TaxTMI 
TaxTMI 
2026 (3) TMI 426
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....ondent is stated to have floated a tender for the construction of an office building located at Sy. No. 2/2, Venkatala Village, Yelahanka Hobli, Bengaluru. The Petitioner, having bid for the same, was declared successful and awarded the tender. The Letter of Intent (LOI) came to be issued on 7.5.2018, and the Letter of Award (LOA) came to be issued on 28.5.2018, confirming the acceptance of the bid of the Petitioner for an amount of Rs. 1,33,68,56,000/-. 3. Thereafter, a contract was entered into on 9.7.2018, which included the Conditions of Contract (CC). The scope of work for the Petitioner's services was contained in the above documents, more fully described in the drawings, specification, bill of quantities. 4. Respondent initially made a payment of a sum of Rs. 3,06,01,970/- as mobilisation advance to the Petitioner, in pursuance of which, the Petitioner furnished a bank guarantee against such advance payment, which was required to be kept alive until the entire advance payment was repaid/adjusted. The Petitioner furnished a mobilisation bank guarantee on 23.01.2019 for a sum of Rs. 1,56,13,250/-. The agreement stipulated that 5% of all payments made to the Petitione....
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....rbitration proceedings shall be handled & construed as per the Indian Contracts Act 1872 and the Arbitration and Conciliation Act, 1996 and Rules and amendments made there under. The arbitration proceedings shall be conducted at Bangalore. The prevailing party in the Arbitration conducted hereunder shall be entitled to recover from the other party (as part of the arbitral award or order) its attorney's fees and other costs. 7. The Respondent had issued a reply notice on 10.4.2023 denying the existence of an arbitration agreement between the parties, and it is in that background that the Petitioner has approached this Court seeking the appointment of an arbitrator. 8. Notice having been issued, the Respondent has entered an appearance and filed his objections statement, taking up various contentions. According to the Respondent, the Respondent has terminated the contract/agreement on 25.02.2020. Since the Corporate Insolvency Resolution Process of the Petitioner commenced on 17.12.2019, claims were called for from the creditors of the Petitioner. 9. Accordingly, the Respondent sent their claims to the Resolution Professional (RP) on 1.3.2020 along with....
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.... an arbitration agreement is placed before the Section 11 Court, the Section 11 Court should appoint an arbitrator and refer the parties for adjudication by the arbitrator. None of the disputed aspects ought to be considered by this Court. 13.2. In this regard, he relies upon the decision of the Hon'ble Apex Court in the case of SBI General Insurance vs Krish Spinning 2024 12 SCC 1, more particularly Paras 110, 113, 114, 115, 116, 117, 118, 119, 121 and 138, which are reproduced hereunder for easy reference: 110. The parties have been conferred with the power to decide and agree on the procedure to be adopted for appointing arbitrators. In cases where the agreed upon procedure fails, the courts have been vested with the power to appoint arbitrators upon the request of a party, to resolve the deadlock between the parties in appointing the arbitrators. 113. The scope of examination under Section 11(6-A) is confined to the existence of an arbitration agreement on the basis of Section 7. The examination of validity of the arbitration agreement is also limited to the requirement of formal validity such as the requirement that the agreement should be in writing. ....
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....fore does not align with the stated goal of the Arbitration Act to ensure expeditious and time-bound appointment of arbitrators." (emphasis supplied) 117. In view of the observations made by this Court in Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re [Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1 : 2023 INSC 1066], it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else. For this reason, we find it difficult to hold that the observations made in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] and adopted in NTPC Ltd. v. SPML Infra Ltd. [NTPC Ltd. v. SPML Infra Ltd., (2023) 9 SCC 385 : (2023) 4 SCC (Civ) 342] that the jurisdiction of the Referral Court when dealing with the issue of "accord and satisfaction" under Section 11 extends to weeding out ex facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in Interplay Between Arbit....
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....n only for the purpose of weeding out cases where there are no arbitration agreements. His submission is that it is the arbitral tribunal that has to rule on the issue of the existence of the arbitration agreement by considering the contentions taken after evidence and arguments advanced. His submission is also that the validity of the arbitration agreement would have to be decided by the arbitrator and not by the Section 11 Court, including the aspect of whether there is accord and satisfaction, since it is a mixed question of law and fact. He therefore submits that in the present matter, whether there was accord and satisfaction in the CIRP process or not, would have to be determined by the arbitral tribunal. 13.4. He refers to and relies upon the decision of the Hon'ble Apex Court in the case of In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act, 1899 [(2024) 6 SCC 1] more particularly paras 62, 165 to 169 and 220, which are reproduced hereunder for easy reference: 65. The Stamp Act is a fiscal legislation which is intended to raise revenue for the Government. It is a mandatory statute. In Hind....
