TMI Blog2022 (8) TMI 1160X X X X Extracts X X X X X X X X Extracts X X X X ..... th his defence of a claim. It held that the respondent had a right to move a counterclaim. It also held that the Arbitral Tribunal had a duty to adjudicate the same along with the claim. The learned Tribunal thereafter looked into the I B Code and the language of Section 14 which provides for a moratorium. It quoted the entire Section 14 and held that from the language of Section 14 (1) (a), it was clear that on the date of commencement of the CIRP, the NCLT could impose a moratorium prohibiting the institution of a suit or continuation of a pending suit or proceeding against the corporate debtor including execution of any judgement, decree or order in any court of law, Tribunal, Arbitral Panel or other Authority - Only after determination of objections under Section 34, the party may move a step forward to executing such Award and in case the objections are settled against the corporate debtor, then its enforceability against the corporate debtor certainly shall be covered by the moratorium of Section 14(1) (a). The Learned Tribunal thereafter observed that it is clear from a perusal of the observations made by the Delhi High Court that until and unless the effect of continuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Section 138, being a criminal law provision, cannot be held to be a proceeding within the meaning of Section 14 of the IBC. The Supreme Court observed that Section 138 proceedings although a criminal proceeding is in essence initiated only to recover an amount of the bounced cheque against the assets of the Company, and would therefore be included in the term proceedings against the corporate debtor. It is evident from the careful consideration of the entire judgement rendered in P Mohan Raj that the observations made by the Supreme Court were in the context of the facts of the case where it had been argued before it by the respondents that criminal proceedings as well as quasi-criminal proceedings can go on against the corporate debtor or its directors as they do not strictly fall within the definition of proceeding under Section 14 (1) of the Act. The court held that a Section 138/141 proceedings under the Negotiable Instruments Act is against the corporate debtor is covered by Section 14 (1)(a) of the I B Code. It however clarified that in the case before it such proceedings under the Negotiable Instruments Act could continue against the company as well as the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s order dated 17.03.2020 appointed Justice (Retired) Anurag Kumar. The petitioner filed its Statement of Claim of more than Rs.45 crores on 14.09.2020. The respondent filed a Defence Statement and a Counter Claim of Rs.144,11,93,202/- (Rupees One hundred Forty Four Crores Eleven Lakhs Ninety Three Thousand Two Hundred Two only) before the Learned Tribunalon 16.11.2020. The petitioner also filed a reply. 2. In a connected arbitration proceedings pending before another sole Arbitrator, Justice (Retired) Anil Kumar, a preliminary objection was taken on 25.03.2021 by the respondent that the arbitration proceedings cannot proceed in view of the provisions of Section 14 of the I B Code. 3. On 08.04.2021, taking a cue from the application of the Respondent in the other arbitration proceedings the petitioner filed an application before the Learned Tribunalfor rejection of the counterclaim stating that it had no jurisdiction to adjudicate as the moratorium ordered by the NCLT was still in operation. The NCLT s orders were open to challenge before the NCLAT or the Supreme Court of India. The respondent had not challenged the moratorium declared by the NCLT on 4 July 2019. The responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isted on 17.01.2022 and till such date, arbitrator was directed not to proceed with the arbitration. The respondents were directed to file their counter affidavit in the matter. Against this order granting interim relief to the petitioner the petitioner had approached the Supreme Court for modification of the order of interim relief to the extent that the arbitrator may continue to hear the claim of the petitioner on its merits but ignore the counterclaim of the respondent as it amounted to an institution of a suit against the corporate debtor which is prohibited under Section 14 (1)(A) of the I B Code. It has been argued that the Supreme Court did not think it appropriate to pass any order on such application being made to it. It had only clarified that not only the application of the petitioner should be considered but the maintainability of the petition should also be considered by this court on the next date of hearing. 6. The Learned Senior Advocate has pointed out the prayer clause in this petition under Article 227 which is for quashing of the order dated 19.09.2021 passed by the learned Tribunal in arbitration proceedings pending before him in the matter of Trading Engin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar Gupta 2020 (8) SCC 531; (7) P. Mohan Raj v Shah Bros.Ispat (Pvt) Ltd 2021 (6) SCC 258. 