NCLAT
Case BriefsTribunals/Commissions/Regulatory Bodies

   

National Company Law Appellate Tribunal: While dealing with a matter seeking expunging the adverse remake made against the appellant, a bench comprising of Ashok Bhushan*, J., Dr. Alok Srivastava and Barun Mitra (Technical Members), held that there is no prohibition according to the statutory provision governing appearance of an advocate in representing a different company in separate proceedings filed under S. 7 of Insolvency and Bankruptcy Code, 2016.

Factual Matrix

The Appellant, Anand Varma was appointed as the Resolution Professional in the Corporate Insolvency Resolution against the Corporate Debtor ‘National Plywood Industries Ltd.'. The appellant invited Expressions of Interest (EOIs) and respondent no.1 and respondent no.4 submitted their respective EOI's. Respondent no. 4 was the only one who submitted the Resolution Plan as discussed by the Committee of Creditors (CoC) and which was then approved and sent for approval before the Adjudicating Authority.

An Application under S. 7 IBC was filed by authorised signatory of ‘Damayanti Tea Industries' through its Advocate, the appellant. The CoC once again considered the Resolution Plans submitted by both respondent nos. 1 and 4 and like before the resolution plan submitted by respondent no. 4 was approved.

Respondent no.1 approached the Adjudicating Authority alleging a conflict of interest and filed an I.A No. 43/2021 praying to remove respondent no. 2 as the Resolution Professional and set aside all acts of the Resolution Professional in which the Resolution Professional had been instrumental, as unfair, biased, motivated and lacking in transparency. Vide order dated 08-04-2022, the Adjudicating Authority disposed of I.A and issued some directions.

According to the appellant, the Adjudicating Authority made some “prejudicial observations” against him. The present appeal was filed by the appellant for expunging the adverse remarks made against him by the Adjudicating Authority.

Contention of the parties

The appellants contended that the Adjudicating Authority has observed that the appellant has appeared for the Resolution Professional in the CIRP of the Corporate Debtor and has also appeared on behalf of ‘Damayanti Tea Industries' by filing an application under S. 7 IBC. The very basis of observations by the Adjudicating Authority that Appellant has appeared for respondent no. 2 and 4 is unfounded. The appellant was not representing respondent no. 4 in the CIRP of the Corporate Debtor.

The respondents contended that the promoter of the Corporate Debtor and is also promoter of ‘Damayanti Tea Industries' and the appellant filed an application under S. 7 IBC on behalf of ‘Damayanti Tea Industries' when Resolution Plan submitted by respondent no.4 was pending consideration before the NCLT. The appellant was representing both the parties which is clearly conflict of interest.

Tribunal's Observation

The Tribunal observed that according to the Adjudicating Authority the appellant has appeared both for Resolution Professional and Resolution Applicant in the CIRP of the Corporate Debtor, but it is not the correct fact. The appellant was not appearing for respondent no.4 which is a Resolution Applicant in the CIRP of the Corporate Debtor but had filed an application under S. 7 IBC on behalf of ‘Damayanti Tea Industries' which is a separate company registered under the Companies Act.

“…‘Damayanti Tea Industries' is a unit of ‘M/s. Chandrabali Commercial India Pvt. Ltd.' incorporated on 27.07.2000 with its separate identification number. Respondent No.4 who was the Resolution Applicant in the CIRP of the Corporate Debtor is ‘PLBB Products Pvt. Ltd.' which is registered company having separate registration number and entity. The Section 7 Application filed by ‘Damayanti Tea Industries' has no concern with the subject matter of CIRP of the Corporate Debtor.”

The Tribunal opined that the appellant had not appeared for Resolution Professional and Resolution Applicant i.e., respondent no. 4 in the CIRP of the Corporate Debtor and there is no prohibition on advocate to represent different company in separate proceedings filed under S. 7 IBC.

“No prohibition can be read in the statutory provision governing appearance of an Advocate in representing a different company in separate proceedings filed under Section 7.”