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....of the Arbitration Act. In Duro Felguera [Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764], this Court held that the Referral Courts only need to consider one aspect to determine the existence of an arbitration agreement - whether the underlying contract contains an arbitration agreement which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement. Therefore, the scope of examination under Section 11(6-A) should be confined to the existence of an arbitration agreement on the basis of Section 7. Similarly, the validity of an arbitration agreement, in view of Section 7, should be restricted to the requirement of formal validity such as the requirement that the agreement be in writing. This interpretation also gives true effect to the doctrine of competence-competence by leaving the issue of substantive existence and validity of an arbitration agreement to be decided by Arbitral Tribunal under Section 16. We accordingly clarify the position of law laid down in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] in the context of Section 8 and Section 11 o....
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....45 does not require the judicial authority to give a final determination. The Court observed that : (SCC p. 267, para 74) "74. There are distinct advantages in veering to the view that Section 45 does not require a final determinative finding by the Court. First, under the Rules of Arbitration of the International Chamber of Commerce (as in force with effect from 1-1-1998), as in the present case, invariably the Arbitral Tribunal is vested with the power to rule upon its own jurisdiction. Even if the Court takes the view that the arbitral agreement is not vitiated or that it is not invalid, inoperative or unenforceable, based upon purely a prima facie view, nothing prevents the arbitrator from trying the issue fully and rendering a final decision thereupon. If the arbitrator finds the agreement valid, there is no problem as the arbitration will proceed and the award will be made. However, if the arbitrator finds the agreement invalid, inoperative or void, this means that the party who wanted to proceed for arbitration was given an opportunity of proceeding to arbitration, and the arbitrator after fully trying the issue has found that there is no scope for arbitration. Sinc....
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.... whether the underlying contract contains an arbitration agreement, which provides for arbitration pertaining to disputes that have arisen between the parties to the agreement. The burden of proving the existence of the arbitration agreement is on the party seeking to rely on the agreement. His submission is that the existence of Clause 19.13 in the agreement is not disputed by the Respondent, and that existence has been established by the Petitioner, requiring the matter to be referred to arbitration. His submission is also that the finding of the Section 11 Court is only a prima facie finding. The same will not be binding on the arbitral tribunal. That issue could be decided by the arbitral tribunal. 13.6. He relies upon the decision of the Hon'ble Apex Court in the case of Duro Felguera S A., vs. Gangavaram Port Ltd. (2017) 9 SCC 729, more particularly Paras 48, 56 to 59 thereof which are reproduced hereunder for easy reference: 48. Section 11(6-A) added by the 2015 Amendment, reads as follows: "11. (6-A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), sh....
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....d Judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the Designated Judge would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the Designated Judge. (v) Designation of a District Judge as the authority under Section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act. (vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would not interfere with the orders passed by the arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms o....
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.... Patel Engg. Ltd., (2005) 8 SCC 618] This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide. 22.1. The issues (first category) which the Chief Justice/his designate will have to decide are: (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement. 22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether the claim is a dead (long-barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligat....
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....itrable, and the proceedings pending before the Company Law Board, would not merit any serious consideration. The elaborate correspondence by and between the parties, as brought on record of the present proceeding, would indicate that any attempt, at this stage, to resolve the disputes by mutual discussions and mediation would be an empty formality. The proceedings before the Company Law Board at the instance of the present Respondent and the prayer of the petitioners therein for reference to arbitration cannot logically and reasonably be construed to be a bar to the entertainment of the present application. Admittedly, a dispute has occurred with regard to the commitments of the respondent Company as regards equity participation and dissemination of technology as visualised under the Agreement. It would, therefore, be difficult to hold that the same would not be arbitrable, if otherwise, the arbitration clause can be legitimately invoked. Therefore, it is the objection of the respondent Company that the present petition is not maintainable at the instance of the petitioners which alone would require an in-depth consideration. 13.9. By relying on Demerara, his submission is that....
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....bmission is that a Coordinate Bench of this Court has held that once the agreement is admitted, the arbitration clause therein also having been admitted, any other objection would have to be raised under Section 16 of the A&C Act which cannot be examined in a proceedings under Section 11 which is summary proceedings and therefore, he submits that any issue raised by the respondents would have to be considered by the arbitrator and not by this Court. 13.12. On the basis of the above, he submits that the petition is required to be allowed and an Arbitrator be appointed. 14. Sri Dhyan Chinnappa, learned senior counsel appearing for the Respondent, would submit that: 14.1. The petition suffers from suppressio veri, suggestio falsi. There is no valid enforceable arbitration agreement subsisting between the parties in view of the approval of the resolution plan and the consequent operation of the Clean Slate doctrine under Section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC). His submission is that once the CIRP process has been commenced and completed, there is a Clean Slate doctrine that applies, inasmuch as neither the creditor nor the debtor of the company undergoing....
