{"id":296119,"date":"2023-07-06T12:00:39","date_gmt":"2023-07-06T06:30:39","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=296119"},"modified":"2023-07-07T16:12:42","modified_gmt":"2023-07-07T10:42:42","slug":"nclat-application-s-9-ibc-for-implementation-of-arbitral-award-not-maintainable","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/07\/06\/nclat-application-s-9-ibc-for-implementation-of-arbitral-award-not-maintainable\/","title":{"rendered":"\u2018Arbitration Proceedings\u2019 and \u2018IBC Proceedings\u2019 cannot go on together; NCLAT upholds NCLT&#8217;s order rejecting Section 9 application"},"content":{"rendered":"<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><b>National Company Law Appellate Tribunal, Chennai:<\/b> While upholding the impugned order passed by the Adjudicating Authority, a Division bench comprising of <b>M. Venugopal<\/b>,* J., and Ms. Shreesha Merla (Technical Member), held that an appeal filed under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544939\" target=\"_blank\" rel=\"noopener\">34<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Arbitration and Conciliation Act, 1996<\/a> (the Act, 1996) against an <i>ex-parte<\/i> arbitral award is a &#8216;pre-existing dispute&#8217; and, therefore, a valid ground for the rejection of an application preferred under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549828\" target=\"_blank\" rel=\"noopener\">9<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">Insolvency and Bankruptcy Code, 2016<\/a> (IBC).<\/p>\n<p><b>Factual Matrix<\/b><\/p>\n<p style=\"margin-bottom: 3%;\">In the instant matter, an Arbitral Award was passed on 29-11-2018 in favour of the appellant-Operational Creditor for non-payment of lease rentals as per the Lease\/Rent Agreement&#8217;, water and electricity charges, Common Area Maintenance charges, diesel generator charges and TDS.<\/p>\n<p style=\"margin-bottom: 3%;\">The appellant then preferred an application under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549828\" target=\"_blank\" rel=\"noopener\">9<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a> read with R. 6 of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002844010\" target=\"_blank\" rel=\"noopener\">Insolvency and Bankruptcy (AAA) Rules, 2016<\/a> for the initiation of Corporate Insolvency Resolution Process (CIRP) against the respondent-Corporate Debtor. The respondent objected to the application by contending that the defaulted sum purportedly arose from the Arbitral Award dated 29-11-2018. The respondent has preferred an appeal under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544939\" target=\"_blank\" rel=\"noopener\">34<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Act, 1996<\/a> before the High Court of Delhi against the Arbitral Award dated 29-11-2018.<\/p>\n<p style=\"margin-bottom: 3%;\">Vide order dated 27-04-2021, the Adjudicating Authority dismissed the appellant&#8217;s application on the ground that the operational debt in question deemed to be a &#8216;dispute&#8217; and the application was filed for recovery of amount awarded in Arbitration. Aggrieved by the impugned order dated 27-04-2021 by the Adjudicating Authority, the appellant as an affected person preferred an appeal before the NCLAT, challenging the same.<\/p>\n<p><b>Moot Point<\/b><\/p>\n<p style=\"margin-bottom: 3%;\">Whether the application preferred under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549828\" target=\"_blank\" rel=\"noopener\">9<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a> read with Rule 6 of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002844010\" target=\"_blank\" rel=\"noopener\">Insolvency and Bankruptcy (AAA) Rules, 2016<\/a> by the Operational Creditor is per se &#8216;maintainable&#8217;, for the purpose of executing the Arbitral Award?<\/p>\n<p><b>NCLAT&#8217;s Observation<\/b><\/p>\n<p style=\"margin-bottom: 3%;\">The NCLAT observed that a &#8216;dispute in existence&#8217; means and includes raising a dispute before a Court of Law or an Arbitral Tribunal, before the receipt of notice under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549817\" target=\"_blank\" rel=\"noopener\">8<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a> and the dispute continues where there is a challenge to an &#8216;Arbitral Award&#8217; in an appeal under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544939\" target=\"_blank\" rel=\"noopener\">34<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Act, 1996<\/a>. The NCLAT further observed that the Adjudicating Authority and NCLAT is to reject any application filed under the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a>, if the dispute truly exists in fact and it is <b>&#8220;not &#8216;spurious&#8217; or an &#8216;imaginary&#8217;, and not a &#8216;hypothetical&#8217; one.