Discussing Rr. 14 and 33 of Bar Council of India Rules, 1975, the Tribunal observed that there is no violation of any Rules of Etiquette or conflict of interest in the CIRP of the Corporate Debtor as ‘Damayanti Tea Industries' is a separate company and has initiated separate proceeding under S. 7 against different Corporate Debtor.

The Tribunal mentioned, Neeraj Garg v. Sarita Rani, (2021) 9 SCC 92, where it was observed that

“While it is of fundamental importance in the realm of administration of justice to allow the judges to discharge their functions freely and fearlessly and without interference by anyone, it is equally important for the judges to be exercising restraint and avoid unnecessary remarks on the conduct of the counsel which may have no bearing on the adjudication of the dispute before the Court.”

The Tribunal noted that the observations made by the Adjudicating Authority in the judgment were not necessary for deciding the issues and the observations made against the appellant were uncalled for.

Allowing the appeal, the Tribunal directed the expunging of all adverse observations made against the appellant.

[Anand Varma v. Piyush Periwal, 2022 SCC OnLine NCLAT 455, order dated 04-11-2022]


Advocates who appeared in this case :

Mr. Maninder Singh, Mr. Krishnendu Datta (Senior Advocate) and Mr. Kaustubh Prakash, Counsel for the Appellants;

Mr. Abhijit Sarkar, Mr. Rishi Kumar Singh Gautam and Mr. Manish Verma, Counsel for the Respondent No. 1;

Mr. Abhijeet Sinha, Counsel for the Respondent No. 4.


*Ritu Singh, Editorial Assistant has put this report together

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT)- The Coram of Justice Jarat Kumar Jain (Judicial Member), Ashok Kumar Mishra (Technical Member), and Alok Srivastava (Technical Member) while dismissing an appeal summarily without notice to the Respondent was of the opinion, that there was no need to interfere with the impugned order since the adjudicating authority had rightly held that the petition was not maintainable.

In the pertinent matter, it was alleged that the adjudication authority had erroneously dismissed the Petition as not maintainable. Appeal was filed by the Shareholder of the Financial Creditor Company, and it was submitted that the petitioner can initiate action on behalf of the Company if the same is in the interest of the Company and the Board is not pursuing the same, as per the doctrine of derivative action. The adjudicating authority was of the opinion that such person does not come within the definition of aggrieved person under Section 61 of the IBC. Therefore, the Appeal was not maintainable. The adjudicating authority held that no Board Resolution was filed in regard to advance loan to Corporate Debtor Company as required under Section 186 of the Companies Act, 2013.

The Tribunal held that

“we have considered the submissions, undisputedly there is no board resolution authorising the appellant to file the petition under Section 7 of the IBC and filed this Appeal as there is deadlock in the Financial Creditors Company”.

The Court further held that,

“The facts of the cited cases are quite different and in theses citations it is held that a shareholder has no locus standi to maintain the suit, affirmed one of the exceptions to the aforesaid rule that where a shareholder can show that the wrong doers are in control of the defendant company and hence the company would be unable to maintain the action. So far as the Petition under Section 7 of the IBC is concerned, there is a specific notification by the Central Government under sub-section (1) of Section 7 of the IBC that on behalf of the Financial Creditor a guardian, an executor or administrator of an estate of a financial creditor, a trustee and a person duly authorized by the board of directors of a company may file Application for initiation of CIRP against the Corporate Debtor. In such situation, doctrine of derivative action cannot be applied in Petition under Section 7 of the IBC.”

[M Sai Eswara Swamy v. Siti Vision Digital Media Pvt. Ltd., Company Appeal (AT) (Ins) No. 706 of 2021, decided on 09-09-2021]


Counsel for the Parties:

For Appellant:

Mr. P Nagesh, Sr. Adv. with Mr. Harshal Kumar, Mr. Shivam Wadhwa

For Respondent:

Mr. Arvind Nayar, Sr. Adv. with Mr. Shivam Singh, Mr. Abhinav Singh, Advocates


Agatha Shukla, Editorial Assistant has reported this brief.