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.... to the Board to be recorded on its database. (4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors. 14.4. By referring to Section 31, he submits that the said provision does not preserve, revive or reserve any contractual rights or action in favour of the Petitioner against the Respondent, nor does it provide for continuation of a terminated contract or the arbitration clause contained therein. His submission in this regard is that all the aspects are deemed to have been dealt with by the RP during the CIRP process.....
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....ct to a subsisting arbitration agreement and in that background, what was seen was whether, prima facie, the existence of the arbitration agreement was established. Those decisions did not deal with a situation where the very contract and arbitration clause stood extinguished by operation of law under a statutory insolvency policy on approval of the resolution plan under Section 31 of the IBC. His submission is that there is a distinction between the extinguishment of the contract by way of a statute and the termination of an agreement by the parties. If the statute extinguishes a contract, the arbitration clause cannot be relied upon. 14.8. Insofar as accord and satisfaction, his submission is that the judgment in Krish Spinning dealt with the aspect of accord and satisfaction between the parties, and not according to the satisfaction decided by the Court like the NCLT, on the basis of the recommendation made by the RP. The RP, having considered all the dues by both parties, has balanced the amounts due and paid 71 paise for every rupee to the Respondent, which is deemed to have been made after taking into consideration all the dues of the Respondent to the Petitioner. 14.9.....
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.... that have been given in relation to the debts of the corporate debtor. Far from supporting the stand of the respondents, it is clear that in point of fact, Section 31 is one more factor in favour of a personal guarantor having to pay for debts due without any moratorium applying to save him." 106. Following this judgment in V. Ramakrishnan case [SBI v. V. Ramakrishnan, (2018) 17 SCC 394 : (2019) 2 SCC (Civ) 458], it is difficult to accept Shri Rohatgi's argument that that part of the resolution plan which states that the claims of the guarantor on account of subrogation shall be extinguished, cannot be applied to the guarantees furnished by the erstwhile Directors of the corporate debtor. So far as the present case is concerned, we hasten to add that we are saying nothing which may affect the pending litigation on account of invocation of these guarantees. However, NCLAT judgment being contrary to Section 31(1) of the Code and this Court's judgment in V. Ramakrishnan case [SBI v. V. Ramakrishnan, (2018) 17 SCC 394 : (2019) 2 SCC (Civ) 458], is set aside. 107. For the same reason, the impugned Nclat judgment [Standard Chartered Bank v. Satish Kumar Gupta, ....
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.... debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I&B Code is revival of the corporate debtor and to make it a running concern. 68. All these details are required to be contained in the information memorandum so that the resolution applicant is aware as to what are the liabilities that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure, that the corporate debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stakeholders after it gets the seal of approval from the adjudicating authority upon its satisfaction, that the resolution plan approved by CoC meets the requirement as referred to in sub-section (2) of Section 30 is that after the approval of the resolution plan, no surprise claims should be flung on the successful resolution applicant. The dominant purpose is that he should start with fresh slate on the basis of the resolution plan approved. 69. This aspect has been aptly explained by this Court in Essar Steel (India) L....
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....State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued. 15.3. By relying on Ghanashyam Mishra's case, he submits that once the resolution plan is approved by the adjudicating authority after it is satisfied that the resolution plan is approved by the COC meets the requirement as referred to in subsection (2) of section 30, it shall be binding on the corporate debtor and his employees, members, creditors, guarantors and other stakeholders. An information memorandum, once submitted, containing all the details, the resolution applicant becomes aware of what liabilities the resolution applicant may have to face and provide a plan. The same cannot be subsequently negated by one of the creditors, claiming any money post the resolution plan becoming successful. 15.4. He relies on the judgment of the Hon'ble Apex Court in the case of Gluckrich Capital Pvt. Ltd., vs. The State of West Bengal and Ors. 2023 SCC Online SC 1187, more particularly Paras 5 to 10, which are reprod....
