Trading ... vs U.P. Power Transmission Corp. ...
2022 Latest Caselaw 11132 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 


 
Reserved on 14.03.2022
 
Delivered on 24.08.2022
 
A.F.R.
 

 
Case :- MATTERS UNDER ARTICLE 227 No. - 23908 of 2021 
 
Petitioner :- Trading Engineers International Ltd.Thru.Agent Mahipal Singh 
 
Respondent :- U.P. Power Transmission Corp. Ltd. Thru. Its Chairman 
 
Counsel for Petitioner :- Gantavya,Dhanesh Relan,Kumar Abhishek,Mayur Narang,Meha
 
Rashmi,Utkarsh Kumar 
 
Counsel for Respondent :- Puneet Chandra,Sunil Sharma 
 

 
Hon'ble Mrs. Sangeeta Chandra,J. 

1. This petition has been filed by the petitioner a Private Limited company which is under liquidation through its Insolvency Resolution Professional (Hereinafter referred to as "IRP") praying for quashing of the order dated 19.09.2021 passed by the sole Arbitrator (hereinafter referred to as the "learned Tribunal") in arbitration proceedings Trading Engineers (International) Ltd versus U.P. Power Transmission Corporation Limited (UPPTCL).

The facts relevant for decision of this petition in brief are that the petitioner being under huge debt, several petitions under Sections 7 & 9 of the Insolvency and Bankruptcy Code 2016 (hereinafter referred to as the I & B Code) were filed before the NCLT New Delhi. In one such proceeding, Smt. Vijay Purohit versus Trading Engineers, the NCLT initiated Corporate Insolvency Resolution proceedings by appointment of IRP by its order dated 04.07.2019. In the meantime the petitioner had issued a legal notice on 11.6.2019 to the respondent for initiation of arbitration proceedings for Rs.45,55,18,787/- (Rupees Forty Five Crores Fifty Five Lakhs Eighteen Thousand Seven Hundred Eighty Seven) in terms of the Contracts dated 15.4.2011 and 28.4.2011. On failure of the respondent to reply to such notice the petitioner approached this Court for appointment of a sole Arbitrator. This Court by its 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 respondent filed its reply before the Learned Tribunalon 29.05.2021 stating that the determination of counterclaim is not barred under Section 14 of the I&B Code, and the question of violation of Section 14 would only arise when execution proceedings are initiated after determination of dispute and adjudication of claim as well as counterclaim. The petitioner filed another application on 15.06.2021 reiterating its prayer for rejection of counterclaim filed by the respondent. The petitioner's application was made mainly on the ground that the claim and counter claim had been filed during the period of moratorium under Section 14 of the I&B Code. The claimant had submitted that after initiation of Corporate Insolvency Resolution Process all creditors are required to file their claims before the Resolution Professional and the only option which was available with the respondent was to file a claim before the IRP. No counterclaim could be filed as under paragraph 238 of the I&B Code, the Code has been given overriding effect over all other laws and procedure under Arbitration Act would not, more specifically apply where a moratorium has been issued under the provisions of Section 14 of the said Code.

4. The Learned Tribunalrejected the application dated 08.04.2021 by its order dated 19.09.2021. Hence this petition. The grounds for challenge to the order dated 19.09.2021 by the petitioners being that it is perverse as the learned Tribunal has decided that it will adjudicate both the claim and the counterclaim together in terms of the mandate given to it under section 23 (2-A) of the Act of 1996.

5. Sri Sanjay Bhasin, learned Senior Advocate assisted by Shri Sunil Sharma and Sri Puneet Chandra, has raised a preliminary objection as to the maintainability of this writ petition under Article 227 of the Constitution and learned Senior Counsel has referred to the interim order passed by this court on 23.12.2021 in this Petition. The counsel for the respondent had placed reliance upon several judgments of the Supreme Court and has argued that this court had entertained the petition without going into the question of maintainability because it was of the opinion that it is related to disputed questions of fact that could be decided at the time of final hearing. It had nevertheless granted an interim order to the petitioner to the extent that the matter was directed to be listed 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 Engineers (International) Limited versus U.P. Power Transmission Corporation Limited. The interim relief application prays for stay of adjudication of the counterclaim raised by the respondent before the learned Tribunal.

