Code of Civil Procedure, 1908 – s.47 – Arbitration and Conciliation Act, 1996 – s.34 – Insolvency and Bankruptcy Code, 2016 – s.31 – Micro, Small and Medium Enterprises Development Act, 2006 – Respondent filed claim petitions against the appellant before the Facilitation Council under the provisions of MSME Act – On 07.06.2017, arbitral proceedings commenced – On 27.06.2017, financial creditors of appellant invoked s.7 of IBC before the NCLT – NCLT imposed moratorium and an interim resolution professional was appointed – Therefore, arbitral proceedings were kept in abeyance – Respondent filed its claim before the resolution professional – Ultimately resolution plan was approved by NCLT settling all the claims of operational creditors at nil value – No appeal was preferred by the respondent – On lifting of moratorium, Facilitation Council resumed the arbitral proceedings – An award passed on 06.07.2018 against the appellant – Appellant did not challenge the award u/s.34 of the 1996 Act – Respondent instituted execution proceeding – At the stage of execution, appellant filed petition contending that arbitral award was nullity and not executable as claim of respondent was settled at nil – Petition was dismissed and the Executing Court by order dated 03.03.2023 directed to comply with award dated 06.07.2018 – The said order was challenged by the appellant by filing writ petition before the High Court, which was dismissed – Correctness: Held: High Court is correct in answering the issue that a plea of nullity qua an arbitral award can be raised in a proceeding u/s.47 CPC but such a challenge would lie within a very narrow compass – However, objection to execution of an award u/s.47 CPC is not dependent or contingent upon filing a petition u/s.34 of the 1996 Act – High Court was not justified in taking the view that since the appellant did not file a petition u/s.34 of the 1996 Act, therefore, it was precluded from filing an application before the Executing Court to declare the award as void and hence nonexecutable – In so far the other issues framed by the High Court are concerned, it is by now well settled that once a resolution plan is duly approved by the adjudicating authority u/s.31(1), all claims which are not part of the resolution plan shall stand extinguished and no person will be entitled to initiate or continue any proceeding in respect to a claim which is not part of the resolution plan – In so far the resolution plan is concerned, the resolution professional, the committee of creditors and the adjudicating authority noted about the claim lodged by the respondent in the arbitration proceeding – However, the respondent was not included in the top 30 operational creditors whose claims were settled at nil – If the claims of the top
30 operational creditors were settled at nil, it goes without saying that the claim of the respondent could not be placed higher than the said top 30 operational creditors – Moreover, the resolution plan itself provides that all claims covered by any suit, cause of action, arbitration etc. shall be settled at nil – Therefore, it is crystal clear that in so far claim of the respondent is concerned, the same would be treated as nil at par with the claims of the top 30 operational creditors – Claim of the respondent stood extinguished – Therefore, the Facilitation Council did not have the jurisdiction to arbitrate on the said claim – Since the award was passed without jurisdiction, the same could be assailed in a proceeding u/s.47 CPC – The award dated 06.07.2018 is incapable of being executed – Impugned order of the High Court is set aside. [Paras 47, 49, 50, 50.1, 52] Words and Phrases – Lifting of Moratorium – Meaning of: Held: Lifting of the moratorium does not mean that the claim of the respondent would stand revived notwithstanding approval of the resolution plan by the adjudicating authority – Moratorium is intended to ensure that no further demands are raised or adjudicated upon during the corporate insolvency resolution process so that the process can be proceeded with and concluded without further complications. [Para 50.1]
Insolvency and Bankruptcy Code, 2016 – ss.30, 31, 32, 238 – Finality and binding value of Resolution Plan – Discussed. [Paras 25-33]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Ankit Gyan. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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