Arbitrator Rightly Dismissed FC’s Counterclaim Against CD as Resolution Plan Extinguished All Pending Arbitration Claims

Case Details: West Bengal Power Development Corporation Ltd. v. Ujaas Energy Ltd. - [2024] 166 taxmann.com 138 (HC-Calcutta)

Judiciary and Counsel Details

• Sabyasachi Bhattacharyya, J
• Jishnu Chowdhury, Chayan Gupta, Rittick Chowdhury & Aviroop Mitra, Advs. for the Petitioner.
• Abhrajit Mitra, Sr. Adv., Ms Rajshree Kajaria, & Satadeep Bhattacharya, Advs. for the respondent

Facts of the Case

In the instant case, the petitioner, a public sector undertaking, floated an e-tender for the job of design and engineering. The Respondent/claimant participated in the tender and came out successful. The CIRP was initiated against the respondent, and the RP was appointed.

The Respondent subsequently invoked the arbitration clause in the agreement between the parties and made several claims before the Arbitrator. The petitioner filed a statement of defence as well as a counter claim. Meanwhile, the resolution plan was approved by the NCLT.

The Respondent filed an application under section 31(6) of the IBC seeking dismissal of the counterclaim on the ground that all claims against the Respondent were extinguished by virtue of the said approval. The Arbitrator passed the impugned interim award, allowing the said application and dismissing the counterclaim.

Thereafter, the petitioner filed an instant petition challenging the interim award on the grounds that part of the counterclaims would arise after the initiation of the CIRP and would fall beyond the authority of RP and outside the resolution plan.

It was noted that the petitioner was a financial creditor vis-a-vis the respondent and was duty-bound to make all claims before the RP. Further, counterclaims before the Arbitrator were filed before approval of the resolution plan, and pre-CIRP and intra-CIRP claims came within the purview of the resolution plan.

High Court Held

The High Court observed that Clause 2.4.1 of the said resolution plan stated that pending counterclaims in arbitration would stand extinguished and the said clause was binding on the petitioner in terms of section 31 of the IBC.

The High Court held that in terms of section 31 of the IBC, claims incorporated in the petitioner’s counterclaims before the Arbitrator stood finally extinguished with approval of the resolution plan and need not or could not be further adjudicated by the Arbitral Tribunal.

The High Court, further held that since the Arbitrator arrived at plausible and legally correct findings in dismissing counterclaims, no ground for interference with the impugned interim award was made out, and, thus, the instant petition was to be dismissed.

List of Cases Reviewed

• Ghanashyam Mishra and Sons (P.) Ltd. v. Edelweiss Asset Reconstruction Company Ltd., (2021) 9 SCC 657, (para 57), followed.

List of Cases Referred to

• In Kailash Nath Associates v. Delhi Development Authority and Another (2015) 4 SCC 136 (para 12)
• last proposition, learned counsel cites Madhav Prasad Agarwal v. Axis Bank Limited, reported at (2019) 7 SCC 158 (para 20)
• Sejal Glass Limited v. Navilan Merchants Pvt. Ltd. (2018) 11 SCC 780 (para 20)
• SSangyong Engineering and Construction Company Limited v. NHAI (2019) 15 SCC 131 (para 22)
• Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited (2021) 9 SCC 657 (para 24)
• Jaypee Kensington Boulevard Apartments Welfare Association and others v. NBCC (India) Ltd. and others (2021) 1 SCC 401 (para 26).