7. The Learned Senior Advocate has pointed out that the respondent did not go to the Supreme Court challenging the interim order granted by this court on 23.12.2021. The petitioner had itself gone to the Supreme Court for modification of the interim order. The Supreme Court instead of modifying and directing the Learned tribunal to continue to adjudicate the claim of the petitioner against the respondent, had directed this court to consider the maintainability of the petition under Article 227 of the Constitution.

8. It has been argued that the High Court under Article 227 of the Constitution should no adjudicate upon an order passed by the Arbitral Tribunal deciding its jurisdiction to continue with the arbitration proceedings. The learned counsel for the respondent has placed reliance upon Section 5, Section 16, and Section 34 of the Act of 1996, and has also referred to the Statement of Objects and Reasons of the Act of 1996 as amended by the Act of 2015. It has been argued that the legislative intent has been made clear that arbitration proceedings should continue without unnecessary and undue interference at each and every stage by the courts including extraordinary jurisdiction as exercised by the High Court under Article 226 and supervisory jurisdiction under Article 227 of the Constitution.

9. The learned counsel appearing for the respondent has placed reliance upon the following -

(1) SBP and Co. versus Patel Engineering Ltd and Another (2005) 8 SCC 618 and paragraph 45, 46 and 47 as also paragraph 103 and 108.

(2) Deep Industries Ltd Versus Oil and Natural Gas Corp Ltd and another (2019 SCC online SC 1608) and paragraphs 13, 16, 17, 22 and 24.

(3) Bhaven Construction through Authorised Signatory Premji Bhai K Shah versus Executive Engineer Sardar Sarovar Narmada Nigam Ltd and another (2021 SCC online SC 8) and paragraphs 11, 16, 18, 20 and 21

(4) Punjab State Power Corporation Limited versus Emta Coal Ltd and another (2020 SCC online SC 1165) paragraph 5;

(5) Navayuga Engineering Co versus Bangalore Metro Rail Corp Ltd (2021 SCC online SC 469);

(6) Essar Steel India Ltd Committee of Creditors versus Satish Kumar 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 against the corporate debtor including execution of any judgement, decree or order in any Court of law, Tribunal, Arbitration panel or other Authority. Although arbitration proceedings are not specifically mentioned in the language of Section 14(1)(a), proceedings relating to "transactions" entered into by the corporate debtor before the imposition of the moratorium are also included. The definition of "transaction" in Section 3 (33) of the I&B Code being an inclusive one, it is extremely wide in nature and would include a transaction evidencing a debt or liability.

11. The learned counsel for the petitioner has also placed reliance upon:-

(i) Deep industries Ltd versus Oil and Natural Gas Corp Ltd and another (2019) SCC online SC 1602 Para 13;

2) Bhaven Construction versus Executive Engineer, Sardar Sarovar Narmada Nigam Limited (2021) SCC online SC 8, paras 17 to 20 & 25;

3) Surendra Kumar Singhal and others versus Arun Kumar Bhalotia and others, (2021) SCC online DEL 3708; paras 17 to 21 & 24;

4) State of U.P. versus G.V.K. Emry (U.P) Private Limited Writ Petition No.16858 (MS) of 2021;

5) Radheshyam versus Chhabi Nath and others (2015) 5 SCC 423; paras 24 & 25;

6) UmmaJi Keshao Meshram versus Radika Bai, (1986) Supplement SCC 401; paras 85, 91, 100 to 103; and

7) Alchemist Asset Reconstruction Company Limited Vs. M/s Hotel Godavari (Pvt.) Ltd., (2017) SCC Online SC 1669.

12. It has been argued that Article 227 gives the High Court the power of superintendence over all courts and tribunals in relation to which it exercises territorial jurisdiction. This includes Arbitration Tribunal. This supervisory jurisdiction is intended to ensure that the subordinate courts and tribunals act within the limits of their authority and in accordance with law. Since Article 227 is a constitutional provision therefore no fetters can be placed on the jurisdiction conferred on the High Court by any ordinary legislation like the Arbitration Act 1996, hence existence of a statutory remedy in an ordinary legislation cannot take away or limit the right to exercise constitutional power under Article 227. While it had been held by the Supreme Court that the High Court should be extremely circumspect in exercising its discretion under Article 227, it has been emphasised repeatedly that if there is an exceptional circumstance which would justify the exercise 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 constitutional amendment and not by ordinary legislation. The power of superintendence conferred upon every High Court by Article 227 is a supervisory jurisdiction intended to ensure that subordinate courts and Tribunals act within the limits of their authority and according to law. The power under Article 227 of the Constitution is intended to be used sparingly and only in appropriate cases, for the purpose of keeping the subordinate courts and tribunals within the bounds of their authority and, not for correcting mere errors.

