TMI Blog2020 (4) TMI 773X X X X Extracts X X X X X X X X Extracts X X X X ..... elivered on 16-3-2018 and the respondent has replied on 5-4-2018. Giving a notice of pendency of application under section 9 of the Arbitration and Conciliation Act, 1996 by the respondent after 10 days from receipt of demand notice, does not hit section 8(2) of IBC, 2016. Thus, the dispute raised by the respondent is patently feeble legal argument unsupported by evidence on the basis of pending application under section 9 of the Arbitration and Conciliation Act, 1996, for an interim measure without establishing that an amount of ₹ 63,31,706.09/- is due to the respondent. Time limitation - HELD THAT:- In accordance with section 238 of the IBC, 2016, the provisions of the Code have overriding effect on the Arbitration and Conciliation Act, 1996. The Registered Office of the Corporate Debtor is situated in Jaipur and therefore this Tribunal has jurisdiction to entertain and try this Application. The matter is within the purview of Law of Limitation. Application admitted - moratorium declared. - IA NO. 203/JPR/2019, IB NO. 596 (ND)/2018, TA NO. 116 OF 2018 - - - Dated:- 14-2-2020 - P.S.N. Prasad, Judicial Member And Raghu Nayyar, Technical Member For the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the services from the Applicant and opened a Trading Account No. 1070913 with Applicant through its branch office at Jaipur and started trading from September, 2017 and continued till November, 2017. On 28-11-2017 the respondent had purchased 1,00,000 shares of Steel Exchange of India Limited ( SEIL ) at the average rate of ₹ 130.055/- per share, and in view thereof Rs, 1,30,38,956.27/- was debited to the respondent's account. As per the applicant's books of account a sum of ₹ 90,24,817.40/- became due on 30-11-2017 from the respondent. Since the value of the SEIL shares were reducing and in view of the non-payment by the respondent, as per Regulation 3.15 of the Exchange Regulations, the applicant sold 30,873 shares of the Respondent for a consideration of ₹ 25,70,364.42/. When the value of shares reduced to ₹ 52.25/- on 08-12-2017, the Applicant had sold 69,127 shares out of the remaining shares and the thereby the respondent's account was credited with an amount of ₹ 36,05,249.28/- and reducing the debit balance to ₹ 28,83.058.80/-. 6. According to the Applicant, the Demand Notice dated 21-12-2017 was issued to the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of transactions on account of which debt fell due, and the date from which such debt fell due. ₹ 28,83.058.80/- 2. Amount claimed to be in default and the date on which the default occurred Total amount of debt claimed to be in default is ₹ 28,83,058.80/- plus interest @ 24% per annum for the default period from the date of default. Date of default: 28-11-2017. 10. The Respondent has filed reply on 28-9-2018 and raised the following preliminary objections: (a) As per clause No.45 of Annexure 4 with heading Rights and Obligations of Stock Brokers, Sub-Brokers and Clients of Client Registration Form, it is provided that any dispute arising shall be settled by the Arbitrator therefore, this Tribunal has no jurisdiction to hear the present application. (b) No dues are pending to the Applicant from the Respondent, instead the Respondent is owed the sum of ₹ 63,31,706.09/- from the Applicant and in respect of same a case is pending before the Court of Additional District and Session Judge, Jaipur, filed by the Respondent under section 9 of the Arbitration and Conciliati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case filed by the Respondent under section 9 of the Arbitration and Conciliation Act, 1996 cannot be said to be a dispute because said petition is only an interim petition to secure an amount. The Respondent has neither raised any dispute nor filed any claim before any Arbitral Tribunal even after filing of alleged section 9 petition, therefore, it cannot be considered that a suit or arbitral proceeding is pending. It is submitted by the applicant that the Respondent had received the Demand Notice on 16 March, 2018 and should have replied thereto latest by 26 March, 2018 but the Respondent had sent its reply to Demand Notice only on 5 April, 2018 i.e. beyond 10 days. 13. It is further submitted by the Applicant that the right under the IBC, 2016 is in addition to and not in derogation of the Arbitration and Conciliation Act, 1996. Thus, sections 42 and 8 of the Arbitration and Conciliation Act are not a bar for filing a petition under section 9 of the IBC Code, 2016. It is further submitted that all trading transactions effected in the account of the Respondent are based on its knowledge and consent and the confirmations of the same were sent over the registered Email id and thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociation of the Applicant/Respondent; and b. Hold that the Applicant/Respondent M/s. Arkay International Finsec Limited is not a Corporate Debtor ; and c. Dismiss the Petition filed by the Non-Applicant/Petitioner under section 9 of the Insolvency Bankruptcy Code, 2016 being not maintainable against the Applicant herein as the Applicant herein is not covered within the scope and ambit of the term Corporate Debtor ; and d. Pass any other appropriate order or direction in favour of the Applicant/Respondent which maybe considered just and proper in the facts and circumstances of the case. 17. It is submitted by the Respondent in the said IA that a Certificate of Registration under section 45-IA of the Reserve Bank of India Act, 1994 was granted