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2022 (12) TMI 1060
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....he respondent presented itself as a prominent infrastructure development company to the petitioner and based on its representation, the petitioner awarded development works to be carried out in the project to the respondent. 3. Subsequently, the petitioner entered into a separate contract agreement dated June 21, 2012 ("contract", hereinafter) with the respondent. The term of the contract period was for 24 months and total price of the contract was ?394,30,00,000/-. However, the said project was not completed because of various defaults on the part of the respondent, and the project timelines were extended till June 30, 2017. A major portion of the works were de-scoped, vide agreement dated May 11, 2018 as the respondent was unable to complete the work on time and further did not carry out the maintenance works; which in terms of the contract, the respondent was liable to do for five years. The maintenance work of the project is still ongoing and is being carried out through some other agencies at the risk and cost of the petitioner. Due to the delay caused by the respondent, and the subsequent de-scoping, the petitioner incurred additional expenses. The respondent also failed t....
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....arch 05, 2021, the petitioner issued a notice under Section 21 of the Act of 1996 and invoking Clause 20.2 of the Contract, which deals with Dispute Resolution Procedure. The said Clause provided that the dispute between the parties would be attempted to be resolved through mutual discussion, failing which names of three arbitrators would be proposed by the petitioner. Clause 20.2 is reproduced below:- "20.2 Dispute Resolution Procedure 20.2.2 Amicable Resolution 20.2.1.1 Save where expressly stated to the contrary in this Contract, any dispute, difference or controversy of whatever nature between the Parties, however, arising under, out of or in relation to this Contract include disputes, if any, with regard to any acts, decision or opinion of DLFs Representative and so notified in writing by either party to the other (the "Dispute") shall in the first instance be attempted to be resolved amicably by mutual discussions co-operation and consultation in accordance with the procedure setout in clause 20.2.1.2 below. 20.2.1.2 Either party may require such Dispute to be referred to a nominated official/director of each *Party, for amicable settlement....
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.... The Courts in Delhi alone and the High Court at New Delhi alone shall have jurisdiction concerning all matters in terms of this Contract. Performance under the Agreement shall continue unabated during Arbitration Proceedings and no payment due or payable by one party to the other shall be withheld unless any such payment is or forms as part of the subject matter of the Arbitration Proceedings. The Party invoking arbitration shall specify the disputes to be referred to Arbitration under this cause together with the amounts claimed or any other remedy demanded in respect of each such dispute. The Arbitral Proceedings in respect of particular disputes shall commence on the date on which a request for reference of that disputes for arbitration is received by the other side. The Arbitrator shall give his award separately on each individual item in dispute. The Arbitrator shall also give reasons for arriving at the conclusion separately for each item in dispute. The Award of the Arbitrator shall be final, conclusive and binding on both the parties to these contracts." 9. The petitioner accordingly proposed the names of three retire....
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....as the petition under Section 9 of the IBC is already pending before the NCLT, Chandigarh and the present petition is an attempt by the petitioner to thwart the insolvency proceedings. 14. The respondent had initially issued a demand notice on July 15, 2019 under Section 8 of the IBC for an operational debt of ?32,44,52,926/-. Upon the failure of the petitioner to provide a reply, the respondent approached the NCLT under Section 9 of the IBC on December 2, 2019. The NCLT issued notice to the petitioner vide order dated December 24, 2019. The petitioner in its reply to the said petition also filed an application under Sections 5 and 8 of the Act of 1996 before the NCLT seeking reference of the alleged disputes to arbitration. Though the said application is yet to be heard and adjudicated by the NCLT, a bare perusal of the same would establish that the present petition has been filed by the petitioner seeking essentially the same relief as has been sought by it before the NCLT. The petitioner has failed to place before this Court, the said application and even the reply to the petition under Section 9. 15. It is also stated that the respondent is a part of the IL&FS Group, whic....
