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2017 (8) TMI 1330
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....d that there is an existence of dispute pending adjudication between the parties. 2. In order to decide the controversy in its proper perspective, it will be necessary to notice the material facts. 3. Appellants rented the premises, rent of which was payable by respondent - Corporate Debtor pursuant to Lease Deed dated 23rd November, 2005 but having not paid, the parties invoked arbitration clause. Pursuant to the order passed by the Hon'ble High Court of Delhi, Hon'ble Justice (Dr.) Mukundakam Sharma (Retired) was appointed as a Sole Arbitrator to adjudicate all disputes arising out of Lease Deed dated 23rd November, 2005 between the appellants and the respondent. 4. The Arbitrator passed an award on 9th September, 2016 in favour of the appellants granting the following relief:- "a. Rs. 2,67,52,283/- on account of rend from 1.4.2008 upto 22.3.2010 along with interest @ 12% per annum w.e.f 23.3.2010 upto the date of the Award. b. Rs. 1,11,56, 145/- on account of damages equivalent to rend for a period of 6 months from 22.3.2010. c. Future interest @12% per annum on the amounts, as calculated above, from the date of the award till the date....
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....lant before the learned Adjudicating Authority wherein reliance was placed on decision of one or other High Court's order. 10. According to the learned counsel for the respondent the petition under Sec. 9 of the I&B Code is not maintainable because the appellants do not owe any 'operational debts' to the Corporate Debtor and thereby the 1^st appellant is not an 'operational creditor'. Referring to the definition of 'operational debts' as defined under Section 5(21) of the I&B Code, learned counsel for the respondent contended that ipsofacto claim arising out of 'supply of goods' and providing 'services', which may include employment will not amount to operation debt. Therefore, ipsofacto the 1st appellant does not and cannot qualify to be an 'operational creditors', as there is no 'operational debt'. "Debt" is not arising under the law for the time being inforce as is mandate of sub-section (21) of Sec. 5 of the I & B Code and it would be attracted only when the said debt is payable as per said provision. 11. It was further contended that Sections 8, 9, 5(20) and 5(21) must be construed in accordance with the object ....
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....the meaning of Sec. 5(20) r/w Sec. 5(21) of the I & B Code? 17. Before deciding the first and second issue, it is desirable to refer the observations of the Adjudicating Authority to understand the reasons for not entertaining the application under Sec. 9. The Tribunal proceeded on presumption that a dispute is pending in view of the pendency of a case under Sec. 37 of the Arbitration Act as is apparent from the observation and finding quoted below: "22. In the instant case an arbitral award has been announced on 9.9.2016 and the application for setting aside the award filed under section 34 of the Arbitration Act has been rejected on 19.12.2016. It has been mentioned by the respondent in its reply dated 27.01.2017 sent under section 8(2) of the Code to the notice issued under section 8(1) of the Code by the applicant that the debt is disputed and appeal under section 37 of the Arbitration Act is pending, The reply dated 27.1.2017 reads as under:- "1. At the outset, kindly note that our client is disputing the existence of the 'operational debt' allegedly payable to you by our client. Our client is vigorously contesting the Award dated 9.9.2016 (Award) ....
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....cant. The proceedings are yet to attain finality as appeal under section 37 of the Arbitration Act is pending. On behalf of the respondents reliance has rightly been placed on the judgement of the Bombay High Court rendered in the cases of DSL Enterprises Private Ltd. (DB) and Rajendra (SB) (Supra). 25. We have not been able to persuade ourselves to accept the submission advanced on behalf of the applicant that 'arbitration proceedings' stand concluded by virtue of section 32 of the Arbitration Act. The argument is wholly unsustainable once we take into account the provisions of provides for section 33 of the Arbitration Act itself. It corrections and interpretation of award and even for additional award after the award has been announced. As already observed section 34 and section 37 of the Arbitration Act provide for setting aside of the award and the remedy of appeal. The appeal under section 37 of the Arbitration Act is still pending. The judgments of Bombay High Court has been rightly relied upon by the learned counsel for respondents. " 18. The Adjudicating Authority further proceeded to observe : "27. We are further of the view that already proce....
