Bombay High Court
Amkhim Holdings Pvt. Ltd vs Zaveri Constructions Pvt. Ltd on 18 April, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
2024:BHC-OS:7419
(9)carbpl-30650-2023 (1).doc
rajshree
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION (L) NO.30650 OF 2023
Ankhim Holdings Pvt. Ltd. & Anr. ] .. Petitioners
vs.
Zaveri Constructions Pvt. Ltd. ] .. Respondent
Ms.Ankita Singhania a/w Saahil Memon and Noel Thomas i/b Link Legal for the Petitioners.
Mr.Manoj Kumar Mishra a/w Rahul Darji for the Respondent.
CORAM : BHARATI DANGRE, J DATE : 18th April, 2024.
P.C. 1] Commercial Arbitration Petition is filed seeking substitution of the Arbitrator in accordance with the Rules, that are applicable to the appointment of Arbitrator and also praying for extending the timeline for making the Arbitral Award, by the substituted Arbitrator, from 16.10.2023 till 28.02.2024.
Digitally signed by RAJSHREE RAJSHREE KISHOR MORE 2] Heard the learned counsel Ms. Ankita Singhania for the KISHOR Date:
MORE 2024.05.07
12:46:34
+0530
Petitioners and the learned counsel Mr. Manoj Kumar Mishra for the Respondent.
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(9)carbpl-30650-2023 (1).doc The relief of substitution is prayed for in the wake of the communication by the Sole Arbitrator addressed to the Parties on 11.10.2023, terminating the arbitral proceedings, since the Parties had expressed their inability to pay the fees and charges of the sole Arbitrator, who was arbitrating the disputes between the parties.
The Arbitrator directed the Parties to collect papers lying in his office, on making the payment of secretarial charges. 3] Ms. Ankita Singhania, representing the Petitioners has placed before me the sequence of events and it is her submission that the arbitral proceedings must be taken ahead by the substituting the Arbitrator and by extending his mandate.
The learned counsel Mr.Manoj Kumar Mishra, by inviting my attention to the orders passed by the National Company Law Tribunal (NCLT) Mumbai bench thereby imposing moratorium and also by referring to the order dated 26.08.2022, would submit that the proceedings before the learned Arbitrator pursuant to imposition of moratorium are non est and, therefore, he would oppose the further progress of the arbitral proceedings as the hearing conducted by the Arbitrator, according to him, is in the teeth of the moratorium imposed by the NCLT and according to him, the decision/orders of the Arbitrator passed on these dates, are not binding.
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(9)carbpl-30650-2023 (1).doc 4] In order to appreciate the rival contentions, I must make reference to the background facts.
Petitioner Nos.1 and 2 are the Companies incorporated under the Companies Act, 1956, whereas, the Respondent is a private limited company.
In the wake of the existing disputes between the Parties, CARBP No.347/2019 was instituted in this Court, in which the Petitioner claimed reliefs under Section 9 of the Arbitration and Conciliation Act, 1996. On 19.10.2018, this Court directed the Parties to maintain status-quo in respect of the entire Suit project, more particularly, the unsold flats and the bank accounts.
On 09.07.2019, the Parties tendered Minutes of Order in form of "Consent Terms", where an arrangement was worked out amongst themselves. It was agreed between the Parties that the disputes shall be referred for adjudication, by appointing sole Arbitrator and by consent of Parties, the former Chief Justice of Calcutta High Court, was appointed as prospective Arbitrator, to arbitrate the disputes arisen between them under the Partnership Deed dated 02.06.2010.
The Petition under Section 9 was permitted to be treated as an Application under Section 17 of the Act of 1996, to be adjudicated by the Arbitrator.