10. In response to the arguments made by the learned counsel for the respondent, the learned counsel for the petitioner had submitted that the company is under liquidation and a CIRP is pending before the National Company Law Tribunal, Adjudicating Authority, under the Insolvency and Bankruptcy Code 2006 and and Insolvency Resolution Professional has been appointed on 04.07.2020 therefore no counterclaim by the respondent against the petitioner could be entertained by the Arbitrator. The learned counsel for the petitioner has referred to Section 14 of the I B Code and sub-clause 1(a) thereof to say that both the institution of proceedings and the hearing in pending proceedings including execution is barred and this argument was raised before the Learned Tribunal that a moratorium had come into being as soon as the Adjudicating Authority entertained the insolvency proceedings. The Learned counsel for the petitioner has referred to the language of sub-clause (a) of Section 14 (1) of the I B Code where it prohibits the institution of suits or continuation of pending suits or proceedings ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these powers, the same ought to be exercised even if there is an alternate statutory remedy. The High Court ought to interfere under Article 227 where there is a patent lack of inherent jurisdiction, or where a party is left remedyless, or a Tribunal has acted in bad faith, or the tribunal has not acted within the limits of its authority resulting in grave injustice or failure of justice, where the Tribunal has assumed a jurisdiction it does not have, failed to exercise a jurisdiction it does have, or exercised jurisdiction in a manner which tantamounts to overstepping the limits of its jurisdiction. 13. The learned counsel for the petitioner has placed reliance upon Ummaji Keshao Meshram and others versus Radhika Bai and another (supra) and paragraph 85 thereof wherein the Supreme Court had observed that the insertion of Article 226, 227 and 228 in the Constitution without making them subject to any law to be made by the appropriate legislature put these Articles beyond the legislative reach of Parliament and the State legislatures with the result that the jurisdiction conferred by these Articles can only be curtailed or excluded with respect to any matter by a constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such Tribunals act within the limits of their authority and according to law. Article 227 being a constitutional provision no fetters can be placed on the jurisdiction conferred by such Article by any ordinary legislation like the Arbitration Act. The High Court should exercise its jurisdiction under Section 227 where there is a patent lack of inherent restriction, or a party is left remedyless, or a party has acted in bad faith, or a Tribunalhas not acted within the limits of their authority, or there is a grave injustice or failure of justice such as when the Tribunal has assumed a jurisdiction it does not have or failed to exercise a jurisdiction that it does have or exercised a jurisdiction in a manner which tantamount to overstepping the limits of jurisdiction. 16. The learned counsel for the petitioner has argued that even though in paragraph 22 of its order, the learned Tribunal has observed that strictly speaking a counterclaim is in the nature of a suit against the corporate debtor under Section 14(1)(a) of the I B Code 2016 and strictly speaking is a proceeding during the moratorium period, yet he concludes that he must still go on with such proceedings because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 18. In Deep Industries Ltd. Versus Oil and Natural Gas Corporation Ltd. and Another (supra), a three judges bench of the Supreme Court was considering the question as to whether High Court could have exercised its jurisdiction under Article 227 of the Constitution of India when it comes to matters that are decided under the Arbitration and Conciliation Act 1996. The respondent ONGC had awarded a contract to the Appellant for a period of five years. The contract was terminated much earlier. The Appellant invoked the arbitration clause contained in the contract on 02.11.2017 and a sole Arbitrator was appointed on 21.12.2017. On 02.02.2018 claim was filed by the Appellant. On 15.02.2018 Show Cause Notice was issued to the appellant and it was a blacklisted. The Appellant had earlier challenged the termination of its contract and the Show Cause Notice regarding blacklisting and had claimed damages. It filed an application for amendment in the pending petition challenging blacklisting order as well. Meanwhile a Section 16 application was filed before the Arbitrator on the ground that since arbitration notice was confined only to termination of agreement, blacklisting would be out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers was challenged in a First Appeal which was dismissed. Such order came to be challenged in a petition under Article 227 praying for exercise of supervisory jurisdiction which vested in the High Court. The Supreme Court considered the language of