OP. ED.SCC Journal Section Archives

The jurisdiction of the Arbitral Tribunal emanates from the agreement between the parties.1 Therefore, the existence of the arbitration agreement between the parties is a sine qua non for reference of the disputes between parties to arbitration.2

 

The Arbitration and Conciliation Act, 1996 (“the Act”) is the law governing arbitration proceedings in India. Section 7 of the Act defines an “arbitration agreement” to mean an agreement by the parties to submit disputes that have arisen or which may arise between them in respect of a defined legal relationship to arbitration.3 Further, Section 7(3) of the Act mandates that an arbitration agreement shall “be in writing”. Under the Act, an arbitration agreement is deemed to be in writing if : (a) it is contained in a document signed by the parties;4 (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement;5 (c) an exchange of statement of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other;6 or (d) a contract between the parties making a reference to another document containing an arbitration clause indicating an intention to incorporate the arbitration clause from such other document into the contract.7

 

This article seeks to examine the scope and purport of Section 7(4)(c) of the Arbitration and Conciliation Act, 1996 which stipulates that an arbitration agreement is deemed to be in writing if it is contained in an exchange of statement of claim and defence wherein the existence of arbitration agreement is alleged by one party and not denied by the other. In order to accomplish the aforesaid objective, the authors first examined the legislative history of Section 7 of the Act resulting in its enactment. Thereafter, the authors briefly examined the divergent views expressed by the High Courts and the Supreme Court of India on the scope and meaning of Section 7(4)(c) of the Act. The authors concluded by summarising their views on the true scope and purport of the said sub-section.

 

READ COMPLETE ARTICLE HERE

 

———

Senior Advocate and Additional Advocate General of Karnataka.

†† Advocate enrolled with the Bar Council of India in May 2016. He is a gold medallist from National Law University, Jodhpur and practises law at Bangalore, India.

*The article has been published with kind permission of Eastern Book Company. Cite as (2021) 3 SCC J-32

1 Indu Malhotra, O.P. Malhotra’s the Law & Practice of Arbitration and Conciliation (3rd Edn., 2014), p. 354.

2MTNL v. Canara Bank, (2020) 12 SCC 767, para 9; Yogi Agarwal v. Inspiration Clothes & U, (2009) 1 SCC 372, para 10; Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306

, para 13.

3 Section 7(1), Arbitration and Conciliation Act, 1996.

4 Section 7(4)(a), Arbitration and Conciliation Act, 1996.

5 Section 7(4)(b), Arbitration and Conciliation Act, 1996.

6 Section 7(4)(c), Arbitration and Conciliation Act, 1996.

7 Section 7(5), Arbitration and Conciliation Act, 1996; Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306, para 12.

8 Generally see, Rohan Tigadi, “Indian Arbitration : Ghost of Implied Exclusion and other related issues”, 12 (2) Asian International Arbitration Journal 181 (2016).

9 See, Article 7 of the Model Law on International Commercial Arbitration 1985 (United Nations Commission on International Trade Law, UN Doc. A/40/17, Annex I).

10 Generally see, Hindustan Construction Co. Ltd. v. Union of India, 2019 SCC Online SC 1520, para 19; BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, para 68.

11Kalpana Mehta v. Union of India, (2018) 7 SCC 1, paras 123-35.

12 A/RES/40/72, Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (11 December 1985); Preamble, Arbitration and Conciliation Act, 1996.

13K.S. Puttaswamy (Privacy-9J.) v. Union of India, (2017) 10 SCC 1, para 154.

14 It is an international government organisation formed in 1956 to serve as an advisory board to member States on matters of international law.

15 International Commercial Arbitration, Note by the Secretary General (A/CN.9/127)

16 UNCITRAL, Note by the Secretariat further work in respect of International Commercial Arbitration (A/CN.9/169), Para 2.

17 UNCITRAL Report of the Secretary General : Study on the application and interpretation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (A/CN.9/168)

18 Note by the Secretariat : Further work in respect of International Commercial Arbitration (A/CN.9/169), Para 6.

19 Report of Working Group on International Contract Practices on the Work of its Third Session, A/CN.9/216, Para 1.

20 UNCITRAL, Report of the Secretary General : Possible Features of a Model Law on International Commercial Arbitration (A/CN.9/207), Paras 39-43.