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....udgment of the hon'ble Supreme Court in Usha Ananthasubramanian v. Union of India in the context of section 339(1) one of the companies Act, 2013 as extracted above would clearly apply even in the context of section 66(1) of the IBC. Accordingly, an application under section 66(1) by the resolution professional would not bar any civil action in accordance with law, either at the instance of the resolution professional or liquidator or by the corporate debtor in its new avatar on a successful CIRP for recovery of any dues payable to the corporate debtor by such organisation/legal entities. Such legal action is independent of section 66(1)." 9. Learned counsel appearing for the respondents has pointed out to us that even the NCLT in other similar matters has taken the same view following the judgment of this Court in Usha Ananthasubramanian v. Union of India. Reference has been made to the order dated February 9, 2023# passed in an application in C.P. (IB) No. 4258/(MB) of 2019. 10. We are of the considered opinion that in such circumstances, it is for the resolution professional or the successful resolution applicant, as the case may be, to take such civil reme....
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....fessional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. 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 would successfully take 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 knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count. 30. An important question arose for consideration in Ghanshyam Mishra (supra). Again a three-Judge Bench of this Court examined a question as to whether any creditor including the central government, state government ....
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....is not part of the resolution plan. 102.3. Consequently all the dues including the statutory dues owed to the central government, any state government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued. 31. In Ruchi Soya Industries Ltd. (supra), a two-Judge Bench of this Court referred to the decision in Ghanshyam Mishra (supra) and thereafter declared that on the date on which the resolution plan was approved by the NCLT, all claims stood frozen and no claim, which is not a part of the resolution plan, would survive. 32. A three-Judge Bench of this Court in Ajay Kumar Radheshyam Goenka (supra) held that a creditor has no option but to join the process under the IBC. Once the plan is approved, it would bind everyone under the sun. The making of a claim under the IBC and accepting the same and not making any claim will not make any difference in the light of Section 31 of IBC. Both the situations will lead to Section 31 and the finality and binding value of ....
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....t a successful resolution applicant cannot be faced with undecided claims after the resolution plan is accepted. Otherwise, this would amount to a hydra head popping up which would throw into uncertainty the amount payable by the resolution applicant. In so far the resolution plan is concerned, the resolution professional, the committee of creditors and the adjudicating authority noted about the claim lodged by the Respondent in the arbitration proceeding. However, the Respondent was not included in the top 30 operational creditors whose claims were settled at nil. This can only mean that the three authorities conducting the corporate insolvency resolution process did not deem it appropriate to include the Respondent in the top 30 operational creditors. If the claims of the top 30 operational creditors were settled at nil, it goes without saying that the claim of the Respondent could not be placed higher than the said top 30 operational creditors. Moreover, the resolution plan itself provides that all claims covered by any suit, cause of action, arbitration etc. shall be settled at nil. Therefore, it is crystal clear that in so far claim of the Respondent is concerned, the same wou....
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....onal has ampie powers to proceed and protect the debts of the Corporate Debtor, but it cannot do so by merely filing an Application under Section 60(5) of the Code in the pending CIRP of the Corporate Debtor. The Hon'ble Supreme Court in the matter of Gluckrich Capital Pvt. Ltd. Vs. The State of West Bengal & Ors., on 19.05.2023 held: "We are of the considered opinion that in such circumstances, it is for the Resolution Professional or the successful resolution applicant, as the case may be, to take such civil remedies against third party, for recovery of dues payable to corporate debtor which may be available in law. The remedy against third party. however, is not available under Section 66 of IBC, and the civil remedies which may be available in law, are independent of the said Section. 15. The Applicant has attached a list of invoices as pending payment against the Respondent No. 2. The Respondent No. 2 has challenged the debt on the ground that the said amount was set-off against the claim of the Respondent No. 2 due from the proprietorship firm Jagannath Marbles and Granites, which is managed by the erstwhile director of the Corporate Debtor and the said ....
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....s of the corporate creditor not been dealt with, that decision is inapplicable. 16.3. Insofar as Gluckrich Capital's case, his submission is that was a case where the statutory authorities' rights were extinguished. Since the issue before the Court was whether government claims could be pursued post approval of the resolution plan. 16.4. As regards Electrosteel, he submits that that was a case arising out of an execution of an arbitral award in favour of an operational creditor and in that background, the Hon'ble Apex Court held that the claims of the creditors stood extinguished upon approval of the resolution plan and that the arbitral award could not be executed post-CIRP. 16.5. On the basis of the above submissions, he submits that the resolution process being completed, the claims of the Respondent having been considered by resolution professional and payments made would be deemed to have taken into account, the claims of the Petitioner against the Respondent and as such, after the resolution process is completed, the Petitioner cannot initiate proceedings once again inasmuch as the Respondent has been forced to take a haircut on account of statutory provision of ....