Section 5 of the Act of 1966 as also Section 37 and held that it was important to note that under Section 29A of the Act inserted by Amendment in 2016, a time limit was given within which Arbitral Awards must be made. Even in so far as Section 34 applications are concerned, Subsection (6) added by the same Amendment stated that these applications are to be disposed of expeditiously. The Supreme Court observed in paragraph 11 thus:- given the aforesaid statutory provision and given the fact that the 1996 Act repealed the three previous enactments in order that there be speedy disposal of all matters covered by it, it is clear that the statutory policy of the Act is that not only a time limit is set down for disposal of Arbitral proceedings themselves, but time limits have also been set down for Section 34 references to be decided. Equally in Union of India Versus Messers Varindera Construction Ltd. Reported in (2020) 2 SCC 111, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aggrieved person or the statute under which the action complained of has been taken, itself contains a mechanism for redressal of grievance still hold the field . 24. The Supreme Court referred to the judgement rendered by the larger bench of seven judges in SBP and Company (Supra), where the Court was considering interference with an order passed by an Arbitral Tribunal by the High Court under Article 226/227 and had observed in paragraph 45 and 46 as follows: It is seen that some High Courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution. We see no warrant for such an approach. Section 37 makes certain orders of the Arbitrator appealable under Section 34, the aggrieved party has an avenue for ventilating his grievances against the Award including any in between orders that might have been passed by the Arbitral Tribunal acting under Section 16 of the Act. The party aggrieved by any order of the Arbitral Tribunal has a right of Appeal under Section 37 of the Act, has to wait until the Award is passed by the Tribunal. This appears to be the schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 of the Act did not permit any Second Appeal and only one bite at the cherry. It observed further- ...,The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final Award at which stage it may be raised under Section 34 Further to state that serious disputes as to jurisdiction seem to have cropped up is not the same thing as saying that the Arbitral Tribunal lacked inherent jurisdiction in going into and deciding the Section 17 application. In point of fact, the Arbitral tribunal was well within its jurisdiction in referring to the contract even if it be accepted that the principle laid down in Section 41 (e) of the Specific Relief Act was infracted... is a mere error of law and not an error of jurisdiction, much less an error of inherent jurisdiction going to the root of the matter. Therefore, even otherwise, the High Court judgement cannot be sustained and is set aside. 27. In paragraph 17 the Supreme Court further observed: 17. We reiterate that the policy of the Act is speedy disposal of arbitration Cases. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. Such appeal was entertained and allowed. Aggrieved, the appellant filed the Civil Appeal before the Supreme Court saying that Section 16(2) of the Act mandates that the sole Arbitrator had the jurisdiction to adjudicate the preliminary issue of jurisdiction, which can only be challenged under Section 34 of the Act. On the other hand the respondent no.1 contended that under Article 226 and 227 of the Constitution it was always open for the respondent no.1 to invoke the jurisdiction of the High Court to set aside an arbitration proceeding which was a nullity. 29. The Supreme Court observed in paragraphs 11 and 12 as under: 11. We need to note that the Arbitration Act is a Code in itself. This phrase is not merely perfunctory, but has definite legal consequences. One such consequence is spelt out under Section 5 of the Arbitration Act, which reads as under......The nonobstante clause is provided to uphold intention of the legislature as provided in the Preamble to adopt UNCITRAL model law and Rules, to reduce excessive judicial interference which is not contemplated under the Arbitration Act . 12. The Arbitration Act itself gives various procedures and forms to chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n M/s Deep Industries Ltd (supra) that the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumberated by us hereinabove so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction. 