&#8221;<\/b> The NCLAT opined that <b>&#8220;an &#8216;Arbitration Proceedings&#8217;, and &#8216;IBC Proceedings&#8217;, cannot go on together.&#8221;<\/b><\/p>\n<p style=\"\">The NCLAT observed that the respondent has preferred an appeal under S. <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544939\" target=\"_blank\" rel=\"noopener\">34<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Act, 1996<\/a>, challenging the Arbitral Award and the fact that an appeal is filed against the <i>ex-parte<\/i> award by the respondent shows that prima facie there exist a &#8216;pre-existing dispute&#8217;. The NCLAT further observed that in the present case, an award was passed on the &#8216;rental dispute&#8217;, therefore, when the same is challenged in the appeal, it will be considered as &#8216;dispute&#8217; only, not &#8216;Operational Debt&#8217;.<\/p>\n<p style=\"margin-left: 36pt; margin-bottom: 3%;\"><b>&#8220;&#8230;for &#8216;initiating&#8217; a &#8216;Corporate Insolvency Resolution Process&#8217;, against the &#8216;Corporate Debtor&#8217;, there ought to be &#8216;no real dispute&#8217;, existing between the respective &#8216;Parties&#8217;, to the &#8216;Debt&#8217;, owed in question. So long as the &#8216;Arbitration Award&#8217;, was challenged under the relevant Section of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Arbitration and Conciliation Act, 1996<\/a>, the &#8216;Operational Debt&#8217;, in the instant &#8216;Appeal&#8217;, is considered to be under &#8216;Dispute&#8217;.&#8221;<\/b><\/p>\n<p><b>NCLAT&#8217;s Verdict<\/b><\/p>\n<p style=\"margin-bottom: 3%;\">In the light of facts and circumstances of the present case, the NCLAT comes to an <b>&#8216;inescapable&#8217;, &#8216;inevitable&#8217; and &#8216;irresistible&#8217; conclusion<\/b> that the Adjudicating Authority&#8217;s order is free from any legal error and the Section 9 application filed for recovering the Sum awarded in an arbitration proceedings was rightly dismissed.<\/p>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\">KK Ropeways Ltd. v. Billion Smiles Hospitality (P) Ltd., <a href=\"http:\/\/www.scconline.com\/DocumentLink\/EMuhrGWB\" target=\"_blank\" rel=\"noopener\">2023 SCC OnLine NCLAT 271<\/a>, order dated 12-06-2023<\/span>]<\/p>\n<p style=\"text-indent: 18pt;\"><strong><span style=\"color: #000080;\">*Judgment by Justice M. Venugopal<\/span><\/strong><\/p>\n<hr\/>\n<p>Advocates who appeared in this case :<\/p>\n<p style=\"margin-left: 18pt;\">Mr. Manu Kulkarni and Mr. Madhur A. Kalyanshetty, Counsel for the Appellant.<\/p>\n<h3 style=\"color: #000080;\">Buy Arbitration and Conciliation Act, 1996 &nbsp; <a href=\"https:\/\/www.ebcwebstore.com\/product_info.php?products_id=382\" target=\"_blank\" rel=\"noopener\">HERE<\/a><\/h3>\n<p style=\"margin-bottom: 3%;\"><a href=\"https:\/\/www.ebcwebstore.com\/product_info.php?products_id=382\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996-191x300.png\" alt=\"arbitration and conciliation act, 1996\" width=\"191\" height=\"300\" class=\"aligncenter size-large wp-image-294803\" srcset=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996-191x300.png 191w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996-38x60.png 38w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996.png 620w\" sizes=\"auto, (max-width: 191px) 100vw, 191px\" \/><\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p><i>NCLAT held that an application preferred under Section 9 of the IBC for implementation of an Arbitral Award is not maintainable.<\/i><\/p>\n","protected":false},"author":67514,"featured_media":293392,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[43781,38453,30182,22014,12521],"class_list":["post-296119","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-cirp","tag-justice-m-venugopal","tag-national-company-law-appellate-tribunal","tag-nclat","tag-nclt"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Application filed under Section 9 of the IBC for implementation of Arbitral Award is not maintainable: NCLAT<\/title>\n<meta name=\"description\" content=\"NCLAT held that an Application filed under Section 9 of the IBC for implementation of Arbitral Award is not maintainable.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2023\/07\/06\/nclat-application-s-9-ibc-for-implementation-of-arbitral-award-not-maintainable\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"\u2018Arbitration Proceedings\u2019 and \u2018IBC Proceedings\u2019 cannot go on together; 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