on 3-3-1998 to carry on business of Non-Banking Financial Institution. Copy of certificate issued by RBI is annexed with the application. Therefore, the respondent is a 'Financial Service Provider' as defined under section 3(17) of the IB Code, 2016 and does not come within the purview of the definition of Corporate Person as defined under section 3(7) of IBC, 2016 and accordingly, an application under section 9 of IBC, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution) or Bank . Also, at Page No. 49 of the said KYC Form the respondent has mentioned that it intends to invest in the stock market with its own funds and not through borrowed funds . Having himself so answered in the KYC Form the respondent now cannot take a stand that he is a NBFC and does not fall under the definition of Corporate Debtor with respect to the transaction under consideration. 21. It is also submitted that the moving an application for seeking interim measures etc by the court under section 9 of Arbitration and Conciliation Act, 1996 does not amount to dispute under the IBC, 2016 and relied on the judgment of the Hon'ble Supreme Court in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 85 taxmann.com 292/144 SCL 37, whereby the Hon'ble Supreme Court has observed as follows: It is clear that such notice (of dispute) must bring to the notice of the operational creditor the existence of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a self-contained Code which is exhaustive in nature when it comes to reorganisation and insolvency resolution. However, an exception had been carved out while enacting the Code that the ' financial service providers' have been kept outside the purview of the Code. Being a consolidating legislation only those acts are permitted which are mentioned in the Code and it cannot be made applicable to 'financial service providers' including 'non-banking financial institutions' and MFI's banks, which have been kept outside the purview of the Code. 25. The Respondent also relied on the below mentioned part of the judgment passed by the Hon'ble Supreme Court in Mobilox Innovations (P.) Ltd. (supra) requirement of existence of dispute is sufficient for rejection of application for insolvency filing of suit or arbitration proceedings not required before receipt of demand notice by Corporate Debtor . 26. The respondent also submits that there is no need to give notice under section 21 of the Arbitration and Consolation Act, 1996 before filing application under section 9 of the said Act. 27. The respondent also submits that as per clause 45 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent falls under the definition of Corporate Debtor and cannot fall under the shell of the term 'NBFC. 30. Further the question with respect to pre-existing dispute, it is necessary to go through section 9 of the Arbitration and Conciliation Act, 1996 which reads as below: Section 9. Interim measures, etc., by Court. - (1) A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court- (i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely:- (a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement in existence. It is also implicit that a dispute must have arisen which is preferable to the arbitral tribunal. Section 9 further contemplates arbitration proceedings taking place between the parties. Mr. Subramaniam is, therefore, right in submitting that when an application under section 9 is filed before the commencement of the arbitral proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings if, at the time when the application under section 9 is filed, the proceedings have not commenced under section 21 of the 1996 Act. In order to give full effect to the words before or during arbitral proceedings occurring in Section 9 it would not be necessary that a notice invoking the arbitration clause must be issued to the opposite party before an application under section 9 can be filed. The issuance of a notice may, in a given case, be sufficient to establish the manifest intention to have the dispute referred to arbitral tribunal, but a situation may so demand that a party may choose to apply under section 9 for an interim measure even before issuing a notice contemplated by section 21 of the said Act. If an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate Arbitration proceedings but does not establish existence of dispute. It is seen in the delivery report filed by the Applicant that the Demand notice under section 8 of IBC, 2016 was delivered on 16-3-2018 and the respondent has replied on 5-4-2018. Giving a notice of pendency of application under section 9 of the Arbitration and Conciliation Act, 1996 by the respondent after 10 days from receipt of demand notice, does not hit section 8(2) of IBC, 2016. Thus, the dispute raised by the respondent is patently feeble legal argument unsupported by evidence on the basis of pending application under section 9 of the Arbitration and Conciliation Act, 1996, for an interim measure without establishing that an amount of ₹ 63,31,706.09/- is due to the respondent. 35. In accordance with section 238 of the IBC, 2016, the provisions of the Code have overriding effect on the Arbitration and Conciliation Act, 1996. The Registered Office of the Corporate Debtor is situated in Jaipur and therefore this Tribunal has jurisdiction to entertain and try this Application. The matter is within the purview of Law of Limitation. 36. The Applicant has not proposed the name of any Interim Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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