33. The Supreme Court observed further that the respondent no.1 had not been able to show exceptional circumstances or bad faith on the part of the appellant, to invoke the remedy under article 227 of the Constitution. No doubt the ambit of Article 227 is broad and pervasive, however, the High Court should not have used its inherent power to interject the arbitral process at this stage. -If the courts are allowed to interfere with the arbitral process beyond the ambit of the enactment , then the efficiency of the process will be diminished the High Court did not appreciate the limitations under Article 226 and 227 of the Constitution and reasoned that the appellant had undertaken to appoint an Arbitrator unilaterally, thereby rendering the respondent no.1 remedyless. However, a plain reading of the arbitration agreement points to the fact that the Appellant herein had actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Section 14 is that the arbitration that has been instituted after the aforesaid moratorium is non-est in law. 37. The Learned counsel for the petitioner has placed reliance upon Committee of Creditors of Essar Steel (supra) to say that once the Resolution Plan is approved by the Committee of Creditors and submitted before the Adjudicating Authority no other claims that may exist apart from those decided on merit by the Resolution Professional and by the Adjudicating Authority/Appellate Tribunal could be decided by any other forum. He has referred to para 63 onwards of the judgement which deals with extinguishment of personal guarantees and undecided claims. He has referred to Paragraph-67 of the judgement where it was observed: a successful Resolution Applicant cannot suddenly be faced with undecided claims after the Resolution Plan submitted by him has been accepted, as this would amount to a hydra head popping up which would throw into uncertainty the amounts payable by a prospective Resolution Applicant who successfully takes over the business of the corporate debtor. All claims must be submitted to and decided by the Resolution Professional so that a prospective R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P to end by a certain date without any exception thereto, may well be an excessive interference with the litigants fundamental right to non-arbitrary treatment under Article-14, and an excessive and arbitrary and therefore unreasonable restriction on the litigant s Fundamental Right to carry on business under Article 19 of the Constitution of India while leaving the provision otherwise intact, we strike down the word mandatorily as being manifestly arbitrary under Article 14 of the Constitution of India the effect of this declaration is that ordinarily the time taken in relation to corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings however, on facts of a given case, if it can be shown to the Adjudicating Authority and/or the Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them that after the Resolution Plan was approved by the NCLT all proceedings instituted against the corporate debtor, arising and pending before the transfer date shall stand withdrawn, and that all liabilities towards operational creditors shall be deemed to have been settled by discharge and payment of resolution amount by the corporate debtor, it was insisted by the Tax Authorities that since there was no specific stay, the proceedings could not be dropped for recovery of Commercial Tax against the corporate debtor. The appellant approached the Supreme Court and argued that though the respondent authorities were aware of the Resolution proceedings, they had failed to submit any claim in response to the public notices issued by the Resolution Professional. On the other hand, the counsel appearing for the State authorities defended the continuance of proceedings for recovery of tax by saying that any order passed by the NCLT would not come in the way of adjudicatory proceedings which were continued by the authorities under the provisions of the relevant statutes.He submitted that the assessment orders which were passed in accordance with law were duly approved in appeal by higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of a claim which becomes payable unless it is disputed. The entire process is to be completed within a specified period from the date of admission of the application and extension of time for completion of CIRP under Section 12 can only be for a limited time period on specific reasons to be indicated in the order so made. As soon as the application is admitted, a moratorium in respect of Section 14 of the Code is to be declared by the Adjudicating Authority and a public announcement is made stating inter alia the last date for submission of claims and the details of the Interim Resolution Professional who shall be vested with the management of the corporate debtor and be responsible for receiving the claims. This IRP must now manage the operations of the corporate debtor as a going concern. The decision of the Committee of Creditors appointed under Section 21 of the Act ought to be taken by a vote of not less than 75% of the voting share of the financial creditors. Under Section 28, the IRP is given wide powers to raise finances, create security interest, etc subject to prior approval of the Committee of Creditors. Under Section 30 any person who is interested in putting the cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e being in force, such as authorities to whom statutory dues are owed. After the amendment any debt in respect of payment of dues arising under any law for the time being in force including the ones