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.... Plan without any express reservation of rights, the disputes now sought to be raised by the Petitioner stands extinguished by operation of law, or amount to accord and satisfaction, waiver or estoppel, or whether they constitute live and arbitrable disputes capable of being referred to arbitration? v. What is the interplay between the doctrine of competence-competence under Section 16 of the Arbitration and Conciliation Act, 1996 and the statutory finality attached to an approved Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016. Specifically, whether upon a prima facie arbitration agreement being shown, all objections ought to be left to the Arbitral Tribunal; or whether the statutory consequences of approval of the Resolution Plan constitute a threshold jurisdictional bar which this Court is required to examine at the stage of Section 11? vi. Whether any live and subsisting arbitrable dispute survives between the parties so as to warrant exercise of jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996, and consequently, whether the present petition deserves to be allowed by appointment of a Sole Arbitrator or....
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....arbitration agreement would have to be decided by the arbitrator and not by the Section 11 Court. 20.4. Placing reliance on In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act, 1899, his submission is that the scope of reference under Section 11 is confined to the examination of the existence of an arbitration agreement, which is only a prima facie determination. The referral courts only need to consider one aspect to determine the existence of the arbitration agreement, namely, whether the underlying contract contains an arbitration agreement which provides for arbitration pertaining to disputes that have arisen between the parties to the agreement. 20.5. He further relies upon Duro Felguera S.A. vs Gangavaram Port Ltd. and submits that after the amendment made to Section 11 in 2015 by inserting Section 6-A, an appointment of an arbitrator would have to be made notwithstanding any judgment, decree or order of any court by confining the examination to the existence of an arbitration agreement. After the amendment, all that the courts need to see is whether an arbitration agreement exists and nothing more, no....
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....ent and quantified the amount payable by the Petitioner to the Respondent at Rs.12,26,30,840/-. The Resolution Plan was approved on 05.04.2022. As per the Resolution Plan, the operational creditors would be paid 0.71% of the amount claimed. Accordingly, the Respondent received only 0.71 paise for every one rupee receivable. His submission is that if the Petitioner were to continue with the arbitration process only in respect of its own claim, after the Respondent having taken a haircut of 99.29 paise per rupee, this would amount to double jeopardy. 20.12. Learned senior counsel refers to Section 31 of the IBC and submits that the said provision does not preserve, revive or reserve any contractual rights or action in favour of the Petitioner against the Respondent, nor does it provide for continuation of a terminated contract or the arbitration clause contained therein. His submission is that all the aspects are deemed to have been dealt with by the RP during the CIRP process. 20.13. Learned senior counsel submits that the decisions in Krish Spinning and Duro Felguera would not be applicable to these facts since they are wholly distinguishable. In those matters, what was consi....
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.... (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in- (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. 20.18. On a plain reading of Section 7, an arbitration agreement must satisfy the following requirements: (a) it must be an agreement by the parties to submit disputes to arbitration; (b) the disputes must arise in respect of a defined legal relationship, whether contractual or not; ....
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....es the requirement that disputes arise in respect of a defined legal relationship. 20.20.3. The clause is contained in the Conditions of Contract dated 09.07.2018, which is a written document executed between the parties. This satisfies the requirement under Section 7(3) that the arbitration agreement be in writing, and under Section 7(2) read with Section 7(4)(a) that it is contained in a document. 20.20.4. The clause further specifies the seat of arbitration as Bangalore and makes express reference to the Arbitration and Conciliation Act, 1996. 20.21. It is pertinent to note that the Respondent does not dispute the existence of Clause 19.13 in the Conditions of Contract. The Respondent's objection is not that there is no arbitration clause, but that the arbitration clause has ceased to be enforceable on account of the completion of the CIRP process and the approval of the Resolution Plan. This is a significant distinction. The existence of the arbitration clause, on a prima facie examination, is clearly established. 20.22. The next limb of this Point requires this Court to examine whether the arbitration agreement survives the termination of the underlying contrac....
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....rantors and other stakeholders. However, Section 31 does not expressly provide for the extinguishment of arbitration agreements. The extinguishment, if any, is of claims and not of the arbitration agreement per se. There is a distinction between the extinguishment of a claim and the extinguishment of the mechanism (i.e., the arbitration agreement) by which a claim may be adjudicated. 20.27. The Respondent's submission that the decisions in Krish Spinning and Duro Felguera are distinguishable is noted. Learned senior counsel argues that those decisions dealt with subsisting arbitration agreements and not with situations where the contract stood extinguished by operation of law. This Court, however, finds that the principle of separability is of universal application. Whether the contract is terminated by the parties or stands extinguished by operation of law, the arbitration clause, being an autonomous agreement, retains its independent existence. The doctrine of separability does not carve out any exception for statutory extinguishment of the underlying contract. 20.28. In In Re: Interplay between Arbitration Agreements, at Para 165, the Hon'ble Apex Court has held th....
