NCLT Mumbai-5 (29..01.2021) in Atul Rajwadkar Vs. HDFC Bank Limited & Ors. [I.A. 2189/2020 in C.P. 2925/I&B/MB/2018]
In view of this, the Bench is of the considered view that the arbitral order passed on 23 of January, 2020, post admission of CIRP against the Corporate Debtor on 17.09.2019, is in violation of objective of the Code and is in contravention of moratorium under Section 14 of the Code
Excerpts of the order;
# 1. This Application is filed under Section 35(3) r/w Section 35 (1)(k) and Section 60 (5) of Insolvency and Bankruptcy Code, 2016 along with rule 11 of NCLT rules, 2016 seeking the following reliefs:
a) praying to declare the Arbitral Award dated 23.01.2020 having been passed in non-compliance of Section 14 of the Insolvency and Bankruptcy Code, 2016 is of no legal effect;
b) in the alternative, grant approval to the Applicant to file and pursue an application under section 34 of the Arbitration and Conciliation Act, 1996 before the appropriate court of law on behalf of Enestee Engineering Limited challenging the Arbitral Award dated 23.01.2020.
# 2. The admission order of the CIRP of the Corporate Debtor was passed on 17.09.2019. Further, in compliance of the admission order, public announcement was made on 30.09.2019. During the CIRP period, the RP received a demand cum notice dated 25.09.2019 invoking an arbitration for a sum of Rs. 5,14,772/- from HDFC bank, the Respondent No. 1 herein.
# 3. On 07.10.2019, Respondent No. 1 vide letter bearing LOT-44/1ST ARB Notice/25 appointed Mr. Abhijit Tikar to adjudicate the dispute between the parties. Mr. Abhijit Tikar accorded his consent to act as sole arbitrator and issued notice to both the parties to appear on 08.11.2019. The Applicant intimated about the initiation of CIRP vide email dated 23.11.2019 to the Respondent No. 1 herein. On 30.11.2019, the Corporate Debtor received another notice from the learned Arbitral Tribunal for appearance and filing of written statement. The Respondent No. 1 who was informed about the initiation of the CIRP against the Corporate Debtor has not informed the learned arbitrator about the admission order passed against the Corporate Debtor.
# 4. The learned Arbitral Tribunal proceeded to pass ex-parte award on 23.01.2020 in favour of the Respondent No. 1 and award an amount of Rs. 5,42,849/- along with Rs. 3089.51 towards interest and an amount of Rs. 16,500 towards costs along with interest @ 15.99% p.a. was passed. The copy of the impugned arbitral order award was served on the Corporate Debtor on 26.08.2020. The impugned award was passed during the moratorium under Section 14 of the Code. The impugned order was passed in violation of the Section 14 of the Code.
# 5. The Applicant upon receipt of the notice have informed the Respondent No. 1 vide letter dated 29.01.2020 to file the claim with the RP and not to proceed with arbitration and inform the Respondent No. 1 not to proceed with the arbitration, in view of the moratorium period and ongoing CIRP of the Corporate Debtor.
# 6. The order of liquidation of the Corporate Debtor was passed on 16.09.2020 in pursuance of the order of liquidation order on 16.09.2020 a public notice was published on 16.09.2020 inviting the claims of the Corporate Debtor. The Respondent No. 1’s Counsel issued notice on 28.09.2018 demand payment of arbitral award. The applicant vide letter dated 21.10.2020 informed the counsel for the Respondent No. 1 of the liquidation order and requested to submitted his claim before the liquidator and also reiterated that the impugned order was passed in violation of the moratorium as on 17.09.2019.
# 7. The Applicant further submits that the incompliance of the strict time lines leading to barring of remedy, he has made a formal application under Sec. 34 of the Arbitration & Conciliation Act 1996, as per the prescribed period of limitation. The Applicant seeks prior permission of the Tribunal under section 33(5) and 35 (1)(k) of the Code.
# 8. Findings:
a. The impugned arbitral award was passed on 23.01.2020. In the instant case, the Respondent No. 1 initiated arbitration proceedings against the Corporate Debtor on 07.10.2019, which is after the order of admission of the CIRP against the Corporate Debtor on 17.09.2019. The Applicant immediately informed the counsel of the Respondent No. 1 vide email on 23.11.2019 that there is an order of admission passed against the Corporate Debtor on 17.09.2020 and that there is a moratorium imposed in view of the ongoing CIRP imposed against the Corporate Debtor.
b. The learned arbitrator probably was not informed about the initiation of the CIRP and hence proceeded to pass an ex-parte arbitral award on 23.01.2020 during the moratorium period.
c. The Counsel for the Applicant relies upon the Judgement of the Hon’ble Supreme Court in Alchemist Asset Reconstruction Company Ltd.vs. Hotel Gaudavan Pvt. Ltd. and Ors. (2018) 16 SCC 94 wherein it was observed and held that;
"the mandate of the new Insolvency Code is that the moment an insolvency petition is admitted, the moratorium that comes into effect Under Section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against Corporate Debtors. This being the case, we are surprised that an arbitration proceeding has been purported to be started after the imposition of the said moratorium and appeals Under Section 37 of the Arbitration Act are being entertained. Therefore, we set aside the order of the District Judge dated 06.07.2017 and further state that the effect of Section 14(1)(a) is that the arbitration that has been instituted after the aforesaid moratorium is non est in law."
In view of the above judgment of the Hon’ble Supreme Court, any order passed by the Arbitral Tribunal during the ongoing CIRP of the Corporate Debtor is hereby set aside. The arbitral proceeding should not have been proceeded between the parties during the pendency of the moratorium.
d. The Counsel for the Applicant also relied upon the judgment of the tribunal in K.S. Oils Ltd. vs. The State,Trade Corporation of India Ltd. and Ors. [20181 146 SCL 588] wherein it was also observed that after initiation of CIRP, all creditors are required to file claim before the Resolution Professional pursuant to the declaration of the moratorium and public announcement.
e. The RP has informed the Respondent No. 1 to file its claims with the RP and in spite of such request, the Respondent No. 1 failed to inform about the commencement of the CIRP of the Corporate Debtor and hence, such arbitral order is in conflict with the objective of the Code and violates section 14 of the Code. The Respondent No. 1 has not filed his claim before the liquidator, but has issued notice demanding payment in view of the arbitral award dated 28.09.2020.
# 9. Conclusion: In view of this, the Bench is of the considered view that the arbitral order passed on 23 of January, 2020, post admission of CIRP against the Corporate Debtor on 17.09.2019, is in violation of objective of the Code and is in contravention of moratorium under Section 14 of the Code. It is hereby ordered as follows:
a. The arbitral award dated 23.01.2020 is hereby set aside.
b. The I.A. is allowed and disposed off.
-----------------------------------------------------------
No comments:
Post a Comment