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(9)carbpl-30650-2023 (1).doc 5] While the Arbitration proceedings were in progress, Reliance Home Finance Private Limited, a Financial Creditor filed the proceedings against the Respondent/Corporate Debtor Zaveri Constructions Private Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016, and the NCLT, Mumbai Bench, on 26.09.2019, admitted the Petition. The Insolvency Professional proposed by the Financial Creditor was appointed as Interim Resolution Professional to conduct the insolvency process and the Tribunal also declared that, upon admitting the Petition, the provisions of moratorium as prescribed under Section 14 of the IBC Code, shall be operative with effect from the date of the order. It was further declared that on commencement of the moratorium, institution of any Suit before the Court of Law, transferring/encumbering any of the assets of the Debtor was prohibited.
The order also provided as under :
"The moratorium shall be effective till completion of the Insolvency Resolution Process or until the approval of the Resolution Plan prescribed under Section 31 of the Code."
6] On 15.03.2022, two Interim Applications filed in the CARBP No.347/2019, were heard by this Court (Justice G.S. Kulkarni) and the order record thus :
"2. It appears that the Interim Resolution Professional as appointed for the respondent-Zaveri Constructions Pvt. Ltd. is now functus officio. So far, there is no liquidation order passed by the NCLT under Section 33(4) against the 4/14 ::: Uploaded on - 07/05/2024 ::: Downloaded on - 09/05/2024 15:55:59 ::: (9)carbpl-30650-2023 (1).doc respondent.
3. It is clearly seen that by an order dated 09 July, 2019 passed by this Court, learned sole arbitrator was appointed. However, in view of the pending proceedings before the NCLT, it appears that the arbitration was kept in abeyance and now certainly a situation is brought about that the proceedings are at large before the arbitral tribunal. Learned counsel for the petitioners fairly states that the present applications can be immediately moved before the learned sole arbitrator as the applications under Section 17 of the Arbitration and Conciliation Act, 1996 (for short, "the Act") and a request can be made to the learned sole arbitrator to pass urgent ad-interim orders in the arbitral proceedings. Certainly respondent no.1 is a Partner in the firm M/s. Anmol Alliance cannot be averse to such a contention as being urged on behalf of the Applicant.
4. Accordingly, both these applications stand disposed of with liberty to the applicant to move these applications as applications under Section 17 of the Act to be adjudicated by the arbitral tribunal.
5. The applicant is at liberty to move an application for any urgent ad-
interim reliefs.
6. The applicant is permitted to request the learned sole arbitrator to consider these applications as expeditiously as possible as it is stated that the applications would be taken up for hearing before the NCLT on 04 April, 2022." 7] Another order which must be taken note of, is the order dated 26.08.2022, passed by the NCLT in the Application filed under Section 33(1)(a) of the IBC, 2016, by the Resolution Professional of Zaveri Constructions Pvt. Ltd., seeking liquidation order, based on the resolution passed by the CoC in its 8th meeting held on 14.10.2020, as contemplated under the IBC, 2016.
The Tribunal recorded as under :
"5. The Applicant made various attempts to call for viable resolution plans, however, despite numerous attempts and even after extension of time provided for submission of Eol, no resolution Plan was received from eligible applicants. Moreover, the CoC in 8th meeting resolved to liquidate the company with 100% favourable voting. Looking at the application and averments, we are of the considered opinion that this is a fit case for liquidation, therefore, we hereby order for liquidation of the company with directions as follows :
a. Mr.Vikas Prakash Gupta, holding Registration No.IBBI/ IPA-001/IP-P00501/2017-2018/10889, is appointed as the Liquidator, in terms of Section 34 of the Code, with remuneration as 5/14 ::: Uploaded on - 07/05/2024 ::: Downloaded on - 09/05/2024 15:55:59 ::: (9)carbpl-30650-2023 (1).doc agreed by the Committee of Creditors;
b. Registry is directed to communicate this Order to the Registrar of Companies, Mumbai and to the Insolvency and Bankruptcy Board of India;
c. The Order of Moratorium passed under Section 14 of the Insolvency and Bankruptcy Code, 2016 shall cease to have its effect and a fresh Moratorium under Section 33(5) of the Insolvency and Bankruptcy Code shall commence; d. This order shall be deemed to be a notice of discharge to the officers, employees and the workmen of the corporate debtor as per Section 33(7) of the Insolvency and Bankruptcy Code, 2016;
e. The Liquidator is directed to proceed with the process of liquidation in a manner laid down in Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016 and in accordance with the relevant rules and regulations.
