Banwari Lal Saraf (Huf) vs M/S Indirapuram Habitat Centre Private ... on 8 August, 2022

[Cites 11, Cited by 0]

Delhi High Court - Orders

Banwari Lal Saraf (Huf) vs M/S Indirapuram Habitat Centre Private ... on 8 August, 2022

1. These seven petitions, four under Section 11 of the Arbitration and Conciliation Act, 1996 ["the Act"], and three under Section 9 of the Act, have been filed by members of the Saraf family [including Hindu Undivided Family concerns], in respect of disputes arising under builder buyer agreements between them and two companies namely, M/s Indirapuram Habitat Centre Private Limited ["IHCPL"] and AVJ Developers (India) Private Limited ["AVJ"]. The other respondents are individuals in management of these two companies and third parties in favour of whom the petitioner alleges that the companies have created third party interests in the properties upon which they have a claim.

2. In the course of these proceedings, it was brought to the attention of the Court that both IHCPL and AVJ are subject to Corporate Insolvency Resolution Proceedings ["CIRP"] under Section 7 of the Insolvency & Bankruptcy Code, 2016 ["IBC"], which are in progress before the National Company Law Tribunal ["NCLT"]. Resolution Professionals ["RPs"] have been appointed in respect of both the companies. Consequently, by an order dated 27.05.2022 in the present petitions, the petitioner was directed to serve both the RPs. The RP appointed in respect of IHCPL has entered appearance through Mr. Tushar Bhardwaj, learned counsel. However, the RP in respect of AVJ has not entered appearance, although Mr. Puneet Bajaj, learned counsel for the petitioners, states that he has been served.

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Digitally Signed By:SHITU                                                         Digitally Signed
NAGPAL
Signing Date:10.08.2022                                                           By:PRATEEK JALAN
10:52:28               ARB.P.   284/2019 & connected matters.                                 Page 3 of 7

3. In view of the fact that a legal question arose as to the amenability of the respondent companies to these proceedings during the pendency of the CIRP, Mr. Ciccu Mukhopadhaya, learned Senior Counsel, was requested to assist the Court as Amicus Curiae by an order dated 29.01.2020. Mr. Mukhopadhaya has filed his written submissions, and a compilation of judgments. It is his submission that by virtue of Section 13(1), read with Section 14(1)(a) and 14(1)(b) of the IBC, the present proceedings cannot continue during the subsistence of the moratorium directed by the NCLT. Mr. Mukhopadhaya draws my attention to two judgments of the Supreme Court which make this position clear. In Alchemist Asset Reconstruction Company Limited vs. Hotel Gaudavan Private Limited and Others (2018) 16 SCC 94, the Court was concerned with a case where an arbitrator was appointed during the period that the respondent to the claim was subject to an order of moratorium under Section 14(1)(a). The NCLT had specifically directed that no arbitration proceedings would go on during this period. However, the arbitrator proceeded with the adjudication. In these circumstances, the Supreme Court held as follows:-

"4. The mandate of the new Insolvency Code is that the moment an insolvency petition is admitted, the moratorium that comes into effect under Section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against corporate debtors.

5. This being the case, we are surprised that an arbitration proceeding has been purported to be started after the imposition of the said moratorium and appeals under Section 37 of the Arbitration Act are being entertained. Therefore, we set aside the order of the District Judge dated 6-7-2017 and further state that the effect of Section 14(1)(a) Signature Not Verified Signature Not Verified Digitally Signed By:SHITU Digitally Signed NAGPAL Signing Date:10.08.2022 By:PRATEEK JALAN 10:52:28 ARB.P. 284/2019 & connected matters. Page 4 of 7 is that the arbitration that has been instituted after the aforesaid moratorium is non est in law."

4. Mr. Mukhopadhaya also cites the judgment of the Supreme Court in P. Mohanraj and Others vs. Shah Brothers Ispat Private Limited (2021) 6 SCC 258, wherein the Court has inter alia considered the question as to whether a petition under Section 34 of the Act can proceed against a company which is subject to CIRP. In this regard, the judgment of a Coordinate Bench of this Court in Power Grid Corporation of India Ltd. vs. Jyoti Structures Ltd. (2018) 246 DLT 485 was cited before the Supreme Court, wherein this Court had held that a petition under Section 34 of the Act would not be covered by Section 14 of the IBC. The Supreme Court in paragraph 97 of P. Mohanraj, however, held that this statement of law is incorrect.

