No Illegality in NCLT’s Order Approving RP where Appellant’s Claim was Based on Pending Arbitration: NCLAT

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  • Last Updated on 25 April, 2023

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arbitration in CIRP

Case Details: Shapporji Pallonji and Co. (P.) Ltd. v. Kobra West Power Company Ltd. - [2023] 149 taxmann.com 199 (NCLAT-New Delhi)

Judiciary and Counsel Details

    • Anant Bijay Singh, Judicial Member & Ms Shreesha Merla, Technical Member
    • Abhijeet Sinha, Mrs Sonali Jaitley Bakshi, Jaiyesh Bakshi, Chirag Sharma, Siddharth Dey, Ms Rashmi Gogoi, Ms Sakshi Tibrewal, Ms Mayuri Shukla & Saikat Sarkar, Advs. for the Appellant.
    • P. Nagesh, Sr. Adv., Himanshu Satija, Mahesh Agarwal, Shivam Shukla, Arshit Anand, Manmeet Singh, Anurah Robin Frey, Ms Pallavi Pratap & Akshay Singh, Advs. for the Respondent.

Facts of the Case

In the instant case, the CIRP was initiated by the corporate debtor invoking section 10 of the IBC. Consequently, the Resolution Professional (RP) was appointed, who invited claims from the creditors of the corporate debtor.

Later, the appellant (i.e., operational creditor) submitted its claim arising from an arbitration proceeding that was pending between the appellant and the corporate debtor prior to the initiation of the CIRP. The status of claims was uploaded on the website of the corporate debtor by the RP.

Further, the resolution plan submitted by the Successful Resolution Applicant (SRA) was filed by the RP before the Adjudicating Authority (NCLT) and the same was approved vide the impugned order.

The appellant challenging the impugned order contended that the RP did not inform him in writing regarding the rejection of his claim. However, the RP had only put the same on the website of the corporate debtor and orally communicated it to the appellant after the approval of the resolution plan.

The appellant also contended that the RP did not have adjudicatory powers to reject the claim on the grounds of pendency of arbitration proceedings.

NCLAT Held

The NCLAT observed that since the arbitration proceedings were pending prior to the invocation of section 10 proceedings and there was no contingent liability or any other provisions made in the resolution plan subject to the result of arbitration proceedings, liberty was to be given to the appellant to pursue all contentions in the pending arbitration proceedings and the same was to be decided on its own merit.

The NCLAT held that there was no illegality in the order of the NCLT to approve the resolution plan and there was no reason to set aside the resolution plan except for observing that RP ought not to have made a contingent provision with respect to the appellant, which would be subject to arbitration proceedings.

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