TaxTMI 
TaxTMI 
2020 (1) TMI 812
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....rate Insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (the IBC) has been initiated against the petitioner as the Corporate Debtor. 2. The question which arises therefore is whether the present application under Section 34 of the Act should be kept in abeyance by reason of the provision of the IBC being invoked by operational creditors against the petitioner. 3. Learned counsel for the petitioner places a bunch of orders of the National Company Law Tribunal (NCLT), Hyderabad Bench in applications by various Operational Creditors against the petitioner (Corporate Debtor). Counsel places the relevant portions of the order which are set out below; "40. This Adjudicating Authority hereby declare that the Resol....
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....for the parties, certain relevant facts are required to be stated at the outset; (i) the Reference was made on 18th June, 2001 and the Arbitrator was appointed on 2nd March, 2006. (ii) the arbitral Award was delivered on 7th July, 2008 for a sum of Rs. 3,21,927.70/- at 9% per annum in favour of the respondent/claimant (iii) the present application for setting aside of the Award was filed on 31st October, 2008 (iv) Operational Creditors initiated proceedings under the IPC against the petitioner (Corporate Debtor) in September 2017. (v) By an order dated 19th July, 2018, the adjudicating authority declared that the moratorium order under Section 14 shall cease to have effect (vi) the appli....
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....irs of the corporate debtor shall base in the IRP and the powers of the Board of Directors shall stand suspended and be exercised by the IRP (Section 17). The IRP has been provided with certain powers and duties under the IBC including receiving and collating of the claims submitted by the creditors pursuant to the public announcement (Section 18). After collation of all the claims received against the corporate debtor and after determining the financial position of the corporate debtor, the IRP shall constitute a Committee of Creditors which shall comprise of all the financial creditors of the corporate debtor (Section 21). The Committee of Creditors may resolve to appoint a Resolution Professional (RP) under Section 22. The duties of the ....
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....filed before the receipt of the Demand Notice of the unpaid operational debt in relation to such dispute and disapproved of the practice of putting corporate debtors into the insolvency resolution process either prematurely or for extraneous considerations. In the words of the Supreme Court, "so long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the Adjudicating Authority has to reject the application" where there was a pre-existing dispute. The Supreme Court also found that the factum of challenge to an Award under Section 34 of the Arbitration and Conciliation Act, 1996 would be sufficient to show that the Award has been disputed and would amount to a case of a "pre-existing ongoing dispute between the p....
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....dings. The question of the respondent approaching the NCLT for filing a claim in 2017 at the time of initiation of the insolvency proceedings, could not, therefore, arise. Both K. Kishan and Mobliox make it clear an earlier dispute or notice of a suit or an arbitration must be given precedence to the insolvency proceedings. 9. Although the facts of the present case are different from K. Kishan since in that case it was the award-holder who had sought to resort to the corporate insolvency process and the award debtor had sought to rely on the arbitration pending between the parties, the caution sounded by the Supreme Court in that decision finds an echo in the present case. Here it is the award-holder who seeks to go on with Section 34 ap....
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....ontentions of the petitioner that the challenge to the Award cannot be considered by reason of the proceedings under the IBC. This is by reason of the fact that the respondent award-holder could not have filed a claim before the NCLT/IRP since the Section 34 proceedings had not been decided in favour of the said respondent in 2017 and hence there was no final or adjudicated claim as on that date. Further, once the stage under Section 14 of the IBC, namely, moratorium with regard to continuation of pending proceedings against the Corporate Debtor has been declared to be over, no further embargo remains for continuing to hear suits and other proceedings to which the Corporate Debtor (the petitioner in this case) is a party. In any event, Sect....