Delhi High Court - Orders
Gangotri Enterprises Ltd vs General Manager Northern Railaways on 10 October, 2022
$~1 to 4
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 366/2020
GANGOTRI ENTERPRISES LTD ..... Petitioner
Through: Mr. Sarthak Chiller and Mr. Sanjeev
Mahajan, Advocates (Ph.9811212045,
e-mail: [email protected])
versus
GENERAL MANAGER NORTHERN
RAILAWAYS ..... Respondent
Through: Ms. Pratima N. Lakra, CGSC with
Ms. Vrinda, Advocates
(Ph.9968324260, e-mail:
[email protected]).
2
+ ARB.P. 367/2020
GANGOTRI ENTERPRISES LTD ..... Petitioner
Through: Mr. Sarthak Chiller and Mr. Sanjeev
Mahajan, Advocates (Ph.9811212045,
e-mail: [email protected])
versus
GENERAL MANAGER NORTHERN
RAILWAYS ..... Respondent
Through: Ms. Pratima N. Lakra, CGSC with
Ms. Vrinda, Advocates
(Ph.9968324260, e-mail:
[email protected]).
3
+ ARB.P. 368/2020
GANGOTRI ENTERPRISES LTD ..... Petitioner
Through: Mr. Sarthak Chiller and Mr. Sanjeev
Mahajan, Advocates (Ph.9811212045,
e-mail: [email protected])
Signature Not Verified
Digitally Signed By:PURAN
SINGH TARIYAL
Signing Date:22.10.2022
16:14:46
versus
GENERAL MANAGER NORTHERN
RAILWAYS ..... Respondent
Through:
4
+ ARB.P. 370/2020
GANGOTRI ENTERPRISES LTD ..... Petitioner
Through: Mr. Sarthak Chiller and Mr. Sanjeev
Mahajan, Advocates (Ph.9811212045,
e-mail: [email protected])
versus
GENERAL MANAGER NORTHERN
RAILWAYS ..... Respondent
Through:
CORAM:
HON'BLE MS. JUSTICE MINI PUSHKARNA
ORDER
% 10.10.2022
1. This Court had put a query on the issue whether this Court can proceed with the present petitions in view of the moratorium that is in force against the petitioner company as corporate debtor.
2. Pursuant to the order passed by this Court, learned counsel for the petitioner submits that the present petitions would be maintainable and can continue on behalf of the corporate debtor. Learned counsel for the petitioner has referred to Section 14 of Insolvency and Bankruptcy Code, 2016 (in short „IBC'). He submits that as per the said Section, there is prohibition of institution of suits or continuation of suits or proceedings against the corporate debtor. However, Section 14 of the IBC does not bar continuation of suits and proceedings on Signature Not Verified Digitally Signed By:PURAN SINGH TARIYAL Signing Date:22.10.2022 16:14:46 behalf of the corporate debtor for recovering amounts in favour of corporate debtor.
3. It is submitted that the Corporate Insolvency Resolution Process (CIRP) involves declaration of moratorium by the NCLT. CIRP considers the resolution plan proposed for the revival of Corporate debtor's business. When such a plan is approved by the Adjudicating Authority i.e. NCLT under Section 31 of the IBC, the moratorium order passed by the NCLT under Section 14 of the IBC ceases to exist. It is submitted that during the pendency of the present case, the petitioner company went into insolvency and a Resolution Professional was appointed by NCLT, Allahabad. It is submitted that the Resolution Professional is yet to finalise the resolution plan and the matter is still pending before the Committee of Creditors (in short „COC‟).
4. Learned counsel for the petitioner relies upon judgment of this Court in the case of Power Grid Corporation Of India Vs Jyoti Structures Ltd., reported as (2018) 246 DLT 485, wherein this Court has held as follows:
"10. In the light of above purpose or object behind the moratorium, Section 14 of the Code would not apply to the proceedings which are in the benefit of the corporate debtor, like the one before this court in as much these proceedings are not a „debt recovery action‟ and its conclusion would not endanger, diminish, dissipate or impact the assets of the corporate debtor in any manner whatsoever and hence shall be in sync with the purpose of moratorium which includes keeping the corporate debtor's assets together during the insolvency resolution process and facilitating orderly completion of the process Signature Not Verified Digitally Signed By:PURAN SINGH TARIYAL Signing Date:22.10.2022 16:14:46 envisaged during the insolvency resolution process and ensuring the company may continue as a going concern."