21 Article 7(2) of the UNCITRAL Model Law, 1985; Report of the Working Group on International Commercial Arbitration of its Third Session (A/CN.9/216), Para 23.

22 Report of the Working Group on International Commercial Arbitration of its Third Session (A/CN.9/216), Para 24 (in this connection, the question was raised whether a party which had appeared before an Arbitral Tribunal without contesting jurisdiction may later invoke lack of a written arbitration agreement. The prevailing view was that such a party could not in those circumstances invoke lack of written agreement. However, it was agreed that the question should be dealt with in the Model Law, as it was a question which could be adequately dealt by domestic law”.); International Commercial Contract : Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration (A/CN.9/264), Paras 6-8.

23 Generally see, UNCITRAL, Report of the Working Group on International Commercial Practices on the work of its Fourth Session (A/CN.9/232); UNCITRAL, Report of the Working Group on International Commercial Practices on the work of its Seventh Session (A/CN.9/246)

24 Summary records of the 320th UNCITRAL Meetings, available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/320meeting-e.pdf> (last accessed on 31-1-2021), Para 5.

25 Summary records of the 320th UNCITRAL Meetings, available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/320meeting-e.pdf> (last accessed on 31-1-2021), Para 6.

26 Report of the United Nations Commission on International Trading Law on the work of its 18th Session, A/40/17, Para 87.

27Ibid. Introduction to the UNCITRAL 2012 Digest of Case Law on International Commercial Arbitration (1985 with amendments adopted in 2006), p. 1, Para 1 available at <https://www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf> (last accessed 31-1-2021)

28 Report of the Working Group on Arbitration of its Thirty-third Session (A/CN.9/485), Para 38.

29 Report of the Working Group on Arbitration on the work of its Thirty-fourth Session, A/CN.9/487, Para 34.

30 Report of the Working Group on Arbitration on the work of its Thirty-sixth Session, A/CN.9/508, Paras 32-35.

31Id, Paras 34-35; Settlement of commercial disputes : Preparation of a model legislative provision on written form for the arbitration agreement, A/CN.9/WGII/WP.136, Para 10; Report of the Working on Arbitration on the work of its Forty-fourth Session (A/CN.9/592), Para 68.

32 Report of the Working Group on Arbitration on the work of its Forty-fourth Session (A/CN.9/592), Para 65.

33Id, Paras 66-67.

34 Article 141, Constitution of India.

35(2011) 1 SCC 320.

36Id, para 12.

37 Order 8 Rule 5, Code of Civil Procedure, 1908.

38(2020) 12 SCC 767.

39Canara Bank v. MTNL, 2011 SCC OnLine Del 5705; Canara Bank v. MTNL, 2011 SCC OnLine Del 5704.

40MTNL v. Canara Bank, (2020) 12 SCC 767, paras 9, 10.

41(2018) 12 SCC 736.

42Tata Elxsi Ltd. v. Anand Joshi, 2000 SCC OnLine Kar 120; Shyamraju & Co. (India) (P) Ltd. v. City Municipal Council, 2019 SCC OnLine Kar 3177

43G. Kapoor v. Reacon Engineers (P) Ltd., 2019 SCC OnLine Del 10667.

44Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi, 2009 SCC OnLine AP 202.

452000 SCC OnLine Kar 120.

46Id, para 5.

472019 SCC OnLine Kar 3177

48G. Kapoor v. Reacon Engineers (P) Ltd., 2019 SCC OnLine Del 10667, paras 15-17.

49Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi, 2009 SCC OnLine AP 202, para 11.

50Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill, (2012) 2 SCC 108, paras 20-21.

51High Court of Gujarat v. Gujarat Kishan Mazdoor Panchayat, (2003) 4 SCC 712, paras 35 & 36; Rajdeep Ghosh v. State of Assam, (2018) 17 SCC 524, para 23.

52Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill, (2012) 2 SCC 108, para 48; Badshah v. Urmila Badshah Godse, (2014) 1 SCC 188, paras 16-18.

