2018 (4) TMI 349 - AT - Insolvency and Bankruptcy

Appellate Tribunal Upholds Jurisdiction Limitation During Insolvency Moratorium

The Appellate Tribunal upheld the Adjudicating Authority's decision, ruling that it lacked jurisdiction to set aside the Indian Council of Arbitration's ... Corporate insolvency proceedings - Held that:- Indian Council of Arbitration cannot proceed during the moratorium period. Set aside the order passed by the Indian Council of Arbitration, declare that the Arbitration Tribunal/ Indian council of Arbitration cannot proceed with the arbitral proceeding pending between the parties. Both the parties are directed not to pursue arbitral proceeding before the Arbitration Tribunal/ Indian Council of Arbitration till final order is passed by the Adjudication Authority on the resolution plan and completion of the moratorium period. However, it will open to both of them to file their respective claim and counter claim, if any, before the Resolution Professional. Issues:- Jurisdiction of Adjudicating Authority to set aside order passed by Indian Council of Arbitration during moratorium period- Impact of moratorium on arbitral proceedings between Corporate Debtor and Financial Creditor- Applicability of Insolvency and Bankruptcy Code over Arbitration and Conciliation Act, 1996Analysis:1. The appeal was filed by the Corporate Debtor against the order rejecting their application to set aside the order passed by the Indian Council of Arbitration during the moratorium period. The Adjudicating Authority held that it lacked jurisdiction to interfere with the arbitral proceeding.2. The Corporate Debtor argued that after the declaration of moratorium and appointment of the Resolution Professional, the arbitral proceeding between them and the Financial Creditor should not proceed as per Section 14 of the Insolvency and Bankruptcy Code, 2016 (I&B Code).3. The Indian Council of Arbitration decided to continue the arbitral proceeding despite the moratorium order, leading to a dispute between the parties regarding the effect of the moratorium on arbitration proceedings.4. The Financial Creditor contended that the moratorium should not affect the Arbitration Tribunal's authority to adjudicate the dispute, opposing the Corporate Debtor's stance.5. The Appellate Tribunal heard arguments from both parties and examined the record before reaching a decision on the matter.6. The Tribunal concurred with the Adjudicating Authority's decision, stating that it was correct in ruling that it did not have the jurisdiction to set aside the Indian Council of Arbitration's order during the moratorium period.7. Citing a Supreme Court judgment, the Tribunal emphasized that the Insolvency Code mandates a moratorium on suits or proceedings against Corporate Debtors upon admission of an insolvency petition, rendering any arbitration initiated post-moratorium non est in law.8. The Tribunal extended this principle to the pending arbitral proceeding between the Corporate Debtor and the Financial Creditor, directing both parties to refrain from pursuing arbitration until the completion of the moratorium period.9. The Tribunal clarified that all creditors, including the Financial Creditor, must submit their claims to the Resolution Professional during the Corporate Insolvency Resolution Process, as specified under the I&B Code.10. By virtue of Section 238 of the I&B Code, which overrides other laws, including the Arbitration and Conciliation Act, 1996, the Tribunal affirmed the Code's supremacy in such matters.11. In conclusion, the Tribunal upheld the decision that the arbitral proceeding between the parties cannot proceed during the moratorium period, directing them to file claims before the Resolution Professional instead. The appeal was disposed of with these directives and observations, without imposing any costs.