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TMI Blog2024 (6) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... sent respondents, would be restricted to the assets of late Shri B.L. Passi, to the extent to which they would inherit the same. Be that as may, a distinction cannot be carved out, in respect of the debt , award in respect of which is claimed in the arbitration proceedings, for the purpose of continuation of the arbitral proceedings, between the liability of the principal borrower/ guarantor who have been granted a moratorium and the others who have not approached the NCLT, as the word debt , as used in Sec. 96 of the IB Code, has to be held to be the debt , in its entirety and not otherwise. Sec. 138 of the I B Code and its effect as enumerated in Sec. 139, have no bearing upon the matter which is being considered in the present petition. It is also necessary to note that there is no provision in the A C Act, 1996 for splitting up of arbitration proceedings, by conceiving of a situation of the arbitration proceedings being stayed against some of the parties and going ahead against some. The arbitration proceedings will have to be decided in their entirety against all the parties and the entitlement of the claimant and the liabilities of the respective respondents, will be determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in view of Sec. 96 of the IB Code, a moratorium had come into effect due to the above proceedings on account of which the Arbitral proceedings were required to be kept in abeyance. The learned Arbitrator by the order dated 11/1/2021 (pg. 64) accorded the benefit of the moratorium to Mr. Tarun Kapoor, the proprietor of SMC and one of the guarantors Smt. Pavan Kapoor and proceedings against them were directed to remain in abeyance, but the arbitration proceedings against the respondents 4 5 were directed to continue. iv) The NCLT proceedings continued and the Member Judicial (NCLT) New Delhi, Court III, by the order dated 04.01.2021 (Page-52) appointed Mr. Kamal Agarwal as the Resolution Professional (RP) and also passed an interim moratorium order in the following terms: 10. It is made known to everyone that one filing this application by the Applicant/Creditor the interim-moratorium commences as is stipulated under Section 96 (1)(a) in relation to all the debts of the personal guarantor and shall cease to have effect on the date of admission of this Application and during the interim moratorium period the following is prohibited: a. Any pending legal action or proceedings in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be dismissed by the order dated 16.12.2021 ( pg. 69 ) as a result of which the proceedings continued. ix) On 06.05.2022 the arbitrator passed an order and disposed of the present petitioners application under Section 17 of the ANC Act by restraining the respondents 1 to 3 in the arbitral proceedings from disposing of certain assets. x) On 19.09.2022 present respondent No. 1 (respondent no. 4-A in arbitration proceedings/one of the legal heirs of late Shri B.L. Passi) filed application before the learned sole arbitrator seeking an indefinite stay on the arbitration proceedings in view of the mandate of Section 96 (1) (b) (i) of the Insolvency Code. xi) By an order dated 07.10.2022 ( pg. 43 ) which is impugned herein, the learned Sole Arbitrator directed the arbitration proceedings to remain in abeyance as long as the moratorium under Section 95 of the Insolvency Code operated. xii) An application filed by the present petitioner to vacate the order dated 17.10.2022 came to be rejected by the order dated 20.03.2023, ( pg. 49 ) which is also impugned. xiii) It is stated at the bar that a settlement agreement came to be executed between the petitioner and Rameshwar Sweets and Namkeens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principal debtor as the liability of the principal debtor and that of the guarantor is coextensive. 3.6. Reliance is also placed upon him on State Bank of India Vs. V. Ramkrishnan and Anr. (2018) 17 SCC 394 , to contend that the object of the moratorium is not to enable the guarantor to escape from the liability. 3.7. Reliance is also placed upon Axis Trustee Services Limited Vs. Brij Bhushan Singal and Anr. 2022 SCC Online Del 3634 to contend that the language of Section 96 (1) of the IB Code cannot be stretched so as to include all co-guarantors within the ambit of the interim moratorium and the expression all the debts in Section 36 (1) (a) has to be in respect of all debts of a particular debtor and would not include guarantors. 3.8. By relying upon Dilip B. Jiwrajka Vs. Union of India 2023 SCC OnLine SC 1530 he contends that the expression debt as used in Section 96 would indicate that it is debt centric, as against which the debt in so far as Section 14 is concerned is creditor centric. 3.9. He therefore submits that impugned order passed by the learned arbitrator cannot be sustained and are liable to be quashed and set aside. 