owed to the Central Government, any State Government or any local authority, which does not form a part of the approved Resolution Plan, shall stand extinguished 45. The Supreme Court in Paragraph-95 thereafter answered the questions framed by it by saying that once a Resolution Plan is duly approved by the Adjudicating Authority under Subsection (1) of Section 31, the claims as provided in the Resolution Plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of the Resolution Plan by the Adjudicating Authority, all such claims which are not part of the Resolution Plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings With respect to a claim which is not part of the Resolution Plan; that the 2019 Amendment to Section 31 of the I B Code i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undecided claims after the Resolution Plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective Resolution Applicant who successfully takes over the business of the corporate debtor. All claims must be submitted to and decided by the Resolution Professional so that a prospective Resolution Applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. this the successful Resolution Applicant does on a fresh slate, as has been pointed out by us here in above.... 48. The learned counsel for the petitioner has placed reliance upon Ebix Singapore (Pvt) Ltd Vs. Committee of Creditors of Educomp Solutions Ltd., Civil Appeal No.3224 of 2020. The Supreme Court in Ebix Singapore (supra) has quoted with approval the observations made by it in Committee of Creditors of Essar Steel India Ltd (supra) where Section 12 of the IBC was considered and it was held that the Insolvency Resolution Process should be completed in 270 days with an outer limit of 330 days. It was held that ...it is only in such exceptional cases that the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken in legal proceedings. A legislative amendment that takes away the basis of a judicial finding is indicative of the strong emphasis of the IBC on its timelines and its attempt to thwart the prospect of stakeholders engaging in multiple litigations, solely with the intent of causing undue delay. Delays are also a cause of concern because the liquidation value depletes rapidly, irrespective of the imposition of moratorium, and a delayed liquidation is harmful to the value of the corporate debtor, the recovery rate of the COC and consequently, the economy at large. In Essar steel (supra) a three-judge bench of this Court, emphasised the rationale of the Insolvency and Bankruptcy Code (Amendment) Act 2019, which introduced the Second Proviso to Section 12 (3). The Court adverted to the BLRC report which underscored delays in legal proceedings as the cause of the failure of the previous insolvency regime under the SICA and the recovery mechanism in SARFAESI.... . 51. The Supreme Court in Ebix (supra) also extracted the speech of the Union Minister in the Rajya Sabha to explain the proposal for Amendment in 2019, which was to avoid the same pitfalls in the IBC. The Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved in paragraph 128 of Ebix (supra) that the evolution of the IBC framework through an interplay of legislative amendments, regulations and judicial interpretations, consistently emphasises the predictability and timelines of the IBC. It noted the amendment made in Regulation 40 with effect from 20.04.2020, which excluded the period of lock down during Covid 19 pandemic from the timeline that has been stipulated under the statutory framework to observe ...,we cannot afford to be swayed by abstract conceptions of equity and contractual freedom of the parties to freely negotiate terms of the Resolution Plan with unfettered discretion, that are not grounded in the intent of the IBC. 54. The Supreme Court in Ebix (supra) after considering the entire provisions of the Act and the Regulations framed under it observed in paragraph 143 thus: 143. The statutory framework governing the CIRP seeks to create a mechanism for resolving insolvency in an efficient, comprehensive and timely manner. The IBC provides a detailed linear process for undertaking CIRP of the corporate debtor to minimise any delays, uncertainty in procedure and disputes. The roles and responsibilities of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had submitted that it had filed its defence and counterclaim before the Learned Tribunal under Section 23 (2-A) of the Act of 1996. The moratorium under Section 14 of the I B Code would have affect only up to the time of completion of the Corporate Insolvency Resolution Process (hereinafter referred to as the CIRP ), relying upon judgement rendered by the NCLAT in Jharkhand Bijli Vitaran Nigam Ltd versus IVRCL Ltd (corporate debtor) 2018 SCC online NCLAT 891; and by the Delhi High Court in Power Grid Corporation of India Limited versus Jyoti Structures Ltd (2017 SCC online Delhi 1289) and SSMP Industries Ltd versus Perkan Food Processors (Private) Limited (2019 SCC online Delhi 9339). It was submitted by the learned counsel for the respondent that the arbitration proceedings had not yet reached a stage which can be said to be in violation of Section 14 (1) a of the I B Code. Such a stage would only arise only after the determination of dispute and adjudication of the claim as well as the counterclaim and on occasion of passing of an Award to the extent that would lead to execution proceedings and recovery action against the assets of the corporate debtor. 