The NCLAT held that the Arbitral Tribunal's Order cannot affect the pending insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.
The National Company Law Appellate Tribunal (NCLAT), Principal bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra & Arun Baroka (Technical Members) was hearing an appeal and held that the arbitration proceedings cannot affect the ongoing insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.
The Corporate Debtor filed an Application under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the High Court of Calcutta seeking the appointment of a sole Arbitrator. Vide order dated 13.09.2023, the Hon’ble High Court of Calcutta allowed the Application and appointed an Arbitrator in the matter. The Operational Creditor filed an SLP (C) 25781/2023 challenging the order dated 13.09.2023 passed by the High Court. The said SLP was dismissed by the Hon’ble Supreme Court making the observation “..........we make it clear that the impugned order and conformation thereof will not affect the pending proceedings under the Insolvency and Bankruptcy Code, 2016”.
The Corporate Debtor also filed an MA No.107/2024 before the Hon’ble Supreme Court seeking clarification of the order dated 28.11.2023, which MA was dismissed by the Hon’ble Supreme Court on 23.01.2024.
In the present case, the Corporate Debtor filed an Appeal against the dismissal of their application by the National Company Law Tribunal, Cuttack Bench, seeking to include two additional documents related to arbitration proceedings in a case initiated by the Operational Creditor. The dispute arose from an Agreement between the parties, and the Operational Creditor had filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority observed that in the present case, the Application was wholly unwanted. Further, reasons have been given in paragraph 8 by the Adjudicating Authority:
“8. The documents intend to be received are emerged after filing of the main C.P.No.36 /CB/2022. The documents need to be received arc arbitration application and order passed on the arbitration application. When the respondent preferred an appeal before the supreme court against the Arbitration order dated 13.09.2023, the Hon'ble Supreme Court of India by its order dated 28.11.2023 clearly mentioned that the impugned arbitration order will not affect this pending proceeding. In spite of specific observation made by the Apex court, the applicant preferred this application. If this request of applicant is conceded then it will go against the observation made by the Apex Court. It is also not explained by the applicant how these additional documents are just and necessary to arrive conclusion in the C.P. No. 36/CB/2022. In these circumstances, this application IA(IB) No, 3 6 / CB / 2024 is DISMISSED.”
The Corporate Debtor's application sought to introduce documents from arbitration proceedings initiated after the Section 9 petition was filed. However, the Adjudicating Authority dismissed the application, stating that the documents were unnecessary for the ongoing case and that the Supreme Court had already clarified in the case of MSTC Limited v. Balasore Alloys Limited, REED 2023 SC 11581, that the arbitration proceedings would not affect the insolvency proceedings. The Corporate Debtor challenged this decision, arguing that the additional documents were essential for their defence.
After hearing arguments from both parties, the Appellate Tribunal upheld the Adjudicating Authority's decision, stating that the additional documents were not relevant to the ongoing proceedings and that the Supreme Court's clarification had already addressed the issue. Therefore, the Appeal was dismissed, and no costs were awarded.
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