f. The Liquidator shall follow up and continue to investigate the financial affairs of the Corporate Debtor in accordance with provisions of Section 35(1) of the Code.
g. The liquidator shall also follow up the pending applications for their disposal during the process of liquidation including initiation of steps for recovery of dues of the Corporate Debtor as per law.
h. The Liquidator shall submit a Preliminary Report to the Adjudicating Authority within seventy-five days from the liquidation commencement date as per Regulation 13 of the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016." 8] It is in the light of this order, it is the submission of Mr.Mishra, that it is only on 26.08.2022, the Tribunal declared that the moratorium shall cease to have its effect and fresh moratorium under Section 33(5) IBC, shall commence.
Hence, it is his specific submission that the moratorium imposed under Section 14 continued to be in force till 26.08.2022 and in the wake of the moratorium, no proceedings could have been continued 6/14 ::: Uploaded on - 07/05/2024 ::: Downloaded on - 09/05/2024 15:55:59 ::: (9)carbpl-30650-2023 (1).doc before the Arbitrator and upon appointment of the Liquidator by the NCLT on 26.08.2022, the provisions of Section 33(5), kick in which prohibit institution of any suit or legal proceedings by or against the Corporate Debtor. Though Mr. Mishra concede to the position in law emerging as to the interpretation of Section 33(5) of the IBC to the effect that Section 33(5) is not applicable to pending proceedings, but creates a bar on institution of fresh proceedings, he would submit that the proceedings before the Arbitrator in the interregnum could not have been continued.
9] Ms.Singhania has placed reliance upon the decision of Delhi High Court in the case of Elcon Engineering Company Limited vs. Energo Engineering Projects Limited & Ors.1 in support of her contention that under Section 33(5) of the IBC, the moratorium is only in respect of institution of fresh Suits and it does not apply to the pending Suits and in an exhaustive discussion and by juxtaposing the said provision against Section 14 of the IBC, Justice Amit Bansal of the Delhi High court, has rightly concluded in Para 13 as under :-
"From the language of Section 33(5) of the IBC, it is clear that the bar/moratorium is only in respect of fresh suits or leal proceedings. Unlike the moratorium under Section 14 of the IBC, where it is clearly noted that the moratorium is in respect of institution of suits or continuation of pending suits or proceedings against corporate debtor, the words "continuation of pending suits or proceedings" are 12022 SCC OnLine Del 2860, 7/14 ::: Uploaded on - 07/05/2024 ::: Downloaded on - 09/05/2024 15:55:59 ::: (9)carbpl-30650-2023 (1).doc conspicuously absent in Section 33(5) of the IBC".
Mr. Mishra has in turn placed reliance on the decision of Madras High Court in the case of M/s. Chennai Metro Rail Limited Represented by the Chief General Manager vs. Lanco infratech Ltd. Represented by the Liquidator, Lanco House, 2020 SCC Online MAD 26397, where a comparison was drawn between Section 33(5) of IBC and Section 44, 46 of the Companies Act and it is held, that under Section 33 (5) there is no prohibition for continuance of already instituted suits and proceedings and the moment the liquidation proceedings commence, there would a bar only in respect of fresh suits or proceedings, in terms of the provision.
10] I am in complete agreement with the view expressed by the Delhi High Court by accepting the rule of interpretation of a statute, that it should be an endevour of the Court to give effect to the words applied by the Legislature and when the Legislature in its wisdom has omitted to consider the pendency of the cases, but has restricted the provision to institution of proceedings, in contrast to the moratorium imposed under Section 14 of the IBC, which comes into effect upon the adjudicating authority passing an order, declaring a moratorium which continue till completion of Corporate Insolvency Resolution Process or till a liquidation order under Section 33(4) of IBC is passed, fresh 8/14 ::: Uploaded on - 07/05/2024 ::: Downloaded on - 09/05/2024 15:55:59 ::: (9)carbpl-30650-2023 (1).doc moratorium in terms of Section 33(5) of the IBC, comes into force .
