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TMI Blog2017 (8) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... e pending adjudication between the parties. 2. In order to decide the controversy in its proper perspective, it will be necessary to notice the material facts. 3. Appellants rented the premises, rent of which was payable by respondent - Corporate Debtor pursuant to Lease Deed dated 23rd November, 2005 but having not paid, the parties invoked arbitration clause. Pursuant to the order passed by the Hon'ble High Court of Delhi, Hon'ble Justice (Dr.) Mukundakam Sharma (Retired) was appointed as a Sole Arbitrator to adjudicate all disputes arising out of Lease Deed dated 23rd November, 2005 between the appellants and the respondent. 4. The Arbitrator passed an award on 9th September, 2016 in favour of the appellants granting the following relief:- "a. 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. b. Rs. 1,11,56, 145/- on account of damages equivalent to rend for a period of 6 months from 22.3.2010. c. Future interest @12% per annum on the amounts, as calculated above, from the date of the award till the date of realization. " 5. The respondent then challenged the award u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of one or other High Court's order. 10. According to the learned counsel for the respondent the petition under Sec. 9 of the I&B Code is not maintainable because the appellants do not owe any 'operational debts' to the Corporate Debtor and thereby the 1st appellant is not an 'operational creditor'. Referring to the definition of 'operational debts' as defined under Section 5(21) of the I&B Code, learned counsel for the respondent contended that ipsofacto claim arising out of 'supply of goods' and providing 'services', which may include employment will not amount to operation debt. Therefore, ipsofacto the 1st appellant does not and cannot qualify to be an 'operational creditors', as there is no 'operational debt'. "Debt" is not arising under the law for the time being inforce as is mandate of sub-section (21) of Sec. 5 of the I & B Code and it would be attracted only when the said debt is payable as per said provision. 11. It was further contended that Sections 8, 9, 5(20) and 5(21) must be construed in accordance with the object of the court as outlined in the long title. 12. Similar arguments was advanced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to refer the observations of the Adjudicating Authority to understand the reasons for not entertaining the application under Sec. 9. The Tribunal proceeded on presumption that a dispute is pending in view of the pendency of a case under Sec. 37 of the Arbitration Act as is apparent from the observation and finding quoted below: "22. In the instant case an arbitral award has been announced on 9.9.2016 and the application for setting aside the award filed under section 34 of the Arbitration Act has been rejected on 19.12.2016. It has been mentioned by the respondent in its reply dated 27.01.2017 sent under section 8(2) of the Code to the notice issued under section 8(1) of the Code by the applicant that the debt is disputed and appeal under section 37 of the Arbitration Act is pending, The reply dated 27.1.2017 reads as under:- "1. At the outset, kindly note that our client is disputing the existence of the 'operational debt' allegedly payable to you by our client. Our client is vigorously contesting the Award dated 9.9.2016 (Award) passed by Mr. Justice Mukundakam Sharma (Retd.), Sole Arbitrator, in Arbitration Case No.3 of 2013, before the Hon 'ble Delhi High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n placed on the judgement of the Bombay High Court rendered in the cases of DSL Enterprises Private Ltd. (DB) and Rajendra (SB) (Supra). 25. We have not been able to persuade ourselves to accept the submission advanced on behalf of the applicant that 'arbitration proceedings' stand concluded by virtue of section 32 of the Arbitration Act. The argument is wholly unsustainable once we take into account the provisions of provides for section 33 of the Arbitration Act itself. It corrections and interpretation of award and even for additional award after the award has been announced. As already observed section 34 and section 37 of the Arbitration Act provide for setting aside of the award and the remedy of appeal. The appeal under section 37 of the Arbitration Act is still pending. The judgments of Bombay High Court has been rightly relied upon by the learned counsel for respondents. " 18. The Adjudicating Authority further proceeded to observe : "27. We are further of the view that already proceedings for execution of the award have been initiated. An effective remedy has been availed by the applicant. We have not been able to accept that a party can invoke more than one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be filled to apply under Sec. 9 of the I&B Code, wherein the order passed by Arbitral Panel has been cited as one of the document, record and evidence of default. This is apparent from Part V of Form 5, as quoted below: " FORM 5 Part-V PARTICULARS OF OPERATIONAL DEBT [DOCUMENTS, RECORDS AND EVIDENCE OF DEFAULT] 