57. The learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 238 of the I B Code had an overriding effect over all laws that are inconsistent with its provisions. (iii) In Jharkhand Bijli Vitaran Nigam Limited the parties had consented for the adjudication of the counterclaim before the sole Arbitrator. In PGCIL (supra), a petition was filed under Section 34 of the Arbitration and Conciliation Act 1996 challenging the Award passed in favour of the corporate debtor who was under CIRP but PGCIL (supra) is no longer good law in the light of observations made by the Supreme Court in P Mohan Raj and others versus Shah Brothers Ispat Private Limited, 2021 (6) SCC 258, decided by a three-judge bench of the Supreme Court. Similarly, judgement rendered in SSMP Industries (supra) by the Delhi High Court had placed reliance upon PGCIL (supra) which has been held to be no longer good law by three-judge decision of the Supreme Court in P Mohan Raj (supra). (iv) the maximum period of 330 days as given in Section 12 of the I B Code 2016 has been read down and treated as not mandatory by the Supreme Court in Committee of Creditors of Essar Steel Ltd versus Satish Kumar Gupta and others 2020 (8) SCC 531 where the Supreme Court observed that the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other Authority. It referred to the observations made by the High Court of Delhi in Power Grid Corporation of India Ltd (supra) and its interpretation of sub-clause (a) of subsection (1) of Section 14 of the I B Code which intended to prohibit debt recovery actions against the assets of the corporate debtor and that Proceedings did not mean all proceedings. Continuation of proceedings which do not result in adversely affecting the assets of the corporate debtor are not prohibited under Section 14(1)(a) of the I B Code. The term including is clarificatory of the scope and ambit of the term proceedings . The term proceedings would be restricted to the nature of action that follows it, i.e., recovery action against the assets of the corporate debtor. The use of the narrower phrase against the corporate debtor used in Section 33(5) of the I B Code further makes it evident that Section 14 (1) (a) is intended to have restricted meaning and applicability. The Arbitration Act draws a distinction between proceedings under Section 34 (i.e. objections to the Award,) and under Section 36 (i.e. the enforceability and Execution of the Award). The proceedings refers to steps take unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the NCLT/Resolution Professional for filing its claims. The nature of a counterclaim is such that it requires proper pleadings to be filed, defences and stands of both the parties to be considered, evidence to be recorded, then issues have to be adjudicated. The proceedings before the NCLT are summary in nature and the Resolution Professional does not conduct a trial. The Resolution Professional really determines what payment can be made towards the claims raised, subject to the availability of funds. The NCLT/RP cannot be burdened with the task of entertaining claims of the defendant which are completely uncertain, undetermined and unknown. Moreover, the question as to whether the defendant is in fact entitled to any amount if determined by the NCLT prior to the adjudication of the plaintiff s claim for recovery, would result in the possibility of conflicting views in respect of the same transaction. The Learned Tribunal thereafter observed that the petitioner s claim as well as the respondent s counterclaim should be adjudicated comprehensively by the same forum. At the point of such determination, i.e. , till such defence is adjudicated, there is no threat to the assets of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is time bound. It was quite clear that the Resolution and plan had been submitted by the IRP before the Adjudicating Authority on 11.06.2021 and the proceedings before the NCLT Delhi were in the final stages. It may be possible that by now the proceedings before the Adjudicating Authority must have come to an end. 66. The learned counsel for the petitioner has placed reliance upon judgement rendered in Surendra Kumar Singhal and others versus Arun Kumar Bhalotia and others, rendered by the Delhi High Court on 25.03.2021. The Delhi High Court in paragraph 24 of its judgement in Surendra Kumar Singhal (supra) thereafter observed A perusal of the above mentioned decisions, shows that the following principles are well settled, in respect of the scope of interference under Article 226/227 in challenge to orders by an Arbitral Tribunal including orders passed under Section 16 of the Act. i) An Arbitral Tribunal is a Tribunal against which a petition under Article 226/227 would be maintainable; ii) the non-obstante clause in Section 5 of the Act does not apply in respect of exercise of powers under Article 227 which is a constitutional provision; iii) for interference u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the High Court would have done well to have referred to our judgement in Deep Industries and dismissed the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs ......We dismiss this Special Leave Petition with costs of Rs.50,000/- to be paid to the Supreme Court Legal Services committee within two weeks . 