TaxTMI 
TaxTMI 
2022 (8) TMI 1160
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....& 9 of the Insolvency and Bankruptcy Code 2016 (hereinafter referred to as the I & B Code) were filed before the NCLT New Delhi. In one such proceeding, Smt. Vijay Purohit versus Trading Engineers, the NCLT initiated Corporate Insolvency Resolution proceedings by appointment of IRP by its order dated 04.07.2019. In the meantime the petitioner had issued a legal notice on 11.6.2019 to the respondent for initiation of arbitration proceedings for Rs.45,55,18,787/- (Rupees Forty Five Crores Fifty Five Lakhs Eighteen Thousand Seven Hundred Eighty Seven) in terms of the Contracts dated 15.4.2011 and 28.4.2011. On failure of the respondent to reply to such notice the petitioner approached this Court for appointment of a sole Arbitrator. This Court by its order dated 17.03.2020 appointed Justice (Retired) Anurag Kumar. The petitioner filed its Statement of Claim of more than Rs.45 crores on 14.09.2020. The respondent filed a Defence Statement and a Counter Claim of Rs.144,11,93,202/- (Rupees One hundred Forty Four Crores Eleven Lakhs Ninety Three Thousand Two Hundred Two only) before the Learned Tribunalon 16.11.2020. The petitioner also filed a reply. 2. In a connected arbitration proc....
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.... Senior Advocate assisted by Shri Sunil Sharma and Sri Puneet Chandra, has raised a preliminary objection as to the maintainability of this writ petition under Article 227 of the Constitution and learned Senior Counsel has referred to the interim order passed by this court on 23.12.2021 in this Petition. The counsel for the respondent had placed reliance upon several judgments of the Supreme Court and has argued that this court had entertained the petition without going into the question of maintainability because it was of the opinion that it is related to disputed questions of fact that could be decided at the time of final hearing. It had nevertheless granted an interim order to the petitioner to the extent that the matter was directed to be listed on 17.01.2022 and till such date, arbitrator was directed not to proceed with the arbitration. The respondents were directed to file their counter affidavit in the matter. Against this order granting interim relief to the petitioner the petitioner had approached the Supreme Court for modification of the order of interim relief to the extent that the arbitrator may continue to hear the claim of the petitioner on its merits but ignore t....
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.... (1) SBP and Co. versus Patel Engineering Ltd and Another (2005) 8 SCC 618 and paragraph 45, 46 and 47 as also paragraph 103 and 108. (2) Deep Industries Ltd Versus Oil and Natural Gas Corp Ltd and another (2019 SCC online SC 1608) and paragraphs 13, 16, 17, 22 and 24. (3) Bhaven Construction through Authorised Signatory Premji Bhai K Shah versus Executive Engineer Sardar Sarovar Narmada Nigam Ltd and another (2021 SCC online SC 8) and paragraphs 11, 16, 18, 20 and 21 (4) Punjab State Power Corporation Limited versus Emta Coal Ltd and another (2020 SCC online SC 1165) paragraph 5; (5) Navayuga Engineering Co versus Bangalore Metro Rail Corp Ltd (2021 SCC online SC 469); (6) Essar Steel India Ltd Committee of Creditors versus Satish Kumar Gupta 2020 (8) SCC 531; (7) P. Mohan Raj v Shah Bros.Ispat (Pvt) Ltd 2021 (6) SCC 258. 10. In response to the arguments made by the learned counsel for the respondent, the learned counsel for the petitioner had submitted that the company is under liquidation and a CIRP is pending before the National Company Law Tribunal, Adjudicating Authority, under the Insolvency and Bankruptcy Code 2006....
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....ich it exercises territorial jurisdiction. This includes Arbitration Tribunal. This supervisory jurisdiction is intended to ensure that the subordinate courts and tribunals act within the limits of their authority and in accordance with law. Since Article 227 is a constitutional provision therefore no fetters can be placed on the jurisdiction conferred on the High Court by any ordinary legislation like the Arbitration Act 1996, hence existence of a statutory remedy in an ordinary legislation cannot take away or limit the right to exercise constitutional power under Article 227. While it had been held by the Supreme Court that the High Court should be extremely circumspect in exercising its discretion under Article 227, it has been emphasised repeatedly that if there is an exceptional circumstance which would justify the exercise of these powers, the same ought to be exercised even if there is an alternate statutory remedy. The High Court ought to interfere under Article 227 where there is a patent lack of inherent jurisdiction, or where a party is left remedyless, or a Tribunal has acted in bad faith, or the tribunal has not acted within the limits of its authority resulting in gra....
