The NCLT, Kolkata Bench dismissing a Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) petition held that for the enforcement of a foreign award, execution petition has to be filed before the Hon’ble High Court which will adjudicate on the enforceability of the award and then on the execution of the award. It further held that foreign awards fall under the exclusive jurisdiction of the High Court and therefore, Tribunal cannot adjudicate on the same.
Brief Facts:
A petition has been filed under Section 9 of IBC by the Operational Creditor to initiate Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) against the Corporate Debtor as there was a default.
Contentions of the Operational Creditor:
A Fixture Note and the Charter Party were entered into by both the Operational Creditor and the Corporate Debtor. However, the Corporate Debtor unilaterally rescinded the Charter Party which is why a dispute arose between the parties. Arbitration proceedings were commenced to resolve the dispute and subsequently, an award was passed vide which the claim of the Operational Creditor was upheld. However, the Corporate Debtor has failed to discharge the liability.
Contentions of the Corporate Debtor:
The Corporate Debtor is a foreign company and has never entered into any agreement including a Charter Party agreement. In 2015, the Corporate Debtor approached the Operational Creditor for hiring the vessel owned by the Operational Creditor on a time charter basis. The negotiations between the parties took place but they could not lead to a successful binding agreement between the parties.
Even in a reply to the commencement of the Arbitration proceedings, the Corporate Debtor had replied that there was no agreement between the parties.
It was argued that there is no operational debt on basis of which the present petition is filed. Even the New York convention award has not been declared as enforceable under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Arbitration Act”) and therefore, the same cannot be said to be an operational debt. It was contended that the foreign award without adjudication as to its enforceability cannot be said to be crystallized into a binding decree of the Court.
Observations of the Tribunal:
The primary issue ascertained by the Tribunal was whether insolvency proceedings can be initiated on the grounds of a foreign award.
The Tribunal opined that in accordance with Section 47 of the Arbitration Act for the enforcement of a foreign award, an execution petition has to be filed before the Hon’ble High Court which will adjudicate on the enforceability of the award and then on the execution of the award. It was held that foreign awards fall under the exclusive jurisdiction of the High Court.
The decision of the Tribunal:
Therefore, the Operational Creditor was given the liberty to resort to other remedies, and accordingly, the petition was dismissed.
Case Title: Trans Sea Transport B.V. v. Lords Polymer (India) Pvt. Ltd.
Coram: Shri Rohit Kapoor (Judicial Member), Shri Balraj Joshi (Technical Member)
Case No.: C.P(IB) No. 186/KB/2019
Advocates for Operational Creditor: Advs. Mr. Yadunath Bhargavan, Ms. Shrishty Punjabi, Ms. Labanyasree Sinha
Advocates for Corporate Debtor: Advs. Ms. Manju Bhuteria, Mr. Pankaj Agarwal, Ms. Pallavi Ray.
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