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....ho successfully takes over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant exactly knows what has to be paid in order that it may take them over and run the business of the corporate debtor. Therefore, the remedy sought to be availed by the petitioner in the present petition is untenable. 19. That apart, it is stated that the invocation of arbitration by the petitioner is untenable in light of a 'moratorium' declared qua IL&FS and its 348 Group Companies including the respondent. Relevant portion of the order dated October 15, 2018 passed by the NCLAT prohibiting commencement or continuation of any new proceedings against IL&FS and its Group Companies is reproduced as under: "Taking into consideration the nature of the case, larger public interest and economy of the nation and interest of the Company and 348 group companies, there shall be stay of (i) The institution or continuation of suits or any other proceedings by any party or person or Bank or Company, etc. against 'IL&FS' and its 348 group companies in any Court of Law/Tribunal/Arbitration Panel or....
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.... account of extended services by consultants 30.92 36.36 c. Overhead expenses 17 17 d. Cost of de-scoping 68.03 47.10 e. Recovery of advance paid 17.94 17.94 f. Electricity bills arrears 1.47 1.45 h. Loss of expected profits, business reputation, goodwill etc. 200 200 i. Interest 185.48 40.55 22. It is stated that the petitioner had concealed the fact that it had lodged the same claims before the CMA as has been sought to be referred to arbitration. 23. A reply has been filed by the petitioner to the supplementary affidavit filed by the respondent wherein it has been stated that the claims up to October 15, 2018 submitted before the CMA is without prejudice and whilst reserving its rights to prosecute its claims for damages against the respondent in the arbitration proceedings, as is clear from a perusal of paragraph 22 of the petition. 24. It is stated that the petitioner has sought reference of all disputes between itself and the respondent to arbitration and not just claims pertaining to damages post October 15, 2018. However, it is averred that if this Court comes to the conclusion that only ....
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....iled before this Court. (ii) Whether the orders dated October 15, 2018 and March 12, 2020 passed by the NCLAT come in the way of exercise of jurisdiction by this Court under Section 11 of the Act of 1996, especially when the moratorium granted by the NCLAT vide the said orders is not in exercise of powers under Section 14 of the IBC but under Sections 241 and 242 of the Companies Act, 2016. (iii) Whether the petitioner can be left without a remedy in respect of its claims post the cut-off date against the respondent, which admittedly lie outside the resolution framework of IL&FS as approved by the NCLAT vide order dated March 12, 2020. 27. It is the submission of Mr. Nayar that the moratorium given by NCLAT vide order dated October 15, 2018 and confirmed by the subsequent order dated March 12, 2020, is not a statutory moratorium under Section 14 of the IBC. In fact, the resolution of IL&FS is not being conducted under the IBC at all but is being done pursuant to the provisions of Sections 241 and 242 of the Companies Act, 2013. Therefore, the rigours of Section 14 of the IBC are not attracted to the present case at all and this is what distinguishes the present....
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....this order on the ground that in Bay Capital, an IL&FS entity was the claimant therein and therefore it could initiate and continue with the arbitration. It was argued that the moratorium is "a one-way traffic" where IL&FS can file proceedings against a third party but not vice versa. According to Mr. Nayar, this distinction overlooks paragraph 6 of the Division Bench Order in Appeal (L) 11080/2021 where even after staying the judgment of learned Single Judge, the Division Bench permitted Bay Capital to file a counter claim and if any impediment was felt, Bay Capital was allowed the liberty to apply for modification or clarification of order. The Division Bench was conscious of the fact that the order of moratorium could be relied upon by IL&FS to non-suit Bay Capital from filing a counter claim (on the ground that counter claim is a proceeding against IL&FS and no proceeding could be filed against IL&FS in view of the order of moratorium) and protected the rights of Bay Capital to file a counter claim in the arbitration proceedings where IL&FS was the Claimant. 31. Mr. Nayar has argued that though the decision of the learned Single Judge in Bay Capital (supra) has been stayed b....
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....led by APCO Titan JV initially against the sole defendant National Highways and Infrastructure Development Corporation Ltd. ("NHIDC"). (ii) The facts were that Border Road Organisation ("BRO") had given a bid to a company SSTL to undertake a road project in J&K. BRO and SSTL entered into a concession agreement which was subsequently transferred from BRO to NHIDC. Parallelly, SSTL appointed an IL&FS group company called ITNL to be the EPC contractor. On its part ITNL appointed the plaintiff APCO Titan as a construction contractor. (iii) The plaintiff directly sued NHIDC invoking Section 70 of the Indian Contract Act, 1872 on the basis that even though it has no direct privity of contract with NHIDC since the benefit of the work done by it has been received by NHIDC, it must be paid by NHIDC under Section 70 of the Contract Act. (iv) In the suit, SSTL and ITNL filed an application under Order 1 Rule 10 CPC seeking impleadment on the ground that the plaintiff could not directly seek recovery of monies and that since the privity of contract is between the plaintiff and ITNL/ SSTL, any recourse of the plaintiff must only be against the latter. It was further a....