5. Mr. Bhardwaj, learned counsel for the RP for IHCPL, supports the submissions of learned Amicus Curiae, and relies upon the same judgments.

6. Mr. Bajaj, learned counsel for the petitioners, on the other hand, cites a judgment of this Court dated 18.07.2019 in CS(Comm) 470/2016 (SSMP Industries Ltd. vs. Perkan Food Processors Pvt. Ltd.) wherein this Court permitted a suit to proceed where claims and counterclaims had been raised both by the corporate debtor and against it. The Court arrived at this conclusion inter alia citing the aforesaid judgment of this Court in Power Grid Corporation of India Ltd (supra). The suit in that case was by the corporate debtor, and the Court held that both claims and counterclaims could proceed. In view of the fact that the present case does not arise in similar facts, I am of the view that the judgment in Signature Not Verified Signature Not Verified Digitally Signed By:SHITU Digitally Signed NAGPAL Signing Date:10.08.2022 By:PRATEEK JALAN 10:52:28 ARB.P. 284/2019 & connected matters. Page 5 of 7 SSMP Industries Ltd (supra). cannot come to the assistance of the petitioners. In any event, as stated above, the judgment in Power Grid Corporation of India Ltd (supra), upon which considerable reliance was placed in SSMP Industries (supra), has been expressly overruled by the Supreme Court.

7. There is no dispute in the present case that both the companies are subject to moratorium orders. In the case of IHCPL, the moratorium was imposed by the NCLT by an order dated 22.08.2019, and in the case of AVJ, by an order dated 21.10.2019. I am informed that in respect of IHCPL at least, a resolution plan has been approved by the committee of creditors and is pending adjudication before the NCLT. In the resolution plan, the petitioners herein had also made certain claims which have been admitted by the RPs.

8. In these circumstances, I am of the view that the present proceedings under Section 11 of the Act cannot be adjudicated at this stage. ARB.P. 284/2019, ARB.P. 286/2019, ARB.P. 287/2019 and ARB.P. 471/2019, alongwith all pending applications in these petitions, are, therefore, disposed of with liberty to the petitioners to apply for revival of the proceedings, and without prejudice to the rights and contentions of the parties at that stage.

9. As far as the petitions under Section 9 of the Act are concerned, Mr. Mukhopadhaya submits that the interim orders passed by this Court - with regard to the properties in issue in the proposed arbitral proceedings

- may be confirmed at this stage subject to the resolution plans that may be approved by the NCLT. He further draws my attention to Section 14(1)(b) of the IBC, which restricts the corporate debtor (here, IHPCL Signature Not Verified Signature Not Verified Digitally Signed By:SHITU Digitally Signed NAGPAL Signing Date:10.08.2022 By:PRATEEK JALAN 10:52:28 ARB.P. 284/2019 & connected matters. Page 6 of 7 and AVJ), from any transfer or alienation of assets during the period of the moratorium.

10. In view of the aforesaid position, the Section 9 proceedings [O.M.P.(I) (COMM.) 83/2019, O.M.P.(I) (COMM.) 107/2019 and O.M.P.(I) (COMM.) 108/2019] are disposed of, alongwith pending applications, confirming the interim orders passed therein, but subject to orders to be passed in relation to the resolution plans which are pending consideration before the NCLT. It is made clear that as far as the resolution plans are concerned, the rights and contentions of all the parties stand expressly reserved, to be adjudicated before the NCLT. Mr. Bhardwaj states that an application of the petitioners in this respect also remains pending in the resolution proceedings.

11. The Court expresses its gratitude to Mr. Mukhopadhaya for his unstinting and valuable assistance in resolution of the legal questions raised in these petitions.

CCP(O) 53/2022 in O.M.P.(I) (COMM.) 107/2019 List on 24.11.2022.



                                                                                  PRATEEK JALAN, J
                    AUGUST 8, 2022
                    'Bhupi'



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Signature Not Verified                                                                  Signature Not Verified
Digitally Signed By:SHITU                                                               Digitally Signed
NAGPAL
Signing Date:10.08.2022                                                                 By:PRATEEK JALAN
10:52:28               ARB.P.   284/2019 & connected matters.                                       Page 7 of 7

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Delhi High Court - Orders