2023 (7) TMI 773 - HC - Insolvency and Bankruptcy

Court dismisses petition challenging arbitral award's execution under Section 47 CPC, upholds compliance order.

The court dismissed the petition, ruling that objections to the arbitral award's execution under Section 47 of the CPC were not maintainable unless the ... Maintainability of objection to execution of the arbitral award referrable to section 47 of the CPC - arbitral award itself was a nullity and hence non-executable - arbitral award not challenged under Section 34 of Arbitration Act, 1996 - HELD THAT:- This court is of the considered view that having not challenged the arbitral award under section 34 of the Act of 1996, the law does not contemplate second opportunity to challenge the award particularly when the Act of 1996 is a self-contained code which prescribes the specific grounds and specific mode of challenge to an arbitral award. This would be the position except under the circumstances, where the award cannot be termed as an award in the eyes of law and therefore it is required to be rendered void ab initio /nullity and consequently required to be declared non-est in the eyes of law. This can be done pursuant to such objection raised under section 47 of CPC at the stage of execution of the award. Award which suffers from inherent lack of jurisdiction in the eyes of law, cannot be said to be award and therefore would fall outside the provision of Arbitration and Conciliation Act, 1996 and can certainly be declared as a nullity in an appropriate proceeding including under section 47 of CPC at the stage of execution of the award. The plea of nullity with regard to the arbitral award can be taken under section 47 of the CPC , but in a very narrow campus. Whether the arbitral award in the present case could be assailed as a nullity and hence non-executable within the permissible grounds of raising such a plea? - HELD THAT:- This Court is of the considered view that the point as to whether the realisable value with respect to one or the other creditor was nil or otherwise certainly require close examination of the resolution plan read with the orders passed by NCLT/NCLAT/Supreme Court which itself is a debatable issue on facts as well as on law. In view of the aforesaid situation and in the light of the facts and circumstances of this case, the arbitral proceedings culminating in the award involved in this case, cannot be said to be suffering from inherent lack of jurisdiction. Upon perusal of the proceedings of the facilitation council, this court finds that the petitioner had submitted before the facilitating council that the order of the facilitation council on the point of jurisdiction which was decided against the petitioner was challenged before the District Court at Alipore but the petitioner never produced the ad-interim order before the Facilitation Council. Otherwise also, the order of stay passed by the District Court at Alipore has no impact due to the interim order as well as the final order passed by Hon’ble Calcutta High Court in the civil revision application. The interim order passed by the District Court is also not available before this court, which was never produced before the Facilitation Council also to ascertain the nature and extent of the interim order. Such issues are not the issues relating to patent or inherent lack of jurisdiction of the facilitation council so as to render the award a nullity in the eyes of law. The argument of the learned counsel for the petitioner, that the award suffers from patent or inherent lack of jurisdiction/ nullity and therefore the objection to the execution of the award could have been taken at the stage of execution without challenging the award under Section 34 of the Act of 1996, is hereby rejected - Issue decided against the petitioner and in favour of the respondent. Irrespective of maintainability of the objection to arbitral award under section 47 of the CPC, Whether on facts, the Facilitation Council lost its jurisdiction to proceed and pronounce the arbitral award in view of insolvency resolution plan of the petitioner which was duly approved under section 31 of the IBC? - HELD THAT:- This issue requires consideration of the point as to whether the amount claimed by the respondent and pending for adjudication in the arbitral proceedings much prior to insolvency commencement date, was ever declared to be nil in terms of the insolvency resolution plan of the petitioner read with various orders passed by NCLT, Kolkata / NCLAT, New Delhi/Supreme court. This would require examination of the approved insolvency resolution plan. It is not in dispute that the approved insolvency resolution plan was never interfered by the NCLT, Kolkata / NCLAT, New Delhi and Hon’ble Supreme Court. The argument of the petitioner that the dues of the petitioner with respect to the pending arbitral proceedings in the instant case before the West Bengal facilitation council was determined to be nil, does not find support from the approved resolution plan placed on record by the petitioner themselves. In such circumstances, there was no occasion for the respondent to challenge the