Bombay High Court
Bay Capital Advisors Pvt. Ltd. ... vs Il And Fs Financial Services Limited And ... on 4 May, 2021
Author: V.G.Bisht
Bench: R.D. Dhanuka, V.G.Bisht
2-appl-10472-2021.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL (L) NO. 10472 OF 2021
WITH
INTERIM APPLICATION (L) NO. 10649 OF 2021
IN
APPEAL (L) NO. 10472 OF 2021
IN
ARBITRATION PETITION (L) NO. 10089 OF 2020
Bay Capital Advisors Private Limited ...Appellant
Versus
IL & FS Financial Services Limited & Ors. ...Respondents
......
Mr. Nikhil Sakhardande, Senior Advocate along with Mr.
Ravichandra Hegde, Mr. Ashish Venugopal ,Ms. Ankita Roy, Ms.
Parinaz Bharucha i/by M/s. Parinam Law Associates, Advocates for
the Appellant in APPL/10472/2021 and the Applicant in
IAL/10649/2021.
Dr. Birendra Saraf, Senior Advocate along with Mr. Rohan Savant,
Mr. Sachin Chandrana, Mr. Chandrajit Das i/by M/s. Manilal Kher
Ambalal & Co., Advocates for Respondent No.1 in APPL/10472/2021
Mr. Aman Vijay Dutta i/by M/s. Chambers of Aman Vijay Dutta,
Advocate for the Respondent No.2.
Mr.Debopriya Moulik, Advocates for the Respondent No.5.
CORAM : R.D. DHANUKA &
V.G.BISHT, JJ.
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1. We have heard the learned Counsel for the parties.
2. By this Appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, "the Arbitration Act"), the appellant (original petitioner) has impugned the order dated 9 th April, 2021 dismissing the Arbitration Petition filed by the appellant with costs quantified at Rs. 7,50,000/-.
3. The appellant has prayed for an injunction restraining respondent No.1 and/ or its servants, agents, administrators, successors, representatives, assigns and/ or any other persons claiming through, under or in trust for them, from any manner, directly or indirectly acting upon and/ or acting in furtherance of the event of default notice dated 23 rd July, 2019, pledge Invocation Notice dated 20th August, 2020 and all ancillary/ incidental correspondence issued in furtherance thereof.
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4. The learned Single Judge has recorded various reasons in the impugned order while rejecting the Petition filed by the appellant under Section 9 of the Arbitration Act.
5. A perusal of the prayers indicates that the appellant has sought an injunction against the respondent No.1 from taking any further steps pursuant to those two notices issued by the respondent No.1 under the agreement entered into between the appellant and respondent No.1. The respondent No.1 have only issued those two notices which are strongly disputed by the appellant. The respondent No.1 has already invoked the arbitration clause against the appellant. The learned Single Judge has made various prima facie observations against the appellant.
6. Mr.Sakhardande, learned Senior Counsel for the appellant, states that the appellant has no objection to defend the proceedings as would be filed by the respondent No.1 before the Arbitral Tribunal. However, if any proceedings are filed by the respondent No.1 before the National Company Law Tribunal (for short, "the Trupti 3/8 ::: Uploaded on - 04/05/2021 ::: Downloaded on - 10/09/2021 04:06:22 ::: 2-appl-10472-2021.doc NCLT"), though the appellant has several defences to the notices issued by the respondent No.1, the appellant would not be able to raise those defences before the NCLT. The apprehension of the appellant is based on the judgment of the Hon'ble Supreme Court in case of Innoventive Industries Limited Versus ICICI Bank and Another 1.
7. The learned Senior Counsel invited our attention to paragraph Nos. 29 and 30 of the said judgment and would submit that the respondent No.1 if files any proceedings alleging the default on the part of the appellant of a financial debt on the basis of the records of an information utility or other evidence produced by the financial creditor under sub-section, the NCLT may not permit the appellant to dispute the correctness of the those two notices issued by the respondent No.1.