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....e scope of jurisdiction of this Court under Section 11 of the Arbitration and Conciliation Act, 1996. In particular, whether in view of Section 11(6-A), this Court is confined to a prima facie examination of the existence of an arbitration agreement, or whether it is competent to examine the legal consequences flowing from the approval of a Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016, including the applicability and effect of the "Clean Slate" doctrine? 21.1. Sri Pradeep Naik, learned counsel for the Petitioner, submits that the scope of examination under Section 11 is extremely narrow and is confined to the prima facie existence of an arbitration agreement. He relies upon Section 11(6-A), which was introduced by the 2015 Amendment and provides that the High Court, while considering an application under sub-section (4), (5) or (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement. The provision is extracted hereunder: Section 11(6-A). The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or....
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....ate doctrine, which flows from Section 31 of the IBC as interpreted by the Hon'ble Apex Court, is a statutory consequence of the approval of the Resolution Plan. It is not a contractual defence like accord and satisfaction or waiver. When a statute extinguishes all rights and liabilities, the question whether the arbitration clause survives is itself a question that goes to the existence of the arbitration agreement. 21.7. His submission is that Krish Spinning dealt with the aspect of accord and satisfaction between private parties, and the Court held that such a question, being a mixed question of law and fact, should be left to the arbitral tribunal. However, the present case does not involve mere contractual accord and satisfaction but involves the statutory extinguishment of claims through an approved Resolution Plan under the IBC, which is a fundamentally different legal question. 21.8. The question of the scope of jurisdiction of this Court under Section 11 is a threshold question that must be answered before proceeding to examine the substantive issues raised by the parties. The answer to this question will determine the extent to which this Court may venture into ....
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....td.. The earlier position which permitted the Referral Court to weed out ex facie non-arbitrable and frivolous disputes has been displaced by the narrower position that the Court's examination is limited to the prima facie existence of the arbitration agreement, and nothing else. 21.14. In In Re: Interplay between Arbitration Agreements (supra), the Hon'ble Apex Court at Para 165 held: 165. The legislature confined the scope of reference under Section 11(6-A) to the examination of the existence of an arbitration agreement. The use of the term "examination" in itself connotes that the scope of the power is limited to a prima facie determination...The scope of examination under Section 11(6-A) should be confined to the existence of an arbitration agreement on the basis of Section 7. Similarly, the validity of an arbitration agreement, in view of Section 7, should be restricted to the requirement of formal validity such as the requirement that the agreement be in writing. This interpretation also gives true effect to the doctrine of competence-competence by leaving the issue of substantive existence and validity of an arbitration agreement to be decided by Arbitral....
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....e IBC, the nature of the claims, whether they were or should have been raised before the RP, and whether they survive the completion of the CIRP process. These are contested questions of law and fact that are more appropriately determined by the Arbitral Tribunal under Section 16 of the Act. 21.20. As held in Krish Spinning (supra), at Para 119: 119. The question of "accord and satisfaction", being a mixed question of law and fact, comes within the exclusive jurisdiction of the Arbitral Tribunal, if not otherwise agreed upon between the parties. Thus, the negative effect of competence-competence would require that the matter falling within the exclusive domain of the Arbitral Tribunal, should not be looked into by the Referral Court, even for a prima facie determination, before the Arbitral Tribunal first has had the opportunity of looking into it. 21.21. At Para 121, the Hon'ble Apex Court further observed: 121. Tests like the "eye of the needle" and "ex facie meritless", although try to minimise the extent of judicial interference, yet they require the Referral Court to examine contested facts and appreciate prima facie evidence (however limited the sc....
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....he corporate debtor against third parties; or whether such extinguishment operates only in respect of claims against the corporate debtor, leaving intact independent remedies of the corporate debtor against its counterparties? 22.1. Sri Pradeep Naik, learned counsel for the Petitioner, in rejoinder, submits that the Clean Slate doctrine would apply only against the corporate debtor, and not as regards the claims by the corporate debtor. His submission is that the Clean Slate applies only to the claims of the Respondent against the Petitioner, and not as regards the claims of the Petitioner against the Respondent. 22.2. In support of this submission, he relies upon COC Essar Steel India Ltd. vs Satish Kumar Gupta and Ors., particularly Paras 105 to 107. At Para 107, the Hon'ble Apex Court held that 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. All claims must be submitted to and decided by the resolution professional. This the successful re....