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....9; and not the pendency of an application under Sec. 34 or Sec. 37 of the Arbitration Act. 23. Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as the 'Rules, 2016') is the form required to be filled to apply under Sec. 9 of the I&B Code, wherein the order passed by Arbitral Panel has been cited as one of the document, record and evidence of default. This is apparent from Part V of Form 5, as quoted below: " FORM 5 Part-V PARTICULARS OF OPERATIONAL DEBT [DOCUMENTS, RECORDS AND EVIDENCE OF DEFAULT] 1. PARTICULARS OF SECURITY HELD, IF ANY, THE DATE OF ITS CREATION, ITS ESTIMATED VALUE AS PER THE CREDITOR. ATTACH A COPY OF A CERTIFICATE OF REGISTRATION OF CHARGE ISSUED BY THE REGISTRAR OF COMPANIES (IF THE CORPORATE DEBTOR IS A COMPANY 2. DETAILS OF RESERVATION / RETENTION OF TITLE ARRANGEMENTS (IF ANY) IN RESPECT OF GOODS TO WHICH THE OPERATIONAL DEBT REFERS 3. PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR ARBITRAL PANEL ADJUDICATING ON THE DEFAULT, IF ANY (ATTACH A COPY OF THE ORDER) 4. RECORD OF DEFAULT WITH THE INFORMATION UTLITY, IF (ANY ATTACH A COPY OF SUCH RECORD) ....
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....aving been made has been rejected. That means, the arbitral award reaches finality after expiry of enforceable time under Sec. 34 and/or If application under Section 34 is filed and rejected. 27. In Vipul Agarwal vs. Atul Kanodia & Co. and anr. AIR 2004 All 205], the Hon'ble Allahabad High Court observed "4. The language of the section clearly indicates that the award can be executed in two situations - one when the time for filing an application for setting aside the award has expired and no application has been filed or where the application has been filed and it has been refused. It is not in dispute that an award can be executed as a decree in view of the provisions of Section 36 of the Act. The only question for consideration in this case is whether the word 'refused' used in Section 36 of the Act means a final refusal after all the proceedings of appeal etc. up to the Supreme Court are over or a refusal by the District Judge is sufficient to make the award executable. If the legislature intended that it is only after the application under Section 34 has been rejected at the appellate stage would the award be enforceable it could have used such wo....
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....e word 'final' in respect of an award in Section 35 the finality being subject to an appeal under Section 37, no such expression of finality to the decision of an application under Section 34 has been used in Section 36. " 28. Russell on Arbitration (22nd edition) paragraph 6.001 defines an award to mean: "in principle an award is a final determination of a particular issue or claim in the arbitration.... " 29. The Hon'ble Supreme Court in Centrotrade Minerals & Metals Inc. vs. Hindustan Copper Limited [ (2017) 2 SCC 228] while dealing with the finality of award under Arbitration and Conciliation Act, 1996 observed and held : The general principle that we have accepted is supported by two passages in Comparative International Commercial Arbitration. In Para 24-3 thereof reference is made to Article 31 (I) of the United Nations Commission on International Trade Law (or UNCITRAL) Rules to suggest that white all awards are decisions of the Arbitral Tribunal, all decisions of the Arbitral Tribunal are not awards. Similarly, while a decision is generic, an award is a more specific decision that affects the rights of the parties, has important consequences and can be enf....
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....the view expressed by the above authors, we have no hesitation in concluding that the "arbitration result" in the first part of Clause 14 of the contract must mean an arbitration award given by the arbitral panel of the Indian Council of Arbitration. To this extent we disagree with *the learned counsel for Centrotrade but agree with the learned counsel for Hindustan Copper Ltd. (hereafter referred to as "HCL"). " 30. Learned counsel appearing on behalf of the respondent referred to the decision of the Hon'ble Supreme Court in Paramjeet Singh Patheja Vs. ICDS Limited - [2006 (13) SCC 322] wherein interpreting Section 9(2)(a) and (b) of the Presidency Towns Insolvency Act, 1909, the Apex Court held an arbitral award is "decree" or "order" for the purpose of insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909. 31. The aforesaid decision is not applicable in the present context, the Presidency Town Insolvency Act, 1909 having superseded by Insolvency and Bankruptcy Code, 2016 and for the purpose of 'dispute' as 'existence of dispute', only the pendency of arbitral proceeding has been accepted as one of the ground of dispute. On th....
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....bsp; xxx xxx " (20) operational creditor" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;" 36. Operational Debt is defined in sub-section (21) of Sec. 5 as follows: "(21) "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;" 37. From the record, it appears that the 1^st appellant claimed to be an 'operational creditor' on the basis of lease deed. The respondent in its reply has taken a plea that the Adjudicating Authority has confined its finding to point as dealt with in the impugned order and all other points, though urged and argued, have not been considered. 38. From the impugned order dated 24th March, 2017, we find that the learned Adjudicating Authority noticed the aforesaid plea at paragraph 6 of the impugned judgment, as quoted below: "6. In order ....