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TMI Blog2024 (11) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority ought to have allowed the Application filed by the Corporate Debtor under Section 8 of the Arbitration Act. There is no dispute to the fact that Financial Creditor has unilaterally appointed a sole Arbitrator and sole Arbitrator, however, terminated the Arbitration Proceeding on 26.10.2021 holding that appointment of Arbitrator is contrary to the law laid down by the Hon ble Supreme Court in `Perkins Eastman Architects DPC Anr. Vs. `HSCC (India) Limited [ 2019 (11) TMI 1154 - SUPREME COURT ] reported in Arbitration Application 32/2019. From the law laid down by the Hon ble Supreme Court, it is clear that if an Application under Section 8 of the Arbitration and Conciliation Act, 1996, is filed, the Adjudicating Authority is duty bound to proceed first to decide the Application under Section 7 by recording a satisfaction with regard to their being default or not. The fact that whether Arbitration Proceedings are pending on the date when Section 7 Application is filed or it is sought to be initiated subsequent to filing of Section 7 Application is immaterial. The remedy under Section 7 is a special remedy, keeping the object and purpose of the IBC Code. When it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor failed to maintain financial discipline and made several defaults. First default occurred on 01.05.2019, last part payment was made on 10.02.2020. Corporate Debtor expressed its acknowledgement of outstanding liability vide letter dated 22.08.2019 and 25.05.2022. iv. An Application under Section 7 was filed by the Financial Creditor for Financial Debt of ₹16,89,54,976.03/ . Financial Creditor, unilaterally appointed an Arbitrator to adjudicate dispute between the Parties on 26.07.2019. Sole Arbitrator vide Order dated 26.10.2021 terminated the Arbitration Proceeding, taking the view that appointment of Arbitrator is contrary to the law laid down by the Hon ble Supreme Court. On 23.06.2023, Financial Creditor filed an Application under Section 7 against the Corporate Debtor before the Adjudicating Authority Kolkata bench. v. On 20.12.2023, Corporate Debtor filed its Reply to the Section 7 Application. After filing of the Reply by the Corporate Debtor, an Application was filed being I.A. 542/2024 on 12.03.2024, seeking reference to Arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. The Application filed by the Corporate Debtor was opposed by the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Authority committed error in rejecting the Application filed by the Appellant. 6. Learned Counsel for the Respondent refuting the submission of the Counsel for the Appellant submits that Application seeking reference to Arbitration was not maintainable. Appellant had already filed a Reply to the Petition under Section 7 on 28.12.2023, whereas Application was filed under Section 8 of the Arbitration Act on 12.03.2024. Application was filed by the Corporate Debtor only to delay the proceeding under Section 7. Arbitration Proceeding which was initiated by the Financial Creditor were terminated by the Arbitrator, and even if for the sake of argument, it is assumed that Arbitration initiated in 2019 is still alive, same could not create any bar on the Adjudicating Authority to decide the Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, (for short `The Code or `The IBC ). In view of the Law laid down by the Hon ble Supreme Court in `Indus Biotech Pvt. Ltd. (Supra) Adjudicating Authority is duty bound to advert to the material available along with the Petition under Section 7 to indicate default and record satisfaction as to whether there is a debt and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.] (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof: [Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under subsection (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.] (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. 10. In the present case, the Reply to Section 7 was filed in December ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant is that Financial Creditor itself has initiated Arbitration Proceeding by unilaterally appointed an Arbitrator on 26.07.2019, hence Section 7 Application ought not to have been proceeded and the Adjudicating Authority ought to have allowed the Application filed by the Corporate Debtor under Section 8 of the Arbitration Act. There is no dispute to the fact that Financial Creditor has unilaterally appointed a sole Arbitrator and sole Arbitrator, however, terminated the Arbitration Proceeding on 26.10.2021 holding that appointment of Arbitrator is contrary to the law laid down by the Hon ble Supreme Court in `Perkins Eastman Architects DPC Anr. Vs. `HSCC (India) Limited reported in Arbitration Application 32/2019. The Counsel for the Appellant submits that the termination of the Arbitration can be done only under Section 32 and recusal of Arbitrator from proceeding is not a termination of Arbitration. Corporate Debtor has also referred to Notice given by the Corporate Debtor subsequent to initiation of Section 7 Application for initiating the Arbitration Proceeding. 13. Learned Counsel for both the Parties have referred to the Judgment of the Hon ble Supreme Court in `Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 7 can be kept pending till the adjudication of Arbitration Proceeding is completed. Allowing the Application under Section 8 filed by the Corporate Debtor amounts to asking the Adjudicating Authority to wait till Arbitration Proceedings are decided which is not in accord with the scheme of the IBC and shall defeat the entire purpose and object of the IBC. Adjudicating Authority in the Impugned Order has rightly rejected Application under Section 8 filed by the Corporate Debtor for referring to the dispute between the parties to the Arbitrator. 15. As noted above, the Application under Section 8 was filed much subsequent to the filing of the Reply by the Corporate Debtor. 16. Learned Counsel for the Respondent has referred to the Judgment of Hon ble Delhi High Court in the matter of `Assam Petroleum Ltd. Ors. Vs. `China Petroleum Technology Development Corporation Ors. reported in 2024 SCC OnLine DL 1832, where in Paragraphs 19 and 20 following has been observed: 19. The issue of reference under Section 8 after the period of filing the Written Statement has expired qua the jurisdiction of Civil Courts, came up for consideration in the case of SPML Infra Ltd. v. Trisquare Switch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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