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.... Court of law. 22.8. Sri Dhyan Chinnappa, learned senior counsel for the Respondent, submits that Section 31 of the IBC does not preserve, revive or reserve any contractual rights or action in favour of the Petitioner against the Respondent. His submission is that on the CIRP proceedings taking place, all the rights and liabilities of the parties are deemed to be fully dealt with and crystallised during that process and no action can be taken up subsequent thereto. 22.9. Learned senior counsel submits that the RP had considered all the claims of both parties. The Respondent submitted its claim of Rs.12,26,30,840.63. The RP, having secured details from the Petitioner and his representative as regards any amounts due by the Respondent to the Petitioner, had taken into account the submissions made and tabulated the dues by holding that there is no amount due by the Respondent to the Petitioner. On that basis, the Resolution Plan was prepared, approved and implemented. Thus, all claims of the Petitioner against the Respondent are deemed to have been considered and resolved during the CIRP process. 22.10. In sur-rejoinder, learned senior counsel distinguishes the decisions reli....
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....ssful resolution applicant can commence the business of the corporate debtor on a fresh slate, free from the burden of pre-existing claims that were addressed during the CIRP process. 22.14. The question is: does the extinguishment under Section 31 operate symmetrically, i.e., does it extinguish both claims against the corporate debtor and claims of the corporate debtor? Or does it operate asymmetrically, extinguishing only claims against the corporate debtor while leaving intact the corporate debtor's own claims? 22.15. On a careful examination of the case law cited before this Court, the following principles emerge: 22.16. First, in COC Essar Steel India Ltd. vs Satish Kumar Gupta (supra), the Hon'ble Apex Court held at Para 107 that a successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan has been accepted. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order to take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate. The principle articulated....
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....ght on this issue. At Para 16, the Tribunal held that the successful resolution applicant is at liberty to proceed against its debtors by filing appropriate application with the competent Court of law. This decision, while of a Tribunal and not binding on this Court, is consistent with the ratio of Gluckrich Capital and reinforces the principle that the corporate debtor's remedies against third parties survive the CIRP process. 22.21. The Respondent's attempt to distinguish these decisions is noted. However, the attempt is not persuasive. The core principle that emerges from Gluckrich Capital is not limited to any particular type of claim or claimant. It is a general statement of law that the resolution applicant may take civil remedies against third parties for recovery of dues payable to the corporate debtor. The Respondent is a third party vis-a-vis the corporate debtor's claims, and the Petitioner's claims against the Respondent (for delays, defects, withholding of amounts, etc.) are civil remedies that are independent of the IBC process. 22.22. The Respondent's submission regarding double jeopardy and inequity is an argument of considerable force. It ....
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.... Insolvency Resolution Process, the submission and adjudication of claims before the Resolution Professional, and the implementation of the approved Resolution Plan without any express reservation of rights, the disputes now sought to be raised by the Petitioner stands extinguished by operation of law, or amount to accord and satisfaction, waiver or estoppel, or whether they constitute live and arbitrable disputes capable of being referred to arbitration? 23.1. Sri Pradeep Naik, learned counsel for the Petitioner, submits that the disputes sought to be raised by the Petitioner are live and arbitrable disputes. His primary submission is that the completion of the CIRP process does not amount to accord and satisfaction, waiver or estoppel in respect of the Petitioner's claims against the Respondent. He relies upon Krish Spinning (supra), to submit that the question of accord and satisfaction is a mixed question of law and fact that comes within the exclusive jurisdiction of the Arbitral Tribunal. At Para 138, the Court held that the dispute regarding accord and satisfaction does not pertain to the existence of the arbitration agreement and can be adjudicated upon by the Arbitr....
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....greement between the parties but by operation of a statutory process under the IBC. The statutory finality attached to the Resolution Plan by Section 31 goes beyond mere contractual accord and satisfaction. 23.7. The question before this Court is whether the disputes sought to be raised by the Petitioner have been extinguished by operation of law, or amount to accord and satisfaction, waiver or estoppel. This question requires examination of several interconnected issues. 23.8. First, as regards accord and satisfaction. The Hon'ble Apex Court in SBI General Insurance vs Krish Spinning (supra) has dealt with this issue directly and conclusively. At Para 119, the Court held: 119. The question of "accord and satisfaction", being a mixed question of law and fact, comes within the exclusive jurisdiction of the Arbitral Tribunal, if not otherwise agreed upon between the parties. Thus, the negative effect of competence-competence would require that the matter falling within the exclusive domain of the Arbitral Tribunal, should not be looked into by the Referral Court, even for a prima facie determination, before the Arbitral Tribunal first has had the opportunity of loo....