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....stances of the case may warrant, maybe, by way of guiding the inferior court or Tribunal as to the manner in which it should now proceed further or afresh as commended to it or guided by the High Court. In appropriate cases the High Court, while exercising supervisory jurisdiction, may substitute such impugned decision by a decision of its own, as the inferior court or Tribunal should have made. Lastly, the jurisdiction under Article 226 of the Constitution is capable of being exercised on a prayer made by or on behalf of the party aggrieved; the supervisory jurisdiction is capable of being exercised Suo Moto as well. 15. On the basis of such judgments, submissions have been made by the Counsel that the High Court under Article 227 can exercise jurisdiction over private Tribunals as well, such as arbitral Tribunals to ensure that such Tribunals act within the limits of their authority and according to law. Article 227 being a constitutional provision no fetters can be placed on the jurisdiction conferred by such Article by any ordinary legislation like the Arbitration Act. The High Court should exercise its jurisdiction under Section 227 where there is a patent lack of inherent ....
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....Resolution Plan may have been allowed or it may have been rejected, in both these scenarios the alleged counterclaim of the respondent could not have been adjudicated and would have stood extinguished as they were not submitted before the Resolution Professional at the relevant time as per the mandate of the I&B Code. The learned Tribunal erroneously stated that the moratorium under Section 14 would apply only at the stage of execution and not at the stage of mere adjudication of claims and counterclaims. In the present case the arbitration clause was invoked on 11.06.2019. The moratorium was declared by the Adjudicating Authority on 04.07.2019. The counterclaim was filed on 16.11.2020 at a time when the moratorium was in force and such counterclaim being in the nature of a Suit could not have been instituted much less adjudicated. 18. In Deep Industries Ltd. Versus Oil and Natural Gas Corporation Ltd. and Another (supra), a three judges bench of the Supreme Court was considering the question as to whether High Court could have exercised its jurisdiction under Article 227 of the Constitution of India when it comes to matters that are decided under the Arbitration and Conciliatio....
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....ly under Section 37 (2) of the Act an Article 227 petition should also not be entertained. It was argued that even under Section 115 of the CPC as amended, Revision would lie only in cases where no Appeal lies but such orders should not be interlocutory orders which do not decide the matter in issue finally. It was held that the High Court should not have entertained the petition under Article 227 as any observations made by the Arbitrator while entertaining a Stay Application and granting interim relief would amount to a mere error of law and not amount to lack of jurisdiction. 20. On the other hand the counsel for the respondent had argued that SBP and Co (Supra) applied only at a stage where an order of Arbitral Tribunal was sought to be interfered with directly under Article 226/227. In the present case the Tribunal's orders was challenged in a First Appeal which was dismissed. Such order came to be challenged in a petition under Article 227 praying for exercise of supervisory jurisdiction which vested in the High Court. The Supreme Court considered the language of Section 5 of the Act of 1966 as also Section 37 and held that it was important to note that under Section 29A o....
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....rated by us hereinabove so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction." 23. The Supreme Court in Paragraph-14 onwards referred to its judgement in Nivedita Sharma Versus Cellular Operators Association of India and Others reported in (2011) 14 SCC 337; wherein several judgements including L. Chandra Kumar Versus Union of India reported in 1997 (3) SCC 261, Thansingh Nath Mal Versus Superintendent of Taxes reported in AIR 1964 Supreme Court 1419, Titaghur Paper Mills Co. Ltd. Versus State of Orissa reported in (1983) 2 SCC 433; Mafatlal Industries Ltd. Versus Union of India reported (1997) 5 SCC 536, were cited and observed that "the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken, itself contains a mechanism for redressal of grievance still hold the field". 24. The Supreme Court referred to the judgement rendered by the larger bench of seven judges in SBP and Company (Supra), where the Court was considering interference with an order passed by ....
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....the object of the Act being that of minimising judicial intervention and that this important object should always be kept in the forefront when a 227 petition is being disposed of against proceedings that are decided under the Act." 26. The three judges bench in Deep Industries (Supra) also noticed that in Punjab Agro Industries Corporation Limited Versus Kewal Singh Dhillon reported in 2008 (10) SCC 128, the Supreme Court had distinguished SBP and Co (supra) but it held that the same was an exceptional case where the statutory provisions did not conceive of any appeal against an order passed under Section 11 refusing to appoint an Arbitrator. In the case of Deep Industries (supra) however, the Supreme Court observed that the High Court has entertained a 227 petition after the First Appeal was dismissed by the Civil Court whereas Section 37 of the Act did not permit any Second Appeal and only one bite at the cherry. It observed further-"...,The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final Award at which stage it may be rai....