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....ght to arbitrate would result in the petitioner being left remediless. 36. He has controverted the submission of the learned counsel for the respondent that the cut-off date has no relevance and arbitration can be commenced after the moratorium is lifted, by stating that the same is based on a complete misunderstanding of debt resolution process undertaken in respect of IL&FS and its Group Companies. He states that a perusal of the order dated March 12, 2022 and the approved resolution framework for the IL&FS would reveal that the framework is different from the resolution process which is typically followed in respect of Companies undergoing corporate insolvency resolution process. According to Mr. Nayar, the process being followed in the present case is for the sale of the paid-up capital of the respondent held by IL&FS and another IL&FS group company called ILFS Financial Services Limited (IFIL) on a Swiss Challenge Method. Further, even the distribution of the proceeds to be received from the sale of such shares is not to be distributed as is usually done in any IBC case i.e., as per the approved Resolution Plan and the mandate of Committee of Creditors but in a sui generis ....
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.... that the present petition has only been filed in order to scuttle the petition under Section 9 of the IBC filed against the petitioner before NCLT, Chandigarh, by stating that the petition under Section 9 of the IBC will be decided on its own merit. The petitioner cannot make a monetary claim under Section 9 of the IBC and the same could only be done in arbitration. 39. He has sought the prayers as made in the petition. 40. Mr. Jayant Mehta, learned Senior Counsel appearing for the respondent has stated at the outset that the instant proceedings is merely an afterthought and a device to thwart the proceedings which have been initiated by the respondent against the petitioner under Section 9 of the IBC, pending before the NCLT, Chandigarh. 41. The petitioner has invoked arbitration vide notice dated March 5, 2021, i.e., fourteen months after the NCLT had issued notice in the proceedings under the Section 9 of the IBC. The petitioner also lodged its claims before the CMA on September 24, 2021 by which time the deadline of lodging claims had already concluded. If the intent of the petitioner was not to thwart the proceedings under Section 9 of the IBC and the claims where ge....
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....olution process of the corporate debtor had concluded long before filing of the Section 11 petition. In any case, the Judgment has been challenged before the Supreme Court and is currently pending adjudication. 48. He has also stated that the petitioner cannot short-circuit the moratorium merely because it believes it has claims after the cut-off date. The objective of the resolution process is to arrive at a plan to bring the corporate debtor back into the economic mainstream so as to be able to repay its debts. Therefore, the fate of the petitioner's claims post October 15, 2018 can only be decided once a resolution plan of the respondent is finally approved and takes effect. Referring the parties to arbitration during the subsistence of a moratorium would defeat the very purpose and concept of moratorium. 49. Mr. Mehta has also argued that the Judgment in the case of Vidya Drolia (supra) is not applicable to the facts of this case as therein the Court was not dealing with a situation where a Section 11 petition was filed on the face of a 'moratorium order' as is in the present case. That apart, the Court therein was also not dealing with a situation wherein the petition wa....
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....h claims would leave the petitioner remediless as it would have no forum to raise the claims arising after the cut-off date. v. The CMA has refused to admit or reject the claims of the petitioner on the ground that the claims are part of the present arbitration proceedings. Hence, if arbitration is denied, even claims arising before cut-off date would not be entertained. Even otherwise, this Court can refer the parties to arbitration with regard to the claims post the cut-off date of October 15, 2018. 53. There is no dispute to the fact that the petitioner entered into a cost sharing agreement with HUDA for external development works for improvement of certain road networks in Gurgaon, Haryana. Subsequently, the petitioner entered into a separate contract agreement dated June 21, 2012 with the respondent with a contract period of 24 months. It is the case of the petitioner that the project could not be completed for various defaults and disputes arose in November 2018 in relation to certain works to be completed/rectified by the respondent. Meanwhile, the Union of India in a petition under Sections 241 and 242 of the Companies Act, 2016 moved the NCLT, Mumbai praying fo....