resolution plan. Admittedly, some of the creditors (operational/financial) had challenged the resolution plan with respect to their claim and provisions made in the resolution plan but all such objections /challenges were dismissed and there has been no interference in the approved resolution plan at any stage. Irrespective of maintainability of the objection to arbitral award under section 47 of the CPC, on facts, the Facilitation Council did not lose its jurisdiction to proceed and pronounce the arbitral award on account of approval of the insolvency resolution plan of the petitioner under section 31 of the IBC. This is on account of the reason that the arbitral proceedings were initiated prior to insolvency resolution date, suspended during the moratorium period, resumed upon expiry of the moratorium period and the approved resolution plan did not determine the claim of the respondent as nil whose pending litigation before the west Bengal facilitation council was taken note of in the resolution plan - issue decided against the petitioner and in favour of the respondent. No need to enter into the issue as to whether MSME Act will prevail order the IBC - HELD THAT:- In the facts of this case, there is no conflict between the proceedings/ final award passed by the facilitation council on the one hand and the manner of dealing with the claim of the respondent under IBC/ approved resolution plan on the other hand. The only impact was that the arbitral proceedings before the facilitation council remained suspended during the period of moratorium declared under IBC and such suspension of proceedings was in terms of section 14 of the IBC. Moreover, the scope of the present proceedings is very limited and it primarily relates to the issue as to whether the award could be assailed as a nullity in the execution proceedings even when it has not been challenged under section 34 of the Arbitration and Conciliation Act of 1996 and as to whether the award could be said to be suffering from patent lack of jurisdiction. This court is of the considered view that the points raised by the petitioner objecting to the execution of the arbitral award were not fit to be entertained at the stage of execution. The grounds do not fit in the very narrow scope of assailing the award as nullity. The scope of such ground has been dealt in details under point no. (a) with findings at para 32 to 35 above. The points raised to assail the award as nullity required deliberations on fact and law and was certainly beyond the scope of examination at the stage of execution of the arbitral award by the executing court. The impugned order does not call for any interference - Petition dismissed. Issues Involved:1. Maintainability of objections to execution under Section 47 of CPC.2. Whether the arbitral award is a nullity and non-executable.3. Jurisdiction of Facilitation Council post-insolvency resolution plan approval.Issue-wise Comprehensive Details:1. Maintainability of objections to execution under Section 47 of CPC:The court examined if objections to the execution of an arbitral award, alleging it to be a nullity, can be raised under Section 47 of the CPC. The court referred to various judgments, including (2017) 5 SCC 371 (Brakewel Automotive Components (India) Pvt. Ltd. v. P.R. Selvam Alagappan), which held that an executing court can only entertain objections if the decree is void ab initio or a nullity. The court concluded that objections under Section 47 of CPC are maintainable in a very narrow scope, specifically when the award suffers from inherent lack of jurisdiction apparent on the face of the record.2. Whether the arbitral award is a nullity and non-executable:The court assessed whether the arbitral award in question could be considered a nullity. The petitioner argued that the Facilitation Council lost jurisdiction due to the insolvency resolution plan. However, the court found that the arbitral proceedings were initiated before the insolvency commencement date, suspended during the moratorium, and resumed post-moratorium. The court referred to the resolution plan and found no evidence that the respondent's claim was settled at NIL. Consequently, the court held that the arbitral award did not suffer from inherent lack of jurisdiction and was not a nullity.3. Jurisdiction of Facilitation Council post-insolvency resolution plan approval:The court examined whether the Facilitation Council lost jurisdiction to proceed with the arbitral award after the approval of the insolvency resolution plan. The court found that the resolution plan did not nullify the respondent's claim or terminate the pending arbitral proceedings. The court concluded that the Facilitation Council retained jurisdiction to proceed and pronounce the arbitral award, as the resolution plan did not determine the respondent's claim as NIL.Conclusion:The court dismissed the petition, holding that the objections raised by the petitioner were not fit to be entertained at the stage of execution. The court found no merit in the argument that the arbitral award was a nullity and upheld the impugned order directing the petitioner to comply with the award.