4. learned counsel for the respondent No. 1 rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no warrant for such an approach. Section 37 makes certain orders of the Arbitral Tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating its grievances against the award including any in between orders that might have been passed by the Arbitral Tribunal acting under Section 16 of the Act. The party aggrieved by any order of the Arbitral Tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The Arbitral Tribunal is, after all, a creature of a contract between the parties, the arbitration agreement, even though, if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the Arbitral Tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution. Such an intervention by the High Courts is not permissible. 46. The object of minimising judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orpn. Ltd. v. Emta Coal Ltd., (2020) 17 SCC 93 (supra) itself has clarified what the patent illegality in Deep Industries Ltd./ ONGC means in the following words : 3. According to Shri Viswanathan, one look at the joint venture agreement and the arbitration clause therein would make it clear that the third party in this case had not been referred to at all, as a result of which there is a patent lack of inherent jurisdiction within the meaning of para 17 of Deep Industries Ltd. [Deep Industries Ltd. v. ONGC, (2020) 15 SCC 706] 4. We are of the view that a foray to the writ court from a Section 16 application being dismissed by the arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack in inherent jurisdiction. A patent lack of inherent jurisdiction requires no argument whatsoever it must be the perversity of the order that must stare one in the face. 6.3. The position has been further clarified in India Glycols Limited and Another / Micro and Small Enterprises Facilitation Council, Medchal, (supra) in the following words : 14. Mr. Parag P Tripathi, senior counsel appearing on behalf of the appellant sought to urge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if a decree/award is passed against the surety/guarantor, then such surety/guarantor, could in turn sue the principal borrower for the recovery of such debt, [ see Jagannath Ganeshram Agarwale Vs. Shivnarayan Bhagirath (supra) and Mukesh Gupta Vs. SICOM Ltd. (supra)]. 9. A debt , is defined in sec. 3 (11) of the IB Code to mean a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. It is material to note that sec. 3 (11) of the IB Code when it defines debt , states it to be a liability or obligation in respect of a claim which is due from any person . The very use of the expression any person , would mean that no distinction can be drawn on the basis of, from whom the debt is due, a principal borrower or a guarantor. Sec. 96 of the IB Code, also uses the expression all the debts , in clause (a) of subsection (1) and any debt , in sub-clauses (I) (ii) of clause (b) of sub-section (1). When Sec. 96 of the IB Code, speaks of a moratorium in respect of any debt , the same would mean the entire debt, irrespective from whom it is due. 9.1. It would be equally trite to say that Sec. 14 of the IB Code would have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pter III of Part II, this is what the hon ble Apex Court said : 57. Section 96, as its marginal note indicates, deals with an interimmoratorium . In terms of section 96, the interim moratorium takes effect on the date of the application. In other words, the very submission of an application under section 94 or section 95 triggers the interim moratorium which then ceases to have effect on the date of the admission of the application (under section 100). The consequences which flow from an interim moratorium are specified in clause (b) of sub-section (1) of section 96. The impact of the interim-moratorium under section 96 is that a legal action or proceeding pending in respect of any debt is deemed to have been stayed and the creditors or the debtors shall not initiate any legal action or proceedings in respect of any debt. The crucial words which are used both in clause (b) (i) and clause (b) (ii) of sub-section (1) of section 96 are in respect of any debt . These words indicate that the interim-moratorium which is intended to operate by the Legislature is primarily in respect of a debt as opposed to a debtor. Clause (b) of subsection (1) indicates that the purpose of the interim-mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the debt of the other guarantors, in this case the legal heirs of the original respondent no. 4, Mr. B. L. Passi. Though it can be said that the liability of the original respondent no. 4, late Mr. B.L. Passi, was co-terminus with the principal borrower and the other guarantors, the liability of the present respondents, would be restricted to the assets of late Shri B.L. Passi, to the extent to which they would inherit the same. Be that as may, a distinction cannot be carved out, in respect of the debt , award in respect of which is claimed in the arbitration proceedings, for the purpose of continuation of the arbitral proceedings, between the liability of the principal borrower/ guarantor who have been granted a moratorium and the others who have not approached the NCLT, as the word debt , as used in Sec. 96 of the IB Code, has to be held to be the debt , in its entirety and not otherwise. 11. Sec. 138 of the I B Code and its effect as enumerated in Sec. 139, have no bearing upon the matter which is being considered in the present petition. 12. It is also necessary to note that there is no provision in the A C Act, 1996 for splitting up of arbitration proceedings, by conceiving ..... X X X X Extracts X X X X X X X X Extracts X X X X
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