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....ny term loan, corporate loan, bridge loan, commercial paper, debentures, fixed deposits, guarantees, letter of support, commitment or comfort and other financial facilities or obligations vailed by 'IL&FS' and its 348 group companies whether in respect of the principal or interest or hedge liability or any other amount contained therein. (iv) Suspension of temporarily the acceleration of any term loan, corporate loan, bridge loan, commercial paper, debentures, fixed deposits and any other financial facility by the 'IL&FS' and its 348 group companies by any party or person or Bank or Company, etc. as of the date of first default. (v) Any and all banks, financial institutions from exercising the right to set off or lien against any amounts lying with any creditor against any dues whether principal or interest or otherwise against the balance lying in any bank accounts and deposits, whether current or savings or otherwise of the 'IL&FS' and its 348 group companies. The interim order will continue until further orders and not be applicable to any petition under Article 226 of the Constitution of India before any Hon'ble High Court or under any jurisdiction of....
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.... the pendency of the appeal before the Supreme Court. 59. The restraint order of NCLAT stays all proceedings, including arbitration. Moreover, it is the case of the petitioner that it has filed claims before the CMA up to October 15, 2018, though the said claims have not been considered by the CMA on the ground of pendency of the present proceedings. 60. In view of the above, the plea of Mr. Nayar is unmerited. In this regard, I may refer to the judgment of a coordinate Bench of this Court in the case of APCO-Titan (JV) (supra), wherein this Court has held that the suit filed therein shall not be maintainable against a Group Company of IL&FS, in view of the order dated October 15, 2018 of the NCLAT. Relevant part of the judgment is reproduced as under:- "32. It is not disputed that the above order continues to operate and apply even qua ITNL. The primary dispute and claim for recovery being against ITNL/SSTL, in view of the order dated 15th October, 2018 of the NCLAT, the present suit would not be maintainable." 61. That apart, the High Court of Himachal Pradesh in the case of M/s VIL Limited v. IL&FS Transportation Networks, CARAP No. 16/2018 dated November 30, 2....
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.... of October 15, 2018 for commencing the resolution process and the CMA having invited claims only up to October 15, 2018, the claims of the petitioner arising after October 15, 2018 need to be referred to arbitration, failing which, the petitioner would be left remediless with regard to the said claims. He stated that the resolution framework of IL&FS is different from the resolution process that is typically followed in respect of companies undergoing CIRP. According to him, the process followed in the present case is for the sale of paid-up capital of the respondent held by IL&FS and another IL&FS Group Company namely IFIL on a Swiss Challenge Method. Even the proceeds to be received from the sale of such shares is not to be distributed as per the approved resolution plan and mandate of the Committee of Creditors, but in a sui generis method. This submission is also without any merit. This I say so, because of the effect of the order of the NCLAT, which is primarily an order akin to an order of moratorium under Section 14 of the IBC. The purpose and rationale behind granting a moratorium is to ensure that the assets of the corporate debtor are protected, with an intention to keep....
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....se, defeating the very purpose for which such an order was passed. Mr. Nayar in support of his submission has relied upon the judgments in the cases of Raghu Ramakrishna Raju Kanumuru (supra), Alapan Bandyopadhyay (supra), L. Chandra Kumar (supra) and Bhagaban Sarangi (supra). 69. In so far as the Judgment in the case of Kanumuru (supra) is concerned, the same shall not help the case of the petitioner. In fact, the Supreme Court has in paragraph 16 of the Judgment stated as under, which would mean, in so far this case is concerned, when the matter is pending before the Supreme Court, any decision whereto shall have a bearing on these proceedings, this Court must not pass any order. "16. In that view of the matter, we are of the considered view that the continuation of the proceedings before the learned NGT for the same cause of action, which is seized with the High Court, would not be in the interest of justice." 70. Similarly the Judgment in the case of Alapan Bandyopadhyay (supra) relied upon by Mr. Nayar shall have no applicability for the reasons already stated above. Even the Judgment in the case of Bhagaban Sarangi (supra) has no bearing on the issue which aris....