69. The learned counsel for the petitioner has also argued that the learned Tribunal has relied upon Delhi High Court Judgments in PGCIL (supra) and SSMP Industries (supra) which have not been found to be good law by the Supreme Court in its judgment in P. Mohan Raj (supra). This Court shall now consider the case of Power Grid Corporation of India Limited Versus Jyoti Structures 2017 SCC Online Del 12729. A coordinate bench of the Delhi High Court was considering the question regarding whether proceedings under Section 34 of the Act could be allowed to be continued by the corporate debtor. The Court considered the argument that if the proceedings are stayed the respondent would be unable to execute the Award given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me transaction between the parties, and would require to be adjudicated on the basis of evidence being placed on the Court s record. The Court would have to first determine the question as to whether any amount at all was due to the plaintiff. It observed that the plaintiff s claim being higher, even if the counterclaim is decreed fully and the claim of the plaintiff is also allowed, the plaintiff would in fact be entitled to recover and not the defendant. The possible outcome of the suit and a counterclaim was not something that could be predicted before actual adjudication. It was clear that the plaint and the counterclaim were interlinked with each other. It went on to observe that in Power Grid Corpn, a Coordinate Bench had held that not all proceedings are barred under Section 14 (1) a of the Code. Only such proceedings are barred which would result in endangering, diminishing, dissipating or adversely impacting the assets of the corporate debtor. As such, the adjudication of the claim and the counterclaim together was not barred till such time that an Award is made in favour of the defendant and debt recovery action against the assets of the corporate debtor is initiated. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature and the Resolution Professional also does not conduct trial. The Resolution Professional merely determines what payment can be made towards the claims raised subject to availability of funds. The NCLT/Resolution Professional cannot be burdened with the task of entertaining claims of the defendant which are completely uncertain, undetermined and unknown. The Court was of the opinion that the plaintiff and the defendant s claim ought to be adjudicated comprehensively by the same forum. Till such time that the defences are adjudicated there is no threat to the assets of the corporate debtor and the continuation of the counterclaim would not adversely impact the assets of the corporate debtor. Only when an Award is made execution proceedings, depending upon the situation prevalent, would be stayed during the pendency of the Section 14 moratorium. 72. In SSMP Industries Ltd. Versus Purple Food Processors Private Limited MANU/DE/ 2362/2019, The Delhi High Court was considering the question as to whether a counterclaim can be considered by it when a moratorium is in operation under Section 14 of the Insolvency and Bankruptcy Code 2016. The plaintiff company had filed the suit for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortantly, under 14(4) this order of moratorium does not continue indefinitely, but has effect only from the date of the order declaring moratorium till the completion of the Corporate Insolvency Resolution Process, which is time bound, either culminating in the order of the Adjudicating authority approving a Resolution Plan or in liquidation. 74. The Court observed in paragraph 53 of P. Mohan Raj (supra) that after going through all the judgements that were cited by both the sides it was evident that a proceeding under Section 138, though cast in language making the act complained of an offence, is really in order to get back through a summary proceeding, the amount contained in the dishonoured cheque together with interest and costs, expeditiously and cheaply. It is the victim alone who can file the complaint which ordinarily culminates in the payment of fine as compensation which may extend to twice the amount of the cheque which would include the amount of the cheque and interest and costs there upon. It s thereafter observed given our analysis of Chapter 17 of the Negotiable Instruments Act together with the amendments made thereto and the case laws cited hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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