C.P. No. (IB)-22(PB)/2017. Case: Annapurna Infrastructure Pvt. Ltd. and Ors. Vs Soril Infra Resources Ltd.. Company Law Board

Case NumberC.P. No. (IB)-22(PB)/2017
CounselFor Appellant: Sanyogita Jain, Adv. and For Respondents: Chetan Sharma, Sr. Adv., Abhishek Swaroop and Abhishek Shivpuri, Advs.
JudgesM.M. Kumar, C.J. (President) and R. Varadharajan, Member (J)
IssueArbitration And Conciliation Act, 1996 - Sections 21, 32, 33, 34, 37; Code of Civil Procedure, 1908 (CPC) - Sections 10, 151, 9; Insolvency And Bankruptcy Code, 2016 - Sections 14, 15, 16, 3(11), 3(12), 5, 5(2), 5(20), 5(21), 5(b), 75, 76, 8, 8(1), 8(1) & (2), 8(2), 8(2)(a), 9, 9(1), 9(3)(b); Patents Act, 1970 - Sections 104, 64, 64(1)
Judgement DateMarch 24, 2017
CourtCompany Law Board


(Principal Bench, New Delhi)

1. M/s. Annapuma Infrastructure Pvt. Ltd. & Ors. - applicants (for brevity 'the applicants) have invoked the provision of Section 9 of Insolvency and Bankruptcy Code 2016 (for brevity 'the Code') with a prayer to trigger Insolvency Process against M/s. SORIL Infra Resources Limited - Respondent (for brevity 'the respondent). The applicants have made the following prayers:

1. To admit the application and pass an order for initiating the Corporate Insolvency Resolution Process under section 9 of the Insolvency and Bankruptcy Code 2016;

2. To appoint an interim resolution professional in terms of section 16 of the Code;

3. To cause a Public announcement of the initiation of Corporate Insolvency Resolution Process and calling for submission of claims under section 15 of the Code; and

4. To declare a moratorium in terms of section 14 of the Code.

2. In order to put the controversy in its proper perspective it would first be necessary to notice few material facts. The applicants have some claims against the Respondent and in pursuance of the order passed by Hon'ble High Court of Delhi Justice (Dr.) Mukundakam Sharma (Retd.) was appointed as Sole Arbitrator to adjudicate all disputes arising out of the lease deed dated 23.11.2005 between the applicants and respondents. It is pertinent to mention that respondent have changed their name and is now known as M/s. SORIL Infra Resources Limited-Respondent. The applicants claimed that applicants are 'Operational Creditor' and the Respondent is a 'Corporate Debtor' within the meaning of code.

3. The arbitrator passed an award on 9.9.2016 in favour of the applicants granting the following reliefs:-

  1. Rs. 2,67,52,283/- on account of rend from 1.4.2008 upto 22.3.2010 along with interest @ 12 % per annum w.e.f. 23.3.2010 upto the date of the Award.

  2. Rs. 1,11,56,145/- on account of damages equivalent to rend for a period of 6 months from 22.3.2010.

  3. Future interest @ 12% per annum on the amounts, as calculated above, from the date of the award till the date of realization.

4. The Respondent then challenged the award u/s. 34 of the Arbitration and Conciliation Act, 1996 (for brevity the 'Arbitration Act') with a prayer to set aside the award. However the application was dismissed on 19.12.2016. As a consequence each of the applicants issued Demand Notice on 13.1.2017 under section 8 of the Code. In response to the Demand Notice Respondent filed reply on 27.1.2017. It is conceded by the applicants that in the reply sent by Respondent the existence of 'Operational Debt' has been disputed and it also stated that an appeal being numbered as FAO(OS)(COMM) 20 of 2017 has been filed under section 37 of the Arbitration Act against the order dated 19.12.2016 passed by learned single Judge while dismissing the appeal under section 34 of the Arbitration Act. It has also been pointed out that execution proceedings to recover the amount due under the award dated 9.9.2016 have also been initiated and are pending consideration before Hon'ble Delhi High Court. It is thus evident that the dispute has arisen on account of payment of rent and interest/damages on the rental amount.

5. Mr. Vijay Nair learned counsel for the Petitioner has vehemently argued that the applicant has to be regarded as a 'Operational Creditor' within the meaning of section 9 read with section 5(20) and 5(21) of the Code. A reference has also been invited to the definition of words the 'debt' and 'default' as defined in section 3(11) and section 3(12) of the Code. It has been submitted that the Demand Notice dated 13.1.2017 was served on 16.1.2017. According to the learned counsel on the date of service of Demand Notice the award of the Arbitrator had attained finality as the application u/s. 34 of the Arbitration Act was dismissed on 19.12.2016 and no appeal u/s. 37 was filed or pending. According to the learned counsel filing of appeal subsequent on 20.1.2017 would be immaterial.

6. In order to buttress his stand that applicant is an 'Operational Creditor' learned counsel has placed reliance on a portion of para 3.2.2 of the report of the Bankruptcy Law Reforms Committee Volume I: Rationale and Design and has argued that the report clearly brings out that the obligation to pay rent is certainly cover by the definition of expression 'Operational Creditors'. According to the learned counsel the expression 'Operational Creditor' used in section 5(20) and 5(21) of the Code must be construed to include the obligation to pay rent to the applicant as an 'Operational Creditor'. According to the learned counsel the definition of 'Operational Creditor' as adopted in section 5(20) of the Code is not exhaustive but it is illustrative as it is evident from the use of word 'include'. Mr. Nair has submitted that it is well settled principle of law that wherever the expression 'include' is used to define an expression then it has room to imply many other things as the definition is not exclusive.

7. Mr. Nair has then submitted that application u/s. 34 of the Arbitration Act cannot be regarded as continuation of arbitration proceeding because the arbitrator is the final judge of the facts and the High Court while hearing objections u/s. 34 is not expected to scrutinize the award as an appellate forum. In support of his submissions learned counsel has placed reliance on para 30 of a judgment of Hon'ble High Court of Delhi in the case of M/s. Raj Kishan & Company v. National Thermal Power Corporation 2012VIIIAD (Delhi) 53 It has been pointed out that in some-what similar circumstances a Division Bench of Hon'ble High Court of Madras in the case of N. Poongodi and Anr. v. Tata Finance Limited 2005 (4) CTC 577 has rejected the objections to the issuance of the insolvency notice and rejected the objections as is evident from the perusal of para 7 of judgment.

8. Another submission made by Mr. Nair is that expression 'arbitration proceedings' used in section 8(2)(a) of the 'Code' cannot be deemed to be pending because under section 21 the Arbitration Act arbitration proceedings commence, on the date on which a request for referring such a dispute to arbitration is received by the respondent. The 'arbitration...

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