14. The learned counsel for the petitioner has also relied upon judgement rendered by the Supreme Court in the case of Radheshyam versus Chhabi Nath and others (supra) to say that proceedings under Article 226 are in exercise of the original jurisdiction of the High Court while proceedings under Article 227 of the Constitution are not original but only supervisory. Article 227 is intended to be used sparingly and the power may be exercised in cases occasioning grave injustice or failure of justice such as when (i) the court or Tribunal has assumed a jurisdiction which it does not have, (ii) has failed to exercise a jurisdiction which it does have, such failure occasioning a failure of justice, and (iii) The jurisdiction though available is being exercised in a manner which tantamount to overstepping the limits of its jurisdiction. In exercise of supervisory jurisdiction the High Court may not only quash or set aside the impugned proceedings, judgement or order but it may also make such directions as the facts and circumstances of the case may warrant, maybe, by way of guiding the inferior court or Tribunal as to the manner in which it should now proceed further or afresh as commended to it or guided by the High Court. In appropriate cases the High Court, while exercising supervisory jurisdiction, may substitute such impugned decision by a decision of its own, as the inferior court or Tribunal should have made. Lastly, the jurisdiction under Article 226 of the Constitution is capable of being exercised on a prayer made by or on behalf of the party aggrieved; the supervisory jurisdiction is capable of being exercised Suo Moto as well.

15. On the basis of such judgments, submissions have been made by the Counsel that the High Court under Article 227 can exercise jurisdiction over private Tribunals as well, such as arbitral Tribunals to ensure 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 of Section 23(2) A of Act of 1996. The learned Tribunal has failed to appreciate that an act done after prohibition that is statutorily imposed, is non-est in law. The counterclaim is a proceeding against the corporate debtor. It is filed after imposition of moratorium and is thus non-est. Adjudication of such a non-est counterclaim would be illegal and perverse and therefore needs to be set aside.

17. It has been argued that the learned Tribunal has observed in para 23 of the impugned order that after determination of the counterclaim when the amount is determined and the execution proceeding starts at that stage the provisions of Section 14 of the I&B Code is to be looked into. It has been argued on the basis of the language of Section 14 (1) that it not only prohibits execution but also prohibits the institution but also continuation of proceedings against the corporate debtor. It has been argued that the learned Tribunal has proceeded on conjectures and surmises and observed in paragraph 25 that it may be possible that by now the proceedings before the Adjudicating Authority may have come to an end which shows that the Tribunal recognised that a moratorium under Section 14 poses a hurdle in proceeding with the counterclaim against the corporate debtor, yet instead of ascerting the current status of the moratorium, the Tribunal has assumed that the moratorium must have ended after lapse of 330 days. It has been argued that the learned Tribunal ought to have reckoned that in the CIRP before the Adjudicating authority, either the Resolution Plan may have been allowed or it may have been rejected, in both these scenarios the alleged counterclaim of the respondent could not have been adjudicated and would have stood extinguished as they were not submitted before the Resolution Professional at the relevant time as per the mandate of the I&B Code. The learned Tribunal erroneously stated that the moratorium under Section 14 would apply only at the stage of execution and not at the stage of mere adjudication of claims and counterclaims. In the present case the arbitration clause was invoked on 11.06.2019. The moratorium was declared by the Adjudicating Authority on 04.07.2019. The counterclaim was filed on 16.11.2020 at a time when the moratorium was in force and such counterclaim being in the nature of a Suit could not have been instituted much less adjudicated.

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 outside the Arbitrators' jurisdiction. This Section 16 application was dismissed by the Arbitrator. On the same day a Section 17 application was separately disposed of by the Arbitrator in which he stayed the operation of the order of blacklisting/two year ban which it said would operate only if the Appellant ultimately loses the final arbitration proceedings. The First Appeal was filed against this order passed under Section 17 which was dismissed. The ONGC then filed a petition under Article 227 of the Constitution before the High Court of Gujarat. The High Court entertained the petition ignoring the preliminary objection that such petition was not maintainable. It passed an order in favour of ONGC not only setting aside the Civil Court's order but also the order passed by the Arbitrator under Section 17 of the Act.