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....s of the agreement. The respondent refused to appoint such Arbitrator. The appellant instead appointed respondent no. 2 to act as sole Arbitrator for adjudication of the disputes. The respondent no.1 preferred an application under Section 16 of the Act disputing the jurisdiction of the sole Arbitrator. The Arbitrator rejected the application of the respondent no.1 and held that it had jurisdiction to adjudicate the dispute. Aggrieved by such orders of the Arbitrator the respondent no.1 preferred a petition under Article 226/227 of the Constitution. It was rejected by the Single Judge as not maintainable by holding that remedy under Section 34 of the Act was available and the respondent no.1 should wait till the Award is passed by the Learned Arbitrator. The respondent no.1 further challenged such order before the Division Bench in the Letters Patent Appeal. Such appeal was entertained and allowed. Aggrieved, the appellant filed the Civil Appeal before the Supreme Court saying that Section 16(2) of the Act mandates that the sole Arbitrator had the jurisdiction to adjudicate the preliminary issue of jurisdiction, which can only be challenged under Section 34 of the Act. On the other ....
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....ed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy. Rather, it is settled law that when a statutory Forum is created by law for redressal of grievances, awrit petition should not be entertained ignoring the statutory dispensation. It is therefore, prudent for a judge to not exercise discretion to allow judicial interference beyond the procedure prescribed under the enactment. This power needs to be exercised in exceptional rarity, where in one party is left remedyless under the statute or a clear bad faith is shown by one of the parties. This high standard set by this Court is in terms of the legislative intention to make the arbitration fair and efficient." 32. The Supreme Court thereafter referred to the observations made by it in M/s Deep Industries Ltd (supra) that the "High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumberated by us hereinabove so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction." 33. The Supreme Co....
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....n its order dated 31.05.2017 referred to Section 14 of the I&B Code and stated that given the moratorium no arbitration proceedings could go on. A First Appeal was filed before the District Judge under Section 37 of the Arbitration and Conciliation Act 1996 and by an order dated 06.07.2017 the appeal was asked to be registered and notice was issued awaiting reply. It was this order which was challenged before the Supreme Court. The Supreme Court observed that the mandate of the new I&B Code is that the moment an insolvency petition is admitted, the moratorium comes into effect under Section 14 expressly interdicts institution or continuation of pending suits or proceedings against the corporate debtors. The Court set aside the order of the District Judge dated 06.07.2017 entertaining the appeal under Section 37 of the Arbitration Act 1996 and observed that the effect of Section 14 is that the arbitration that has been instituted after the aforesaid moratorium is non-est in law. 37. The Learned counsel for the petitioner has placed reliance upon Committee of Creditors of Essar Steel (supra) to say that once the Resolution Plan is approved by the Committee of Creditors and submitt....
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....sickness in industrial companies, yet, legal proceedings under the same dragged on for years as a result of which all the statutory measures proved to be abject failures in resolving the stressed assets. The Supreme Court considered the arguments raised against the validity of Section 4 and found that the only one argument against the amendment is that the time taken in legal proceedings should not be put against parties before the NCLT and NCLAT based upon a latin maxim which sub serves the cause of justice namely, "actus curiae neminem gravabit". The Supreme Court observed thereafter in paragraph 79 thus : - "given the fact that the time taken in legal proceedings cannot possibly harm a litigant if the Tribunal itself cannot take up the litigant's case within the requisite period for no fault of the litigant or the provision which mandatorily requires the CIRP to end by a certain date without any exception thereto, may well be an excessive interference with the litigants' fundamental right to non-arbitrary treatment under Article-14, and an excessive and arbitrary and therefore unreasonable restriction on the litigant's Fundamental Right to carry on business under Art....