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....on to assert its claims during this period. Whether the failure to assert claims during the CIRP amounts to waiver is, again, a factual question that should be determined by the Arbitral Tribunal. 23.13. Similarly, estoppel requires a representation of fact by one party, reliance on that representation by the other party, and consequent detriment. Whether the Petitioner's conduct during the CIRP amounted to a representation that it would not pursue its claims, whether the Respondent relied on such representation, and whether the Respondent suffered detriment as a result, are all factual questions that cannot be resolved at the Section 11 stage. 23.14. Third, as regards extinguishment by operation of law. As discussed in connection with Point No.(iii), the extinguishment under Section 31 of the IBC primarily operates in respect of claims against the corporate debtor. The Hon'ble Apex Court in Gluckrich Capital (supra) has recognised the right of the corporate debtor to pursue civil remedies against third parties. Whether the specific claims sought to be raised by the Petitioner in this case survive the CIRP process is a question that requires detailed examination of th....
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....e arising from the CIRP process, ought to be left to the Arbitral Tribunal. He relies upon Krish Spinning (supra), Interplay between Arbitration Agreements (supra), and Duro Felguera (supra), to submit that the Referral Court should not exercise jurisdiction that is within the domain of the Arbitral Tribunal. 24.2. Learned counsel relies upon Interplay between Arbitration Agreements (supra), at Para 165, where the Hon'ble Apex Court held that "This interpretation also gives true effect to the doctrine of competence-competence by leaving the issue of substantive existence and validity of an arbitration agreement to be decided by Arbitral Tribunal under Section 16." 24.3. Sri Dhyan Chinnappa, learned senior counsel for the Respondent, submits that the statutory finality attached to an approved Resolution Plan under Section 31 of the IBC constitutes a threshold jurisdictional bar that this Court is required to examine at the Section 11 stage. His submission is that the Clean Slate doctrine is not merely a defence on the merits of the dispute, but goes to the very jurisdiction of the Arbitral Tribunal to entertain the dispute. If the claims stand extinguished by operation of ....
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....his Court, the question of whether the Petitioner's specific claims survive the CIRP process is not a threshold jurisdictional question but a substantive defence that goes to the merits of the dispute. The following considerations support this conclusion: 24.8.1. First, the existence of the arbitration agreement is not in dispute. As found under Point No.(i), Clause 19.13 constitutes a valid arbitration agreement that survives the termination of the underlying contract. 24.8.2. Second, the Clean Slate doctrine, as discussed under Point No.(iii), operates primarily in respect of claims against the corporate debtor. The Hon'ble Apex Court in Gluckrich Capital (supra) has recognised the corporate debtor's right to pursue civil remedies against third parties. Whether the Petitioner's specific claims fall within the category of survivable claims is a factual question. 24.8.3. Third, as held by the Hon'ble Apex Court in Krish Spinning (supra) at Para 121, tests that require the Referral Court to examine contested facts and appreciate evidence are not in conformity with the principles of modern arbitration. The question of whether the CIRP process constitutes ....
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....on 31 of the IBC do not constitute a threshold jurisdictional bar which this Court is required to examine at the stage of Section 11. The Arbitral Tribunal is fully competent under Section 16 to determine whether the claims have been extinguished by operation of law, and this question should be left to the Tribunal. 25. Answer to Point No.(vi): Whether any live and subsisting arbitrable dispute survives between the parties so as to warrant exercise of jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996, and consequently, whether the present petition deserves to be allowed by appointment of a Sole Arbitrator or dismissed for want of a subsisting arbitrable claim or enforceable arbitration agreement. 25.1. Sri Pradeep Naik, learned counsel for the Petitioner, submits that the Petitioner has various claims against the Respondent arising from the construction contract, including claims relating to delays and defaults on the part of the Respondent, variations in the scope of works, illegal invocation of the mobilisation bank guarantee during the moratorium period, and other heads of account. These claims constitute live and arbitrable disputes. The arbit....
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.... that objections relating to the effect of the Resolution Plan on the claims should be left to the Arbitral Tribunal. 25.9. The cumulative effect of these findings is that: (a) a valid arbitration agreement exists and subsists prima facie; (b) the scope of this Court's examination is limited to the prima facie existence of the arbitration agreement; (c) the Petitioner's claims against the Respondent, prima facie, survive the CIRP process; and (d) all substantive objections are to be determined by the Arbitral Tribunal. 25.10. In these circumstances, this Court is satisfied that live and subsisting arbitrable disputes, prima facie, survive between the parties so as to warrant exercise of jurisdiction under Section 11(6) of the Act. The Petitioner has established, prima facie, the existence of an arbitration agreement and the existence of disputes that fall within the scope of that agreement. The Respondent's objections, though substantial, are in the nature of substantive defences that must be adjudicated by the Arbitral Tribunal. 25.11. It is, however, necessary to note that the observations and findings of this Court are pri....