Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + HC Insolvency and Bankruptcy - 2023 (2) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (2) TMI 327 - HC - Insolvency and BankruptcyCIRP - Moratorium is in force - Seeking constitution of an arbitral tribunal in terms of Section 18 of the Credit Information Companies (Regulation) Act 2005 - petitioner alleges that the first respondent placed on its website incorrect information provided by the second respondent in respect of the alleged default by the petitioner in respect of loan facilities extended by the second respondent to the borrower - HELD THAT:- When Sections 14 and 19 are read together, it appears that a dispute between a borrower or client, on the one hand, and the credit information company and credit institution, on the other, in relation to the accuracy or completeness of the credit information collected, processed or collated by them would qualify as a dispute relating to the business of credit information. Consequently, such dispute may be referred for arbitration provided no remedy is prescribed in respect thereof by the Act of 2005. Apart from indicating that such disputes may be referred under the applicable ombudsman scheme, learned counsel for the respondents are unable to point out any other remedy that is available to a borrower or client in such circumstances - the present dispute pertains to the business of credit information and, in the absence of any other remedy, resort to arbitration is permissible under Section 18 of the Act of 2005. The first respondent raised the objection that the petitioner did not invoke the arbitration clause after the order - Under Section 18, the RBI is required to appoint the arbitrator or direct parties to constitute the arbitral tribunal as per the Arbitration Act. In this case, by reply dated 01.09.2021, the RBI did not appoint the arbitrator and instead directed the petitioner to approach the Additional Secretary, Department of Agriculture, Cooperation and Farmers Welfare. Therefore, this objection is untenable. The first respondent also contended that the credit information company can correct credit information only upon certification by the credit institution. This could be raised as a defence in arbitration but is not a valid reason to resist the Section 11 petition. The second respondent adverted to the institution of proceedings against the petitioner as personal guarantor before the National Company Law Tribunal at Bombay (the NCLT). Upon initiation of such proceeding, he contended that an interim moratorium is triggered under Sections 95 and 96 of the Insolvency and Bankruptcy Code 2016 (the IBC). Such interim moratorium continues until the petition is admitted and, if admitted, a moratorium would operate thereafter - the interim moratorium applies to any pending legal action or proceeding in respect of any debt and to the initiation of any legal action or proceeding by the creditors of the debtor in respect of any debt. The expression used in Section 96(1) (b) is “in respect of any debt” and not for recovery of a debt. Although on a purely textual reading, the embargo on fresh proceedings will apply only to creditors of the debtor and not to a guarantor, when interpreted in context, the interim moratorium applies not only to proceedings for recovery of a debt but to proceedings in which the liability of the borrower and guarantor are determined in relation to the credit facility. Turning to the facts of this case, the petitioner seeks the constitution of an arbitral tribunal to adjudicate the dispute pertaining to information put out by the first and second respondents in respect to the alleged default by the borrower and the petitioner. Whether the information provided by the first and second respondents, as the credit information company and credit institution, respectively, is correct or incorrect, in turn, depends on the scope of the personal guarantee provided by the petitioner in relation to credit facilities availed of by the borrower and, consequently, on the liability arising thereunder. Hence, an arbitral tribunal cannot decide whether the information is accurate or inaccurate without examining the scope of the personal guarantee(s) and the liabilities arising thereunder, and the NCLT is seized of the said dispute. Thus, the constitution of an arbitral tribunal, at this juncture, would be premature - After the moratorium ends, in case the petitioner were to succeed in the defence before the NCLT and the NCLT concludes that the petitioner did not guarantee the relevant debts, it would be open to the petitioner to initiate proceedings for the constitution of an arbitral tribunal to adjudicate the dispute relating to the credit information provided by the first and second respondents in terms of Section 18 of the Act of 2005. Petition disposed off.
|