19. It was argued before the Supreme Court that once a preliminary objection had been raised before the High Court it should have dealt with it first. The language of Section 5 and Section 37 of the Act were also pointed out and it was argued that although a constitutional provision such as Article 227 cannot be fettered, yet the statutory scheme ought to be taken into account in order to deny relief in almost every case. The appellant placed reliance upon SBP and Co versus Patel Engineering Ltd. and Another reported in (2005) 8 SCC 618, and Fuerst Day Lawson Ltd. Versus Jindal Exports Limited reported in (2011) 8 SCC 333, to say that the Act is a self contained Code and since Second Appeals have been interdicted expressly under Section 37 (2) of the Act an Article 227 petition should also not be entertained. It was argued that even under Section 115 of the CPC as amended, Revision would lie only in cases where no Appeal lies but such orders should not be interlocutory orders which do not decide the matter in issue finally. It was held that the High Court should not have entertained the petition under Article 227 as any observations made by the Arbitrator while entertaining a Stay Application and granting interim relief would amount to a mere error of law and not amount to lack of jurisdiction.

20. On the other hand the counsel for the respondent had argued that SBP and Co (Supra) applied only at a stage where an order of Arbitral Tribunal was sought to be interfered with directly under Article 226/227. In the present case the Tribunal's orders 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 Court had imposed self same limitation on First Appeals under Section 37 so that there be timely resolution of all matters which are covered by the arbitration Award.."

21. The Supreme Court further observed in paragraph 12-

"most significant of all is a non-obstante clause contained in Section 5 which is that notwithstanding anything contained in any other law, in matters that arise under Part-I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part.'' Section 37 grants a constricted right of First Appeal against certain judgements and orders and no others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a Second Appeal being filed (see Section 37 (2) of the Act).

22. It observed in paragraph 13 thus:-

"this being the case, there is no doubt whatsoever that if petitions were to be filed under Article 226/227 of the Constitution against orders passed in Appeals under Section 37, the entire Arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non-obstante clause of Section 5 of the Act. In these circumstances what is important to note is that petitions can be filed under Article 227 against judgements allowing or dismissing First Appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us hereinabove so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction."

23. The Supreme Court in Paragraph-14 onwards referred to its judgement in Nivedita Sharma Versus Cellular Operators Association of India and Others reported in (2011) 14 SCC 337; wherein several judgements including L. Chandra Kumar Versus Union of India reported in 1997 (3) SCC 261, Thansingh Nath Mal Versus Superintendent of Taxes reported in AIR 1964 Supreme Court 1419, Titaghur Paper Mills Co. Ltd. Versus State of Orissa reported in (1983) 2 SCC 433; Mafatlal Industries Ltd. Versus Union of India reported (1997) 5 SCC 536, were cited and observed that "the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the 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 scheme of the Act. The Arbitral Tribunal is, after all, a creature of contract between the parties, the arbitration agreement, even though, if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the Arbitral Tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution. Such an intervention by the High Court is not permissible.

"46. The object of minimising judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 or under Article 226 of the Constitution against every order made by the Arbitral Tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the Arbitral Tribunal, parties have to wait until the Award is pronounced unless, of course, right of Appeal is available to them under Section 37 of the Act even at an earlier stage."

25. The Supreme Court in Deep Industries (Supra) further referred to the attempt made by the Learned Additional Solicitor General to distinguish the judgement in SBP and Co. to say that the same did not apply to the facts of the case, and the Supreme Court observed - "- - - yet, it is important to notice that the seven judge bench has referred to the object of the Act being that of minimising judicial intervention and that this important object should always be kept in the forefront when a 227 petition is being disposed of against proceedings that are decided under the Act."

26. The three judges bench in Deep Industries (Supra) also noticed that in Punjab Agro Industries Corporation Limited Versus Kewal Singh Dhillon reported in 2008 (10) SCC 128, the Supreme Court had distinguished SBP and Co (supra) but it held that the same was an exceptional case where the statutory provisions did not conceive of any appeal against an order passed under Section 11 refusing to appoint an Arbitrator. In the case of Deep Industries (supra) however, the Supreme Court observed that the High Court has entertained a 227 petition after the First Appeal was dismissed by the Civil Court whereas Section 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 Arbitration Act is a Special Act and a self contained Code dealing with arbitration. This court in Fuerst Day Lawson Ltd. (supra) has specifically held as follows:

"89. It is thus to be seen that the Arbitration Act 1940 from its inception and right through to 2004 was held to be a self contained Code - - - - - - once it is held that Arbitration Act is a self contained Code and exhaustive, then it must also be held, using the lucid expression of Justice Tulzapurkar, that if carries with it a negative import that only "Such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done". In other words- - - Where the special Act sets out a self contained code the applicability of the general law procedure would be impliedly excluded."