The arguments of Ms. Singhania that the proceedings continued under Section 14 till culmination of proceedings, fails to impress me as reading between the two orders passed by the NCLT shows that, the first being passed on 26.09.2019 when Zaveri Constructions Pvt. Ltd. was admitted into CIRP, the moratorium under Section 14 commenced and it was continued till 26.08.2022 when the NCLT declared that the moratorium under Section 14 has ceased to have its effect and a fresh moratorium was imposed under Section 33(5) of the IBC,when the proceedings are put in liquidation mode.
11] Undisputedly, there is no institution of fresh proceedings, but the question that arises for consideration before me is, whether the proceedings before the Arbitral Tribunal could have continued after this order was passed.
By assigning purposeful meaning to the wordings in Section 33(5), on initiation of liquidation, no Suit or other legal proceedings shall be instituted by or against the Corporate Debtor and therefore, the said provision cannot be said to create any embargo upon continuing the pending proceedings. The logical deduction that follows, is that from 26.08.2022, the proceedings before the Arbitral Tribunal which were held in abeyance in the wake of imposition of moratorium under Section 9/14 ::: Uploaded on - 07/05/2024 ::: Downloaded on - 09/05/2024 15:55:59 ::: (9)carbpl-30650-2023 (1).doc 14 can revive.
The grievance of Mr.Mishra and in my opinion rightly put forth, out is that the arbitral tribunal, however, resumed the proceedings after the order was passed by this Court on 15.03.2022 and he has made reference to the following meetings held by the Arbitral Tribunal, which according to him, were held during the existence of moratorium under Section 14 of IBC, and are liable to be ignored.
Sr.No. Dates Events
1 17.03.2022 1st Hearing before Arbitral Tribunal, where both parties
were directed to deposit Rs.5 Lakkhs towards fees and charges.
2 24.03.2022 2nd Hearing before Arbitral Tribunal 3 25.03.2022 3rd Hearing before Arbitral Tribunal, where RP filed application u/s 16 of A&C Act.
4 29.03.2022 4th Hearing before Arbitral Tribunal where Arbitral Tribunal rejected application filed u/s 16 of A&C Act. 5 20.04.2022 5th Hearing before Arbitral Tribunal, where Arbitral Tribunal heard Petitioner's application u/s 17 of A&C Act and granted relief in favour of Petitioner.
6 27.07.2022 6th Hearing before Arbitral Tribunal where Arbitral Tribunal set timeline to file Statement of Claim, Statement of Defence and Counter claim (if any) and Statement of Admission and Denials.
7 25.08.2022 Original Timeline fixed for filing Statement of Claim by Petitioner, as per minutes of 6th Meeting.
Ms.Singhania, would justify the hearings by the arbitral tribunal in the light of the order passed by this Court on 15.03.2022. 12] On perusal of the said order, what is relevant to note is that the Court was informed that the IRP has now become functus officio, but 10/14 ::: Uploaded on - 07/05/2024 ::: Downloaded on - 09/05/2024 15:55:59 ::: (9)carbpl-30650-2023 (1).doc there is no liquidation order passed by NCLT under Section 33(4).
The impression that was given to the Court that the arbitral proceedings which were kept in abeyance can now be resumed and on considering this, submission of the Applicant was permitted to file Application under Section 17 before the Arbitrator, with a request to take up the applications for hearing as the proceedings before the NCLT were slated on 04.04.2022.
Ms. Singhania has also relied upon the further order passed on IA(L) No.14336/2023 by Justice Manish Pitale on 25.08.2023 when the Respondent sought a declaration that the dispute between the Parties is non-arbitrable and not within the purview of the Tribunal.
The order dated 15.03.2022 was relied upon to decline the relief to the Respondent.
