Case Law Details
Mahavir Industrial Corporation Vs Hindustan Controls and Equipment Private Limited (NCLT Kolkata)
The case of Mahavir Industrial Corporation vs. Hindustan Controls and Equipment Private Limited brings to light critical issues concerning the jurisdiction of the National Company Law Tribunal (NCLT) and its limitations in setting aside arbitral awards during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code (IBC). The decision underscores the boundaries of NCLT’s authority, particularly in the context of arbitration proceedings that coincide with insolvency resolution processes.
Detailed Analysis
The case arose when the Resolution Professional (RP) of Hindustan Controls and Equipment Private Limited (the Corporate Debtor) filed an application seeking to set aside an arbitral award dated March 6, 2023. This award was issued by a sole arbitrator in a dispute involving M/s. Steel Authority of India and Amiya Commerce & Construction Co Private Limited against Hindustan Controls & Equipment Pvt Ltd.
The RP contended that the arbitral award was issued after the initiation of the insolvency resolution process against the Corporate Debtor, which began on July 5, 2022. The RP argued that the continuation of arbitration proceedings and the issuance of the award violated the moratorium imposed under Section 14 of the IBC, which mandates a stay on all proceedings against the Corporate Debtor.
The RP cited the Supreme Court’s decision in Alchemist Asset Reconstruction Company Ltd. vs. Hotel Gaudavan, arguing that any arbitration initiated after the imposition of the moratorium is null and void. Conversely, the respondent argued that the challenge to the arbitral award should be made under Section 34 of the Arbitration and Conciliation Act, 1996, and not under Section 60(5) of the IBC. They asserted that the NCLT does not have the jurisdiction to set aside an arbitral award.
After hearing the arguments, the NCLT concluded that while it has the authority to issue interim measures and refer parties to arbitration or enforce an arbitration award, it lacks the power to set aside an arbitral award. The NCLT referred to Section 34 of the Arbitration and Conciliation Act, which outlines the process for challenging arbitral awards and specifies that such challenges should be brought before a competent court, not the NCLT.
The tribunal also considered the precedent set by the Supreme Court in the case of Gujarat Urja Vikas Nigam Limited, which emphasized that the NCLT should not overstep its jurisdiction, particularly in matters that do not directly pertain to the insolvency resolution process. The ruling highlighted that the NCLT’s jurisdiction is circumscribed by the IBC and does not extend to adjudicating disputes that fall under the purview of other laws, such as the Arbitration and Conciliation Act.
Conclusion
The NCLT Kolkata’s decision in Mahavir Industrial Corporation vs. Hindustan Controls and Equipment Private Limited reaffirms the limited scope of its authority during the moratorium period under the IBC. It clarifies that the NCLT cannot set aside arbitral awards, even if they are issued during the moratorium, and that such matters must be addressed through the appropriate legal channels as specified by the Arbitration and Conciliation Act. This ruling serves as an important reminder of the distinct boundaries between insolvency proceedings and arbitration, ensuring that each process is respected and followed according to its governing laws.
FULL TEXT OF THE NCLT JUDGMENT/ORDER
1. The Court convened through hybrid mode.
2. Counsel for the parties were heard at length.
3. The Applicant Resolution Professional of Hindustan Controls and Equipment Private Limited, the Corporate Debtor has preferred this application seeking the following reliefs:
a. An order be passed setting aside of the impugned Arbitral Award dated 06.03.2023 passed by Learned sole Arbitrator in an Arbitration Case between M/s. Steel Authority of India – Versus – Hindustan Controls & Equipment Private Limited and Amiya Commerce & Construction Co Private Limited.
b. To restrain the Respondent to take any steps in terms of Impugned Arbitral Award dated 06.03.2023.
c. Ad Interim orders in terms of above.
4. It is the contention of the RP that the Arbitral Award was passed after initiation of Resolution Process against the Corporate Debtor vide order dated 05.07.2022 and ignoring the provisions of moratorium under Section 14 of the IBC.
5. It is submitted that the Arbitrator was aware of the order admitting the Corporate Debtor into Insolvency, yet it did not stay its hands off and went on with the Arbitration proceedings to pass its award during the course of Moratorium.
6. The Applicant has cited the decision of the Hon’ble Apex Court in Civil Appeal No. 16929/2017, arising out of S.L.P. (C ) No. 18195/2017 (Alchemist Asset Reconstruction Company Ltd. -Versus- M/s. Hotel Gaudavan to contend that Arbitration instituted after the Moratorium is non est in law.
7. Per contra, the sole Respondent would contend as under:
a. Challenge to the Award dated March 06, 2023 cannot be made under Section 60(5) of the IBC.
b. This Interlocutory Application is therefore, is not
c. The application seeking setting aside of the Arbitration has to be preferred under Section 2(1)(e ) of the Arbitration and Conciliation Act, 1996.
d. NCLT as an Adjudicating Authority is not a Court within the meaning of Arbitration and Conciliation Act to excise power under Section 34 of the Arbitration and Conciliation Act, hence setting aside application can only be made under Section 34 of the Arbitration and Conciliation Act, which power NCLT cannot invoke.
8. We have considered the rival contentions and perused the
9. We would note that although NCLT has the power to issue an Ante Arbitration injunction, in light of the Section 430 of the Companies Act and also has the power to refer parties to Arbitration or enforce Arbitration Award, it cannot set aside an Arbitral Award.
10. We are mindful of the decision of Hon’ble Apex Court where NCLT has been cautioned not to usurp the legitimate jurisdiction of the other Courts, Tribunals and Forum, when the dispute is not related to the Insolvency of the Corporate Debtor in an Appeal filed by Gujrat Urja Vikas Nigam Limited against the decision of the Hon’ble NCLAT upholding the decision of NCLT staying termination of a power, purchase agreement entered with a firm which latter went into Insolvency, Hon’ble Apex Court has held that “for adjudication of dispute that arise dehors the Insolvency of the Corporate Debtor, the Resolution Professional must approach the relevant Competent Authority” and that Section 238 of the IBC stipulates that Code would over ride other laws including an instrument having effect by virtue of any such law, NCLT’s jurisdiction can be invoked only on the ground that relates to Insolvency Resolution Process. NCLT cannot derive its power from the sprit and object of the IBC. The NCLT has a wide residuary jurisdiction, under Section 60 (5) of the IBC to adjudicate question of law a fact arising out of Insolvency Proceedings nonetheless it is defined by the text of IBC. The NCLT cannot do what the IBC consciously did not provide the power to do.
11. In as much as, the Arbitration Award has been challenged in this application, whereas this Tribunal lacks jurisdiction to set aside an Arbitral Award, although it was passed in course of moratorium under Section 14 of IBC, we dispose of the IA with liberty to the Resolution Professional to initiate appropriate proceedings to challenge the said Award.
12. This application IA(IB) No. 1820/( KB) /2023 is accordingly, disposed of.
13. The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.
14. Certified copy of this order may be issued, if applied for, upon compliance of all requisite formalities.
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