2020 (12) TMI 1021 - HC - Insolvency and Bankruptcy

Appellate court upholds award-holder's claim pre-IBC, directs release of proceeds.

The appellate court confirmed that the award-holder's claim was crystallized by the deposit made by the second appellant before the Insolvency and ... Direction to release and make over the proceeds of account lying with State Bank of India, specialized institutional banking branch, Kolkata with the accrued interest thereon in favour of respondents award/decreeholders - Failure to discharge the obligation of agreement and liability of making reimbursemnt by way of refund of amount collected earlier. Whether an awarded claim deposited by the award-debtor with the executing court can be realised and received by the award-holder to the satisfaction of the award, when the said awarded claim was not a part of the resolution process of the award-debtor, after the resolution plan is approved by the relevant adjudicating authority under the provisions of the said IBC? HELD THAT:- The provisions under Order XXI of the Code of Civil Procedure, it is settled that, is a complete code within the code of 1908. A crystallised decree when remains unsatisfied, to enforce the same, the provisions of the said complete code is available to the beneficiary of the decree to initiate a proper execution proceeding before an executing court having competent jurisdiction. It is equally settled and the time tested proposition that the executing court cannot travel beyond the decree - In the facts of this case, the arbitral award having acquired the character of decree and having been crystallised, the beneficiary of the said award, namely, the respondents award-holders had every right to institute as many as execution proceedings in all possible manners to execute the award until the same is satisfied in its favour. Therefore, the filing of the execution proceeding by the respondents award-holders for execution of the said award is just, proper, lawful and valid. In the present case, the respondents whole-heartedly embrace the order dated March 16, 2009 passed by the appellate court here. There is no impediment to the respondents being permitted to collect the money and receive the same on their undertaking to abandon the appeal. The red herring that has been shown by the appellants herein is the failure on the part of the respondents to lodge a claim pursuant to the advertisement being issued in the insolvency proceedings. Indeed, the respondents could not have lodged any claim, unless the respondents were to exercise any rights pertaining to the Shakespeare Sarani property and such property was still a part of the assets of the insolvent company. Upon the original award-debtor tendering the awarded amount in court, such award-debtor ceased to have any right over the money or the amount tendered and remaining in court. Such money could never revert to the award-debtor and, if the award-holders did not ultimately receive the same, the award-debtor would still have no right to obtain refund thereof. It is for such reason that the judgments cited are of no avail to the appellants herein. The judgment and order impugned does not call for any interference. This court is of the considered opinion that the appeal preferred by the appellants is not maintainable, and devoid of any merit and as such the same is dismissed with costs assessed at ₹ 50,000/-. Issues Involved:1. Validity of the execution of the arbitral award.2. Impact of the Insolvency and Bankruptcy Code (IBC) on the execution of the arbitral award.3. Rights of the award-holder to claim the deposited amount post-IBC resolution plan approval.Detailed Analysis:1. Validity of the Execution of the Arbitral Award:The appeal arises from the order directing the Registrar to release the proceeds of a bank account to the respondents, who are the award-holders. The second appellant, an insolvent company, failed to satisfy an arbitral award dated December 8, 2000, which directed them to pay a sum of Rs. 6,82,62,117/- with interest. The award became a deemed decree under the Arbitration and Conciliation Act, 1996. The second appellant deposited Rs. 13,38,31,477.30/- with the Registrar, Original Side, as directed by the executing court. The appellate court's judgment on March 16, 2009, confirmed that the respondents' claim was crystallized in the money deposited in the executing court.2. Impact of the Insolvency and Bankruptcy Code (IBC) on the Execution of the Arbitral Award:The IBC was promulgated in 2016, and a resolution process commenced for the second appellant on August 30, 2018. The respondents did not submit their claim during the resolution process. The appellants argued that the IBC has a prevailing effect over the arbitral award, and since the respondents did not lodge their claim during the insolvency proceedings, they cannot enforce their claim post-resolution plan approval. However, the court held that the deposit made by the second appellant in 2007 was prior to the IBC's promulgation, and the right to the deposited amount had already passed to the respondents.3. Rights of the Award-Holder to Claim the Deposited Amount Post-IBC Resolution Plan Approval:The court noted that the second appellant's deposit of the awarded sum with the executing court was an unequivocal acceptance of the award. The executing court held the deposited amount as a trustee for the respondents. The appellate order of March 16, 2009, confirmed that the award was satisfied upon the deposit. The respondents' claim was thus crystallized, and the IBC's provisions did not affect the respondents' right to the deposited amount. The court dismissed the appellants' argument that the respondents could not claim the amount due to the IBC resolution plan approval.Conclusion:The court concluded that the appeal by the appellants was not maintainable and dismissed it with costs. The Registrar was directed to release the proceeds to the respondents upon receiving communication that the appeal arising from the special leave petition had been withdrawn. The court held that the IBC did not override the respondents' right to the deposited amount, which had been satisfied prior to the IBC's promulgation. The judgment emphasized that the execution proceeding was just, proper, lawful, and valid.