5. Learned counsel for petitioner has also relied upon judgment of this Court in the case of SSMP Industries Ltd vs. Perkan Food Processors Pvt Ltd. reported as 2019 SCC Online Del 9339, wherein this Court has held as follows:
" 8. The Court has considered the plaint and the written statement/counter claim. The adjudication of the plaint, defences in the written statement and the amounts claimed in the counter claim would have to be considered as a whole in order to determine as to whether the suit or the counter claim would be liable to be decreed. A counter claim would be in the nature of a suit against the Plaintiff which in this case is the „corporate debtor‟. Under Section 14(1)(a) of the Code, strictly speaking, a counter claim would be covered by the moratorium which bars „the institution of suits or continuation of pending suits or proceedings against the corporate debtor‟. A counter claim would be a proceeding against the corporate debtor. However, the counter claim raised in the present case against the corporate debtor ie., the Plaintiff, is integral to the recovery sought by the Plaintiff and is related to the same transaction. Section 14 has created a piquant situation i.e., that the corporate debtor undergoing insolvency proceedings can continue to pursue its claims but the counter claim would be barred under Section 14(1)(a). When such situations arise, the Court has to see whether the purpose and intent behind the imposition of moratorium is being satisfied or defeated. A blinkered approach cannot be followed and the Court cannot blindly stay the counter claim and refer the defendant to the NCLT/RP for filing its claims.
9. The nature of a counter claim is such that it requires proper pleadings to be filed, defences and stands of both Signature Not Verified Digitally Signed By:PURAN SINGH TARIYAL Signing Date:22.10.2022 16:14:46 parties to be considered, evidence to be recorded and then issues have to be adjudicated. The proceedings before NCLT are summary in nature and the RP does not conduct a trial. The RP merely determines what payment can be made towards the claims raised, subject to availability of funds. The NCLT/RP cannot be burdened with the task of entertaining claims of the Defendant which are completely uncertain, undetermined and unknown. Moreover, the question as to whether the Defendant is in fact entitled to any amounts, if determined by the NCLT, prior to the adjudication of the plaintiff's claim for recovery, would result in the possibility of conflicting views in respect of the same transaction. Under these circumstances, this court is of the opinion that the Plaintiff's and the defendant's claim ought to be adjudicated comprehensively by the same forum. At this point, till the defence is adjudicated, there is no threat to the assets of the corporate debtor and the continuation of the counter claim would not adversely impact the assets of the corporate debtor. Once the counter claims are adjudicated and the amount to be paid/recovered is determined, at that stage, or in execution proceedings, depending upon the situation prevalent, Section 14 could be triggered. At this stage, due to the reasons set out above, the counter claim does not deserve to be stayed under Section 14 of the Code. The suit and the counter claim would proceed to trial before this Court."
6. On the other hand, learned counsel for the respondent relies upon judgment of Hon‟ble Supreme Court in the case of Alchemist Asset Reconstruction Company Ltd. vs. M/s. Hotel Gaudavan Pvt. Ltd. & Ors., Civil Appeal No. 16929/2017,. She relies upon the following para from the aforesaid judgment:
"5) The mandate of the new Insolvency Code is that the moment an insolvency petition is admitted, the moratorium Signature Not Verified Digitally Signed By:PURAN SINGH TARIYAL Signing Date:22.10.2022 16:14:46 that comes into effect under Section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against Corporate Debtors."
7. I have considered submissions made on behalf of both the parties. At the outset, it is seen that the judgment of Hon‟ble Supreme Court relied upon by the learned counsel for respondent deals with the aspect that as soon as the moratorium comes into effect under Section 14 of IBC, no proceedings can continue against the corporate debtor. However, in the present case, it is the corporate debtor, who is the petitioner and who has instituted the case. Thus, the present is not a case against the corporate debtor but rather a case on behalf of the corporate debtor for the purposes of recovery of dues payable to the corporate debtor. Thus, in view thereof, the aforesaid judgment of the Hon‟ble Supreme Court will not be applicable to the facts and circumstances of the present case.
8. Considering the law in this regard, as enunciated in the aforesaid judgments of Power Grid Corporation of India (supra) and SSMP Industries (supra), it is held that the present petitions can continue and is maintainable.