8. Dr.Saraf, learned Senior Counsel for the respondent No.1, on the other hand, strenuously urged that the learned Senior Counsel for the appellant is not right in his apprehension. He invited our 1 (2018) 1 SCC 407 Trupti 4/8 ::: Uploaded on - 04/05/2021 ::: Downloaded on - 10/09/2021 04:06:22 ::: 2-appl-10472-2021.doc attention to paragraph No. 28 of the said judgment and would submit that the NCLT will have to adjudicate upon the issue whether any default had occurred or not or whether debt demanded by the respondent No.1 would be due or not.
9. In our prima facie view, the learned Single Judge has rightly recorded various prima facie observations against the appellant while dismissing the Petition filed under Section 9 of the Arbitration Act. The respondent No.1 cannot be prevented from exercising remedy in law if any. It is, however, made clear that all these observations made by learned Single Judge and by this Division Bench are prima facie. The Arbitral Tribunal or the NCLT would decide the matter on its own merits without being influenced by the observations made by learned Single Judge and by us in this order.
10. A conjoint reading of paragraph Nos. 28 to 30 of the said judgment would clearly indicate that at the stage of Section 7 (5) of the Insolvency and Bankruptcy Code 2016, the adjudicating authority is required to be satisfied that a default has occurred and that the corporate debtor is entitled to point out that a default has Trupti 5/8 ::: Uploaded on - 04/05/2021 ::: Downloaded on - 10/09/2021 04:06:22 ::: 2-appl-10472-2021.doc not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete.
11. In our view, Mr. Sakhardande, learned Senior Counsel for the appellant, is not right in his submission that no sooner the proceedings are filed by the respondent No.1 before the NCLT under the said provisions against the appellant, merely on the basis of the records of the respondent No.1 or other evidence produced by the respondent No.1, the NCLT is bound to grant reliefs in favour of the respondent No.1 even without considering the defence of the appellant.
12. The NCLT will have to consider the defence of the appellant and to render a finding whether in fact any default has occurred or not as alleged in the Event of Default notices and pledge Demand Notice and whether in fact any debt is due by the appellant to respondent No.1 or not.
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13. By consent of the parties, a former Judge of this Court Shri Justice J. P. Deodhar is appointed as the Sole Arbitrator to adjudicate upon the disputes between the appellant and the respondent No.1 arising out of the agreement dated 31st March, 2017 between the appellant and the respondent No.1 and other associated documents referred in the notice dated 22 nd April, 2021 invoking arbitration agreement by the respondent No.1. Both the parties have agreed to pay the fees and expenses of the learned Arbitrator equally at the first instance, subject to the final order that would be passed by the learned Arbitrator.
14. The learned Arbitrator shall decide the dispute without being influenced by the prima facie observations made by learned Single Judge and by us in this order.
15. If any proceedings are filed by the respondent No.1 before the NCLT, the NCLT shall also decide the matter without being influenced by the prima facie observations made by the learned Single Judge and by us in this order.
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16. With the aforesaid observations and direction, we are not inclined to interfere with the impugned order passed by learned Single Judge. Insofar as, the costs of Rs. 7,50,000/- awarded by the learned Single Judge is concerned, in our view, in the facts of this case, the costs of Rs. 3,00,000/- would be appropriate and shall be paid by the appellant to respondent No.1 within a period of one week from today.
17. We make it clear that we have heard the learned Senior Counsel for the appellant and the respondent No.1 and dismissed this appeal without going into the issue whether the Petition filed by the appellant under Section 9 of the Arbitration Act before the learned Single Judge itself was maintainable or not.
18. In view of dismissal of the Appeal, nothing survives in the Interim Application and the same is accordingly disposed of.
(V.G.BISHT, J.) (R.D.DHANUKA, J.) Trupti 8/8 ::: Uploaded on - 04/05/2021 ::: Downloaded on - 10/09/2021 04:06:22 :::