Monday, 26 October 2020

SBL Construction Private Limited Vs. IVRCL Limited - AA directed RP to admit the claim of a creditor on the basis of Arbitral Award

 NCLT Hyderabad (01.04.2019)  SBL Construction Private Limited Vs. IVRCL Limited [IA No.403 of 2018. In CP (IB) No.294/07/HDB/2017]

The issue before the AA was whether the claim of a party which is based on an arbitral award, against which an appeal was pending, is admissible or not .The AA noted that in view of moratorium in respect of the CD, the said appeal is stalled. It was observed that the claim is based on a valid and legally issued award under the Arbitration and Conciliation Act. 1996, and hence RP is not right in rejecting legally tenable claim of the applicant. Accordingly , it directed the RP to admit the claim, subject to the condition that the claimant submits an irrevocable undertaking to the effect that he will place back the amount in case the appeal relating to arbitration proceeding is decided against his favour. 


Excerpts of the order;

6. It is further submitted that, when both parties raised disputes then both the parties agreed to refer the matter to the arbitral proceedings and the arbitral proceedings commenced on 14.04.2016. In the course of proceedings, the claimant submitted  its claim along with supporting documents. The claimant raised  total claim of Rs.26.02 crores. Some of the claims were modified/ reduced to some extent during the course of the proceedings. / The Respondent submitted counter with documents in support thereof  and also raised a counter claim for Rs.858.10 lakhs. The Hon'ble  Arbitrator after considering all the issues raised by both the parties  passed award on 11.08.2017, and awarded along with interest at  14% p.a. from 14.04.2016 to till the date of realization for an amount of Rs.6,25,02,676/- plus security deposit amount of Rs.1,98,00,117/ aggregating to a total amount of Rs.8,23,02,793/--

 

7. It is submitted that against the award, the Respondent filed C.O.P.No. 250 /2017  before the XXIV Addl. Chief Judge-cum Commercial Court, City Civil Court, Hyderabad and the same is  still pending before the Hon'ble Court. 


8. The Hon'ble National Company Law Tribunal passed an order appointing an Interim/Resolution Professional for the Respondent  Company. The Interim Resolution Professional has called for the  claims from  the creditors of the Respondent Company. Accordingly, the claimant has filed claim in the prescribed proforma under the Insolvency and Bankruptcy Code on 15.03.2018. 

 

10. In this regard, the claimant humbly submitted that, the Resolution Professional has not issued any notice to the claimant while  adjudicating or deciding the claim of the claimant 


11. It is submitted that the Resolution professional can't sit over the Arbitration award. The award passed by the Arbitrator is binding on the Resolution Professional. The award was passed after hearing both the parties and the Arbitrator after going through the documents submitted by both the parties come to a conclusion that the Respondent Company is liable to pay an amount of Rs.8,23,02,793/- plus interest till the date of realization to the claimant. The Resolution Professional has failed to verify the claim in accordance with the rules prescribed under the Insolvency and Bankruptcy Code and the Contract Act. The Resolution Professional has not even given any observation or remarks in the  admitted column published in the website. It is also duty of the  Resolution Professional to inform to the claimant either by way of e-mail or by way of order to the claimant whether the claim was accepted or rejected. Before verification of the claim, it is the duty of the Resolution Professional to give notice to the Claimant even that also was not done by the Respondent. Till date, the Resolution Professional has not given its observations on our claim dated 15.03.2018. In addition the Resolution Professional has been unfairly denied an opportunity to participate at the time of verification. He has completely violated the natural justice. 


12. At the further outset, the RP submits that the present Application ought to be dismissed in entirety as the same is not maintainable in law. The RP submits that there are disputes pending in respect of the Applicant's claim, which fact has clearly been admitted by the Applicant in his Application itself. 


13. The RP most humbly and respectfully submits that the present Application is not maintainable as the Hon'ble Tribunal does not have the jurisdiction to decide on the merits of the claim filed by any Creditor. The jurisdiction of the Tribunal under section 60(5) of the Code to decide on any claim made by or against the Corporate Debtor can only be invoked once the claim of the claimant has been rejected by the Resolution Professional. However, in the present case, the claim of the Applicant is not even a claim as the same is pending determination before a court of law. 

 

15. The RP states that on March 14, 2018, the Applicant filed its claim  in Form B (“Claim Form”) as prescribed under CIRP Regulations.  The basis of the claim filed by the Applicant was an award dated  August 11, 2017(“Arbitral Award”) passed by the Ld.Arbitrator in the Arbitration dispute raised by the Applicant under the Sub Contract Agreement dated December 04, 2013. 


16. The Applicant has also mentioned in the Claim Form that on December 13, 2017, the Corporate Debtor has filed a C.O.P.No.250 of 2017 against the Arbitral Award before the Hon'ble XXIV Additional Chief Judge-cum-Commercial Court, City Civil Courts at Hyderabad(“ACJ Court”). Further, in para 11 at page 6 of the Application, the Applicant has clearly admitted the said C.O.P. is pending 


17. In view of the pendency of the said petition before the ACJ Court at Hyderabad, the RP is not in a position to admit the claim filed by the Applicant as the debt which is being claimed by the Applicant still remains undetermined. 


18. Once the debt is finally determined by the appropriate court or  authority and the same attains finality, only then the RP would be in a position to either admit or deny the claim of the Applicant. 


19. heard both the sides and perused the material on record.

 

20. The point for consideration is whether the rejection of claim of the Applicant /Claimant by the RP is right or not? 


21. It is an admitted fact that the claimant holds and award passed in  his favour to the tune of Rs. 8.23 Crores together with interest 14% P.a from 14.04.2016 till the date of realization on Rs. 6.25  Crores. The award came to be passed by the Learned Arbitrator  appointed with the consent of parties in terms of the Arbitration  clause contained in the agreement entered between the parties. 


22. It is also a fact that the said award is under challenge before XIV Additional chief judge cum Commercial Court in C.O.P No. 250/2017 and the same is pending adjudication solely on the ground that the award is under challenge the RP has disallowed the Claim of the Applicant. Nevertheless, the pertinent point here is in view of the Moratorium U/s 14 of IB Code, in respect of Corporate Debtor, the Appeal pending before XIV ACJ court, Hyderabad, is also stalled until the period of CIRP. The claim submitted by the Applicant is based on a valid and legally issued award under the Arbitration and conciliation Act, 1996 hence, RP is not right in rejecting legally tenable claim of the Applicant. 


In such circumstances, the RP is hereby directed to admit the claim of the Applicant subject to the condition that the Applicant/claimant submit an irrevocable undertaking by way of Affidavit to the effect that he will place back the amount if in case, the Appeal relating to Arbitration proceeding is decided against Applicant's favour. 


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The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.