13] One important aspect and is of great significance which ought to have received consideration, is the effect of moratorium imposed under Section 14 and in particular sub Section (4), which clearly provide that the order of moratorium shall have effect from the date of such order till completion of corporate insolvency resolution process and what is important to note is the proviso appended to sub-section 4, which reads thus :
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(9)carbpl-30650-2023 (1).doc PROVIDED that where at any time during corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order of liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.
14] The submission of Ms.Singhania, by relying upon Section 12 prescribing timeline for completion of IRP and her submission that the CIRP shall be completed within the period of 180 days and since there is no extension sought by the RP, it has come to end, do not deserve any consideration in light of the proviso to sub section (4) of Section 14.
The effect of proviso is crystal clear, that the order of moratorium shall have effect till completion of CIRP, but during the CIRP period, if the adjudicating authority approves the resolution plan under sub section (1) of Section 31, or if it passes the order of liquidation under Section 33, the moratorium shall ceased to have effect, either from the date of such approval or liquidation order, as the cade may be.
The order passed by the NCLT on 26.08.2022 clearly indicate that since resolution plan could not be approved, and CoC resolved to liquidate the company, the Liquidator is appointed under Section 34 and a fresh moratorium is declared to have commenced under Section 33 (5).
15] In the wake of aforesaid situation, which emerges from the facts placed before me, the moratorium imposed under Section 14 by order 12/14 ::: Uploaded on - 07/05/2024 ::: Downloaded on - 09/05/2024 15:55:59 ::: (9)carbpl-30650-2023 (1).doc dated 26.09.2019, continued to be in operation till 26.08.2022, when it is declared to cease to have its effect and the company is put into fresh moratorium under Section 33(5) of the IBC, by the NCLT.
After this date, the ongoing arbitration proceedings which were in abeyance can continue, but all those which are held between 26.09.2019 and 26.08.2022, are hit by the moratorium, and this remains the position, despite this Court on 15.03.2022 permitting its revival, as it was mislead to believe that on 15.03.2022, the IP has become functus officio. It is in fact only on 26.08.2022, the Tribunal appointed the Liquidator and directed him to proceed with the process of liquidation in the manner laid down in Chapter 3 of Part II of the IBC, 2016, when the Interim Application filed by the RP for liquidation of the Corporate Debtor was allowed.
16] It is for the aforesaid reason, the proceedings held by the Arbitral Tribunal on the 7 dates i.e. from 17.03.2022 to 25.08.2022, are liable to be declared as nullity, but needless to state that the proceedings can be revived before the substituted arbitrator, as now there is no embargo in continuing the arbitration proceedings and by conferring the liberty upon the parties to revive its application and by permitting the arbitral tribunal to pass appropriate orders thereupon including application filed under Section 17 by the Petitioner, I deem it appropriate to substitute the Arbitrator who has terminated the 13/14 ::: Uploaded on - 07/05/2024 ::: Downloaded on - 09/05/2024 15:55:59 ::: (9)carbpl-30650-2023 (1).doc proceedings.
17] In the wake of the above,Justice R.M. Savant (Retired Judge of Bombay High Court) is appointed as Sole Arbitrator to adjudicate the disputes and differences that have arisen between the applicant and the respondent.
The Arbitrator shall, within a period of 15 days before entering the arbitration reference forward a statement of disclosure as contemplated under Section 12 of the Arbitration and Conciliation Act, 1996, to the Prothonotary and Senior Master of this Court to be placed on record.
The Arbitrator, shall after entering the reference fix the date of first hearing and issue further directions as are necessary.
The Sole Arbitrator shall be entitled for the fees as per Bombay High Court (Fee Payable to Arbitrators) Rules, 2018 and the arbitral costs and fees of the Arbitrator shall be borne by the parties in equal portion and shall be subject to the final Award that may be passed by the Tribunal.
The Petitioner shall communicate the order to the learned Arbitrator, forthwith.
18] Comm. Arbitration Application (L) No.30650 of 2023 stands disposed off.
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