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....f the Resolution Plan approved by the Adjudicating Authority?" 41. It referred to the facts of the case regarding NCLT admitting a petition under Section 7 of the I&B Code on 25.07.2017 and initiating the CIRP. On 28.07.2017 the Resolution Professional made a public announcement inviting claims from all the creditors of the corporate debtor as is required under Section 15 of the I&B Code. The last date for submission of claims was 8.8.2017. The Resolution Professional upon receipt of the claims maintained a list of creditors alongside the amount claimed by them and the security interest. The Resolution Professional thereafter also invited Expression of Interest. Resolution Plans were submitted thereafter. Pursuant to the approval by Committee of Creditors of one plan, NCLT also granted approval. Despite various communications addressed to the Tax Authorities informing them that after the Resolution Plan was approved by the NCLT all proceedings instituted against the corporate debtor, arising and pending before the transfer date shall stand withdrawn, and that all liabilities towards operational creditors shall be deemed to have been settled by discharge and payment of resolution....
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....and Sons (supra) referred to several judgements passed by it earlier considering various provisions of the I&B Code including judgement in Innoventive Industries Ltd. Versus ICICI Bank and Another (2018) 1 SCC 407, where it was held that one of the important objectives of the I&B Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up the insolvency process. The Scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the Insolvency Resolution Process begins. Such debt maybe financial debt or an operational debt. Application under Section-7 or Section-9 can be filed and the moment the Adjudicating Authority is satisfied that a default has occurred the application must be admitted. Such debt may be in the form of a payment which actually became due or in the form of a claim which becomes payable unless it is disputed. The entire process is to be completed within a specified period from the date of admission of the application and extension of time for completion of CIRP under Section 12 can only be for a limited time period on specific reasons to be indicated in the orde....
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....ted since one of the dominant purposes of the I&B Code is revival of corporate debtor and to make it a running concern." The Supreme Court in paragraph 64 of the said judgement observed thus: - "As held by this Court in the case of Principal Commissioner of Income Tax Versus Monnet Ispat and Energy Ltd., in view of the provisions of Section 238 of the I&B Code, the provisions thereof will have an overriding effect, if there is any inconsistency with any of the provisions of the law for the time being in force or any instrument having effect by virtue of such law. As such , Vide Section 7 of Act No.26 of 2019, with effect from 16 August 2019 , the following words have been inserted in Section 31 of the I&B Code-" including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed." After the amendment any debt in respect of payment of dues arising under any law for the time being in force including the ones owed to the Central Government, any State Government or any local authority, which does not form ....
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....allenged. Several petitions with respect to the Resolution Plans of various companies' Corporate Insolvency Resolution Process were dealt with individually. The Court first considered the role of Resolution Professional who had to verify and determine the claims by operational creditors, financial creditors, other creditors, workmen and employees and guarantors. 47. In paragraph 67 it set aside the impugned NCLAT judgement where it had left it open for claims that may have existed apart from those decided on merits by the Resolution Professional and by the Adjudicating Authority/Appellate Tribunal to be decided now by an appropriate forum in terms of Section 60 Subsection (6) of the I&B Code saying that such observation made by the NCLAT militates against the rationale of Section 31 of the I&B Code. It observed - "a successful Resolution Applicant cannot suddenly be faced with "undecided" claims after the Resolution Plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective Resolution Applicant who successfully takes over the business of the corporate debtor. All claims must....
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....CIRP is expected to be completed within 180 days under Section 12 (1) of the IPC in terms of subsection (2) and (3) of Section 12 and extension can be sought from the Adjudicating Authority for extending this period up to 90 days. The First Proviso to Section 12 (3) clarifies that such an extension can only be granted once. It observed thus:- "....In Arcelor Mittal (India) (P) Limited versus Satish Kumar Gupta (2019) 2 SCC 1, this Court had held that the time taken in legal proceedings in relation to the CIRP must be excluded from the timeline mentioned in Section 12. Since this could extend the CIRP indefinitely, the Insolvency and Bankruptcy Code (Amendment) Act 2019 inserted a Second Proviso to Section 12 (3) with effect from 16.08.2019 to state that the CIRP in its entirety must be mandatorily completed within 330 days from the insolvency commencement date, including the time taken in legal proceedings. A legislative amendment that takes away the basis of a judicial finding is indicative of the strong emphasis of the IBC on its timelines and its attempt to thwart the prospect of stakeholders engaging in multiple litigations, solely with the intent of causing undu....