9. The arbitration clause in the present matter is contained in Clause 63 and 64 of the General Conditions of Contract (in short „GCC‟) between the parties. Attention of this Court has been drawn to Clause 64 (3)(a)(ii), which reads as under:
"In cases not covered by the clause 64(3) (a)(i), the Arbitral Tribunal shall consist of a Panel of three Gazetted Rly. Officers not below JA grade or 2 Railway Gazetted Officers not below JA Grade and a retired Railway officer, Signature Not Verified Digitally Signed By:PURAN SINGH TARIYAL Signing Date:22.10.2022 16:14:46 retired not below the rank of SAG Officer, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Rly. Officers of one or more departments of the Rly. which may also include the name(s) of retired Railway Officer(s) empanelled to work as Railway Arbitrator to the contractor within 60 days from the day when a written and valid demand for arbitration is received by the GM. Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as contractor‟s nominee within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint at least one out of them as the contractor‟s nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the „presiding arbitrator‟ from amongst the 3 arbitrators so appointed. GM shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractor‟s nominees. While nominating the arbitrators it will be necessary to ensure that one of them is from the Accounts department. An officer of Selection Grade of the Accounts Department shall be considered of equal status to the officers in SA grade of other departments of the Railway for the purpose of appointment of arbitrator."
10. Learned counsel for the respondent submits that as per the aforesaid clause, it is the respondent, who has a panel of gazetted Railway Officers, out of which the petitioner can choose a name for appointment as Arbitrator. She submits that the aforesaid clause has been upheld in the case of Central Organisation of Railway Electrification vs. ECL-SPIC-SMO-MCML (JV), A Joint Venture Company, (2020) 14 SCC 712.
Signature Not Verified Digitally Signed By:PURAN SINGH TARIYAL Signing Date:22.10.2022 16:14:4611. On the other hand, learned counsel for the petitioner submits that legality of judgment in the case of Central Organisation of Railway Electification (Supra) is itself under challenge and that the same has been referred to Full Bench.
12. Learned counsel for the petitioner has handed over the Reference Order dated 11.01.2021 in the case of Union of India vs. M/s Tantia Constructions Ltd., SLP (Civil) No. 12670/2020. In the said Reference Order, the Hon‟ble Supreme Court has held as follows:
"We have perused the aforesaid judgment and prima facie disagree with it for the basic reason that once the appointing authority itself is incapacitated from referring the matter to arbitration, it does not then follow that notwithstanding this yet appointments may be valid depending on the facts of the case."
13. On the basis of the aforesaid Reference Order, Hon‟ble Chief Justice was requested to constitute a larger Bench to look into the correctness of the judgment in the case of M/s Tantia Constructions (supra).
14. Learned counsel for the petitioner has also referred to the reference order dated 16.08.2022 passed by the Hon‟ble Supreme Court in the Steel Limited vs. South Western Railway & Anr. In the said case, the Hon‟ble Supreme Court has categorically stated that the correctness of the decision in case of Central Organisation of Railway Electrification (supra) based on which the appointment of Arbitrator was made and the matter was proceeded before the Arbitrator, was doubted by a subsequent Bench of three Judges. The said matter was placed before a larger Bench for considering the Signature Not Verified Digitally Signed By:PURAN SINGH TARIYAL Signing Date:22.10.2022 16:14:46 aspect of correctness of decision in Central Organisation of Railway Electrification (supra).
15. In view of the aforesaid, it is submitted on behalf of the learned counsel for the petitioner that the aforesaid clause upon which the Northern Railways is relying upon is not legal and proper and no Arbitrator can be appointed on the basis of the panel of Arbitrators given by the Railways.
16. Learned counsel for the petitioner also relies upon judgments in the following cases:
TRF Ltd vs. Energo Engineering Projects Ltd reported as (2017) 8 SCC 377, Voestalphine Schienen GMBH vs. Delhi Metro Rail Corporation Ltd reported as (2017) 4 SCC 665, Perkin Eastman Architect DPC & Anr. vs. HSCC (India) Ltd., reported as 2019 SS Online SC 1517, SMS Limited vs. Rail Vikas Nigam Ltd., reported as 2020 SCC Online Del77 and BVSR-KVR (Joint Ventures) vs. Rail Vikas Nigam, reported as 2020 SCC Online Del 456.
17. Learned counsel for the respondent submits that she needs some time to go through the compilation of judgments and the reference orders as relied upon by the learned counsel for the petitioner.
18. Learned counsel for the respondent may come back with instructions with respect to the appointment of an Arbitrator by this Court in the light of the aforesaid observations of the Court.
19. Learned counsel for the petitioner submits that he has already appointed his nominee Arbitrator. This Court is now required to Signature Not Verified Digitally Signed By:PURAN SINGH TARIYAL Signing Date:22.10.2022 16:14:46 nominate the nominee Arbitrator on behalf of the respondent. Once that is done, both the said Arbitrators will appoint a third presiding Arbitrator in view of the governing clause of the arbitration between the parties.
20. At request of learned counsel for the respondent, list on 14.10.2022.
MINI PUSHKARNA, J OCTOBER 10, 2022 PB Signature Not Verified Digitally Signed By:PURAN SINGH TARIYAL Signing Date:22.10.2022 16:14:46