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2020 (1) TMI 305 - AT - Insolvency and BankruptcyCIRP proceedings - scope of claim and counter claim - whether a counter claim can proceed during the period of Moratorium while the Adjudicating Authority (National Company Law Tribunal) allowed the Corporate Debtor to pursue the claim before the Arbitral Tribunal? HELD THAT - It is true that the Counter-claim made by the Corporate Debtor is a separate proceedings than that of the Arbitral proceedings filed by the Claimant . However they cannot be segregated and can go on simultaneously together. The claim of the Respondent cannot be determined by the Arbitral Tribunal during the period of Moratorium passed by the Adjudicating Authority. In such situation as it cannot be decided as to what amount can be taken we hold that the counter-claim filed by the Corporate Debtor also cannot proceed. This Appellate Tribunal allowed the claim petition filed by the Corporate Debtor of the said case to proceed with. For determination of the claim it was also noticed that the counter-claim or part of it is set-off with the claim this Appellate Tribunal observed that the claim and counter-claim should also be heard together by the Arbitral Tribunal however with a clear understanding on such determination the Corporate Debtor is liable to pay certain amount in such case no recovery is made during the period of Moratorium . There are no merit in the appeal - appeal dismissed.
Issues:
1. Interlocutory Application seeking relief in Corporate Insolvency Resolution Process. 2. Determination of counter claim during the period of Moratorium. 3. Jurisdiction of Adjudicating Authority over arbitral proceedings during insolvency. 4. Applicability of Insolvency and Bankruptcy Code over Arbitration and Conciliation Act. 5. Segregation of claim and counter-claim during insolvency proceedings. Issue 1 - Interlocutory Application in Corporate Insolvency Resolution Process: The Appellant, a Resolution Professional, filed an Interlocutory Application seeking directions for the Arbitral Tribunal to pronounce the final award in a dispute involving the Corporate Debtor to facilitate the Corporate Insolvency Process. The Appellate Tribunal disposed of the appeal, emphasizing that if the Corporate Debtor is found liable to pay, no recovery can be made during the moratorium period. Issue 2 - Determination of counter claim during Moratorium: The Adjudicating Authority refused to set aside an order allowing the Arbitral Tribunal to proceed with the counter claim during the moratorium period. The Appellate Tribunal held that the counter-claim cannot proceed during the moratorium, aligning with the decision in a similar case where it was observed that no recovery can be made during the moratorium if the Corporate Debtor is found liable. Issue 3 - Jurisdiction over arbitral proceedings during insolvency: The Appellate Tribunal clarified that the Adjudicating Authority has no jurisdiction to set aside orders passed by arbitral tribunals during insolvency proceedings. It was emphasized that all claims and counter-claims should be heard together by the Arbitral Tribunal, and no recovery can be made during the moratorium period. Issue 4 - Applicability of Insolvency and Bankruptcy Code over Arbitration Act: The Appellate Tribunal highlighted the Supreme Court's decision that the Insolvency Code prohibits the continuation of arbitral proceedings after the imposition of moratorium. It was held that the Insolvency and Bankruptcy Code prevails over the Arbitration and Conciliation Act, preventing arbitral proceedings during the moratorium period. Issue 5 - Segregation of claim and counter-claim during insolvency proceedings: While acknowledging that claim and counter-claim are separate proceedings, the Appellate Tribunal emphasized that they cannot proceed simultaneously during the moratorium period. The Tribunal directed parties to refrain from pursuing arbitral proceedings until the completion of the moratorium period and to file their claims with the Resolution Professional instead. In conclusion, the appeal was dismissed as the Appellate Tribunal found no merit in the arguments presented, aligning its decision with previous judgments and emphasizing the importance of adhering to the restrictions imposed during the insolvency process.
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