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....on of the Insolvency Resolution Process beyond 330 days, and that it would be in the interest of all the stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the delay cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal the delay or a large part of being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend the time beyond 330 days. - - - - it is only in such exceptional cases that the time can be extended, within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation." 53. The Supreme Court observed in paragraph 128 of Ebix (supra) that the evolution of the IBC framework through an interplay of legislative amendments, regulations and judicial interpretations, consistently emphasises the predictability and timelines of the IBC. It noted the amendment made in Regulation 40 with e....
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....abide by the terms of the submitted Resolution Plans that are pending approval under Section 31, on account of the economic slowdown that impacted every business in the country, no legislative relief for enabling withdrawals or renegotiation as has been provided, in the last 18 months. In the absence of any provision under the IBC allowing for return of the Resolution Plan while a successful Resolution Applicant, vesting the Resolution Applicant with such a relief through a process of judicial interpretation would be impermissible. Such a judicial exercise would bring in the evils which the IBC sort to obviate through the back door.." 56. Having heard the learned counsel for the parties this Court has carefully gone through the order impugned and finds that, the learned counsel for the respondent in support of his case for consideration of its counter claim simultaneously with the petitioner's claim had submitted that it had filed its defence and counterclaim before the Learned Tribunal under Section 23 (2-A) of the Act of 1996. The moratorium under Section 14 of the I&B Code would have affect only up to the time of completion of the Corporate Insolvency Resolution Process (....
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....appellant in the very same arbitral proceedings and if the counterclaim or a part of it is set off with the claim made by the corporate debtor, both the claim and counterclaim of the parties should be heard together by the Arbitral Tribunal in the absence of any bar under the I&B Code. However, if on determination of such counterclaim it is found that corporate debtor is liable to pay certain amount, in such a case no recovery can be made during the period of moratorium. 59. The learned counsel for the petitioner had argued before the Tribunal that (i) connected arbitration proceeding pending before another sole Arbitrator a preliminary objection has been raised by the respondent itself that such arbitration cannot proceed in view of the provisions under Section 9 read with Section 14 of the I&B Code. Such a finding was also recorded by the sole Arbitrator on 25.03.2021 in such other proceedings. (ii)Section 238 of the I&B Code had an overriding effect over all laws that are inconsistent with its provisions. (iii) In Jharkhand Bijli Vitaran Nigam Limited the parties had consented for the adjudication of the counterclaim before the sole Arbitrator. In PGCIL (supra), a petition wa....
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....er by the Arbitral Tribunal. It also observed that in a proceeding before the Arbitral Tribunal, if the respondent wants to file a counterclaim it can only file the same before the Arbitral Tribunal along with his defence of a claim. It held that the respondent had a right to move a counterclaim. It also held that the Arbitral Tribunal had a duty to adjudicate the same along with the claim. 61. The learned Tribunal thereafter looked into the I&B Code and the language of Section 14 which provides for a moratorium. It quoted the entire Section 14 and held that from the language of Section 14 (1) (a), it was clear that on the date of commencement of the CIRP, the NCLT could impose a moratorium prohibiting the institution of a suit or continuation of a pending suit or proceeding against the corporate debtor including execution of any judgement, decree or order in any court of law, Tribunal, Arbitral Panel or other Authority. It referred to the observations made by the High Court of Delhi in Power Grid Corporation of India Ltd (supra) and its interpretation of sub-clause (a) of subsection (1) of Section 14 of the I&B Code which intended to prohibit debt recovery actions against the a....
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....ly speaking thus under Section 14 (1) (a) of the Code a counterclaim would be covered by the moratorium which prohibits the institution of suit or continuation of pending suits or proceedings against the corporate debtor, and counterclaim would be a proceeding against the corporate debtor, however, the counterclaim raised against the corporate debtor is integral to the recovery sought by the Corporate Debtor and is related to the same transaction. Section 14 has created a piquant situation i.e. the corporate debtor undergoing Insolvency proceedings can continue to pursue its claim but the counterclaim would be barred under Section 14 (1)(a). When such situations arise, the Court has to see whether the purpose and intent behind the imposition of the moratorium is being satisfied or defeated. A blinkered approach cannot be followed and the Court cannot blindly stay the counterclaim and refer the defendant to the NCLT/Resolution Professional for filing its claims. The nature of a counterclaim is such that it requires proper pleadings to be filed, defences and stands of both the parties to be considered, evidence to be recorded, then issues have to be adjudicated. The proceedings befor....
