section 47 to 49, only after which it acquires the status of a decree. Only after the Court adjudicates on the enforceability of the foreign award under Section 47 to 49, the foreign award would deem to be a decree of the Court. 24. However, in relation to the enforcement of 'Domestic' award that is not the case; in respect of the 'Foreign' Award, a further declaration is required to be made in respect of its enforcement and admittedly the award in the present case is yet to be enforceable under Section 47 to 49 of the Act, 1996. While this being the fact, and also by taking into consideration the divergent views expressed in this regard by NCLT Hyderabad Bench and Bombay Bench, this Tribunal does not wish to render its finding in relation to the said Issue No. iii and keep it open. 25. In any case, since the Issue Nos. i ii were decided in favour of the Corporate Debtor and against the Operational Creditor and that there exists dispute between the parties and also the 'debt' as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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