53Badshah v. Urmila Badshah Godse, (2014) 1 SCC 188, para 20.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal: Canara Bank, the appellant-financial creditor, challenged the impugned order passed by National Company Law Tribunal, Hyderabad Bench whereby while admitting the application preferred by Appellant under Section 7 of the Insolvency and Bankruptcy Code, 2016 passed an order of moratorium thereby prohibiting the institution of suits or continuation of pending suits or proceedings except before the High Courts and Supreme Court of India, against the Corporate Debtor including execution of any judgment, decree or order in any court of law, Tribunal, arbitration panel or other authority.

The counsel appearing on behalf of the appellant contended that the Adjudicating Authority cannot exclude any court from the purview of moratorium for the purpose of recovery of amount or execution of any judgment or decree, including the proceeding, if any, pending before the High Courts and Supreme Court of India against a ‘corporate debtor’. NCLAT while adjudicating the matter opined that Section 14 relates to ‘Moratorium’ which the Adjudicating Authority is required to declare at the time of admission of the application for ‘corporate insolvency resolution The NCLAT stated that,

“from Section 14(1) (a), it was clear that institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order by any court of law, tribunal, arbitration panel or other authority come within the purview of ‘moratorium’ and that the said provision specifically did not exclude any Court, including the Hon’ble High Courts or Hon’ble Supreme Court of India.”

The NCLAT, dismissing the appeal, and further clarifying the impugned order passed by Tribunal relating to ‘moratorium’ held in clear terms that,

“The Hon’ble Supreme Court has power under Article 32 of the Constitution of India and Hon’ble High Court under Article 226 of Constitution of India which power cannot be curtailed by any provision of an Act or a Court. In view of the aforesaid provision of law, we make it clear that ‘moratorium’ will not affect any suit or case pending before the Hon’ble Supreme Court under Article 32 of the Constitution of India or where an order is passed under Article 136 of Constitution of India. ‘Moratorium’ will also not affect the power of the High Court under Article 226 of Constitution of India. However, so far as suit, if filed before any High Court under original jurisdiction which is a money suit or suit for recovery, against the ‘corporate debtor’ such suit cannot proceed after declaration of ‘moratorium’, under Section 14 of the I&B Code.”

 [Canara Bank v. Deccan Chronicle Holdings Limited, 2017 SCC OnLine NCLAT 255, decided on 14.9.2017]

 

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Principal Bench: Bank of Baroda, the Financial Creditor filed an application to trigger the Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Amrapali Silicon City Pvt. Ltd., the Corporate Debtor. The financial debt was set out in the form of a loan agreement between the debtor and the financial creditor wherein an amount of Rs. 100 crores was sanctioned to the corporate debtor. Amrapali Silicon City Pvt. Ltd. defaulted in paying an outstanding amount of Rs. 56 crore in March, 2016. The question which arose for consideration for the Principal Bench, NCLT was whether the Financial Creditor was able to satisfy the requirement of Section 7 of the Insolvency and Bankruptcy Code (IBC) to initiate a Corporate Insolvency Resolution Process lawfully showing the presence of a default.

Amrapali Silicon City told the Bench said that Bank of Baroda, which is the lead bank of the consortium of lenders, could not individually enforce any right or obligation of the term loan agreement. It contended that the insolvency application even otherwise was incomplete and the same was liable to be rejected. But the Bench dismissed the opposition arguing that the “Explanation to Section 7 (1) clarifies that for the purposes of Section 7, a default includes a default in respect of financial debt, owed not only to the applicant-financial creditor but to any other financial creditor of the Corporate Debt. Moreover, no other financial creditor has come to the forefront to oppose the application”.

The Principal Bench of NCLT, headed by Chief Justice M.M. Kumar, admitted the plea by Bank of Baroda against Amrapali Silicon City Pvt. Ltd. and stated that it would appoint an Interim Resolution Professional who will invite claims from creditors to the company and prepare a resolution plan within the time-frame stipulated under the IBC, 2016. [Bank of Baroda v. Amrapali Silicon City Pvt. Ltd., 2017 SCC OnLine NCLT 814, decided on 4.9.2017]