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....e in support of its case, in the same way a counterclaim also required proper pleadings and evidence in support of the case. Points of determination have to be decided after all evidence is led. The NCLT in summary proceedings, or the Interim Resolution Professional, are not capable of conducting a trial. 64. The Learned Tribunal also observed that mere consideration of claim and counterclaim and adjudicating the facts as claimed there in, would not violate the moratorium. It is only after determination of counterclaim when the amount is determined or the execution proceedings are initiated, the provisions of Section 14 of the I&B Code 2016 would come into play. 65. It was also observed by the Tribunal that under subsection (4) of Section 14 the order of moratorium does not continue indefinitely but has effect only from the date of order initiating CIRP till completion of the said process which in turn is time bound. It was quite clear that the Resolution and plan had been submitted by the IRP before the Adjudicating Authority on 11.06.2021 and the proceedings before the NCLT Delhi were in the final stages. It may be possible that by now the proceedings before the Adjudicatin....
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....his Court finds that in Surendra Kumar Singhal (supra), the Delhi High Court relied upon Punjab State Power Corporation Limited versus Emta Coal Ltd and another, (SLP decided on 18.09.2020) where after referring to the observations made in the Deep Industries' case, the Supreme Court had observed - - "we are of the view that a foray to the writ court from a Section 16 application being dismissed by the Arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack of inherent jurisdiction. Here patent lack of inherent jurisdiction requires no argument whatsoever - it must be the perversity of an order that must stare one in the face. Unfortunately, parties are using this expression mentioned in our judgement in Deep Industries Ltd to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the grounds stated, the High Court would have done well to have referred to our judgement in Deep Industries and dismissed the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inhe....
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....it is in favour or against the corporate debtor. Proceedings against an Award in favour of the corporate debtor would be like stalling the Corporate debtor's efforts to recover its money and hence would not fall within the embargo of Section 14 (1) a of the I&B Code. If a counterclaim is allowed then section 14 (1) (a) of the Code would immediately come into play and the decree would not be Executable against the corporate debtor. 70. The Delhi High Court considered the order of the National Company Law Appellate Tribunal in Jharkhand Bijli Vitaran Nigam Ltd. Versus IVRCL Ltd and Another (Company Appeal (Insolvency) 285/2018 decided on 3 August 2018). It also considered the judgement of the coordinate bench of the Delhi High Court in Power Grid Corporation of India Versus Jyoti Structures Ltd. Manu/DE/5162/2017. It thereafter observed that the claim of the plaintiff was much higher than that of the defendant but both the claim and counterclaim arose out of the same transaction between the parties, and would require to be adjudicated on the basis of evidence being placed on the Court's record. The Court would have to first determine the question as to whether any amount at all wa....
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....decreed. Strictly speaking, even though a counterclaim would be a "proceeding" against the corporate debtor, it had to be considered in view of the recovery sought by the plaintiff as it related to the same transaction. If the court holds that Section 14 only allowed institution of claim by the corporate debtor and did not allow institution of Suit/ Counterclaim by the defendant, it would result in a very iniquitous situation. The counterclaim had to be considered and a blinkered approach could not be followed by the Court and the Court could not blindly stay a counterclaim and refer the defendant to NCLT/RP for filing its claims. The Delhi High Court also observed in paragraph 9 that the nature of the counterclaim is such that it required proper pleading to be filed and the defences and stance of both the parties had to be considered, evidence had to be recorded and then issues had to be adjudicated. It observed that the proceedings before the NCLT are summary in nature and the Resolution Professional also does not conduct trial. The Resolution Professional merely determines what payment can be made towards the claims raised subject to availability of funds. The NCLT/Resolution Pr....
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....eriod. The NCLAT had held that Section 138, being a criminal law provision, cannot be held to be a "proceeding" within the meaning of Section 14 of the IBC. The Supreme Court observed that Section 138 proceedings although a criminal proceeding is in essence initiated only to recover an amount of the bounced cheque against the assets of the Company, and would therefore be included in the term "proceedings" against the corporate debtor. So long as there is a judgement by any court of law which results in coercive steps being taken against the assets of the corporate debtor, all such "proceedings" are necessarily subsumed within the meaning of Section 14(1)(a). It observed in paragraph 10 that the language of Section 14 (1) makes it clear that subject to the exceptions contained in Sub-section (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall mandatorily, by order, declare a moratorium to prohibit what follows in clauses (a) to (d). Importantly, under 14(4) this order of moratorium does not continue indefinitely, but has effect only from the date of the order declaring moratorium till the completion of the Corporate Insolvency Resolution Process, which....