1. PARTICULARS OF SECURITY HELD, IF ANY, THE DATE OF ITS CREATION, ITS ESTIMATED VALUE AS PER THE CREDITOR. ATTACH A COPY OF A CERTIFICATE OF REGISTRATION OF CHARGE ISSUED BY THE REGISTRAR OF COMPANIES (IF THE CORPORATE DEBTOR IS A COMPANY 2. DETAILS OF RESERVATION / RETENTION OF TITLE ARRANGEMENTS (IF ANY) IN RESPECT OF GOODS TO WHICH THE OPERATIONAL DEBT REFERS 3. PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR ARBITRAL PANEL ADJUDICATING ON THE DEFAULT, IF ANY (ATTACH A COPY OF THE ORDER) 4. RECORD OF DEFAULT WITH THE INFORMATION UTLITY, IF (ANY ATTACH A COPY OF SUCH RECORD) 5. DETAILS OF SUCCESSION CERTIFICATE, OR PROBATE OF A WILL, OR LETTER OF ADMINISTRATION, OR COURT DECREE (AS MAY BE APPLICABLE), UNDER THE INDIAN SUCCESSION ACT, 1925(10 OF 1925 ATTACHA COPY 6. PROVISION OF LAW, CONTRACT OR OTHER DOCUMENT UNDER WHICH OPERATIONAL DEBT HAS BECOME DUE 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The language of the section clearly indicates that the award can be executed in two situations - one when the time for filing an application for setting aside the award has expired and no application has been filed or where the application has been filed and it has been refused. It is not in dispute that an award can be executed as a decree in view of the provisions of Section 36 of the Act. The only question for consideration in this case is whether the word 'refused' used in Section 36 of the Act means a final refusal after all the proceedings of appeal etc. up to the Supreme Court are over or a refusal by the District Judge is sufficient to make the award executable. If the legislature intended that it is only after the application under Section 34 has been rejected at the appellate stage would the award be enforceable it could have used such words as 'finally refused' in the section. As stated above the first situation referred to in the section when an award becomes executable is where the limitation for filing an application under Section 34 has run out and no application has been filed. The application for setting aside the award in the context necessarily m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n award is a final determination of a particular issue or claim in the arbitration.... " 29. The Hon'ble Supreme Court in Centrotrade Minerals & Metals Inc. vs. Hindustan Copper Limited [ (2017) 2 SCC 228] while dealing with the finality of award under Arbitration and Conciliation Act, 1996 observed and held : The general principle that we have accepted is supported by two passages in Comparative International Commercial Arbitration. In Para 24-3 thereof reference is made to Article 31 (I) of the United Nations Commission on International Trade Law (or UNCITRAL) Rules to suggest that white all awards are decisions of the Arbitral Tribunal, all decisions of the Arbitral Tribunal are not awards. Similarly, while a decision is generic, an award is a more specific decision that affects the rights of the parties, has important consequences and can be enforced. The distinction between an award and a decision of an Arbitral Tribunal is summarised in Para 24-13. It is observed that an award: (i) concludes the dispute as to the specific issue determined in the award so that it has res judicata effect between the parties; if it is a final award,' it terminates the tribunal's jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel appearing on behalf of the respondent referred to the decision of the Hon'ble Supreme Court in Paramjeet Singh Patheja Vs. ICDS Limited - [2006 (13) SCC 322] wherein interpreting Section 9(2)(a) and (b) of the Presidency Towns Insolvency Act, 1909, the Apex Court held an arbitral award is "decree" or "order" for the purpose of insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909. 31. The aforesaid decision is not applicable in the present context, the Presidency Town Insolvency Act, 1909 having superseded by Insolvency and Bankruptcy Code, 2016 and for the purpose of 'dispute' as 'existence of dispute', only the pendency of arbitral proceeding has been accepted as one of the ground of dispute. On the other hand, as apparent from Form 5 of Rules, 2016 for the purpose Of Code, and Arbitral Award has been held to be a document of debt and non-payment of awarded amount an-mounts to 'default' debt. Therefore, the aforesaid decision referred by learned counsel for the respondent is of no help to the respondent. 32. What has been held by the learned Adjudicating Authority that a dispute has been pending is not only against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;" 37. From the record, it appears that the 1st appellant claimed to be an 'operational creditor' on the basis of lease deed. The respondent in its reply has taken a plea that the Adjudicating Authority has confined its finding to point as dealt with in the impugned order and all other points, though urged and argued, have not been considered. 38. From the impugned order dated 24th March, 2017, we find that the learned Adjudicating Authority noticed the aforesaid plea at paragraph 6 of the impugned judgment, as quoted below: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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