What becomes clear is that the - - - Merely because - - First Appeal was disposed of by a Court subordinate to the High Court, an Article 227 petition ought not to have been entertained."

28. Another Three-judge bench of the Supreme Court in Bhaven Construction versus Executive Engineer Sardar Sarovar Narmada Nigam Limited, 2022 (1) SCC 75; was looking into the question -"whether the arbitral process could be interfered under Article 226/227 of the Constitution, and under what circumstances?" The facts before the court were that the respondent no.1 had entered into a contract with the appellant. Dispute arose regarding payment. The Appellant issued a notice seeking appointment of Arbitrator in terms of the agreement. The respondent refused to appoint such Arbitrator. The appellant instead appointed respondent no. 2 to act as sole Arbitrator for adjudication of the disputes. The respondent no.1 preferred an application under Section 16 of the Act disputing the jurisdiction of the sole Arbitrator. The Arbitrator rejected the application of the respondent no.1 and held that it had jurisdiction to adjudicate the dispute. Aggrieved by such orders of the Arbitrator the respondent no.1 preferred a petition under Article 226/227 of the Constitution. It was rejected by the Single Judge as not maintainable by holding that remedy under Section 34 of the Act was available and the respondent no.1 should wait till the Award is passed by the Learned Arbitrator. The respondent no.1 further challenged such order before the Division Bench in the Letters Patent Appeal. 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 non-obstante 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 challenge the appointment of an Arbitrator. The framework really portrays an intention to address most of the issues within the ambit of the Act itself, without there being any scope for any extra statutory mechanism to provide just and fair solutions."

30. The Supreme Court thereafter referred to the action of the respondent no.1 in choosing to impugn an order passed under Section 16(2) of the Act through a petition under Article 226/227. In the usual course, the Arbitration Act provides for a mechanism of challenge under Section 34. The opening phrase of Section 34 reads as, "Recourse to a court against an arbitral award may be made ''only'' by an application for setting aside such Award in accordance with subsection (2) and subsection (3)". The use of the term "only" as occurring under the provision serves two purposes of making the provision a complete Code and laying down the procedure."

31. The Supreme Court observed in paragraph 17 of Bhaven Constructions (supra) that even though the hierarchy in the legal framework mandates that a legislative enactment cannot curtail a constitutional right, "still it is one thing to say that in the exercise of the powers vested in it under Article 226 of the Constitution, the High Court can entertain a petition against any order passed by or any action taken by the State and/or its Agencies/Instrumentalities or any Public Authority or order passed by quasi judicial body/authority, and it is an altogether different thing to say that each and every petition filed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy. Rather, it is settled law that when a statutory Forum is created by law for redressal of grievances, awrit petition should not be entertained ignoring the statutory dispensation. It is therefore, prudent for a judge to not exercise discretion to allow judicial interference beyond the procedure prescribed under the enactment. This power needs to be exercised in exceptional rarity, where in one party is left remedyless under the statute or a clear bad faith is shown by one of the parties. This high standard set by this Court is in terms of the legislative intention to make the arbitration fair and efficient."

32. The Supreme Court thereafter referred to the observations made by it in 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 actually acted in accordance with the procedure laid down without any malafides. It is just that the respondent no.1 has not been able to show any exceptional circumstance which mandates the exercise of jurisdiction under Article 226 and 227 of the Constitution.

34. The Supreme Court observed in paragraph 25 of Bhaven Construction (Supra) thus :-

"25. It must be noted that Section 16 of the Arbitration Act, necessarily mandates that the issue of jurisdiction must be dealt first by the Tribunal, before the Court examines the same under Section 34. Respondent no.1 is therefore not left remedyless, and has statutorily been provided a chance of appeal.

35. The Supreme Court referred to paragraph 22 of the judgement in Deep Industries where Section 16 of the Act had been dealt with. The Supreme Court held that the High Court had erred in using its discretionary power available under Article 226 and 227 of the Constitution and allowed the Appeal.

36. The learned counsel for the petitioner has also cited Alchemist Asset Reconstruction company Ltd versus M/s Hotel Godavari Private Limited, 2017 SCC online SC 1669, where the Supreme Court was considering a case where an order was passed by the National Company Law Tribunal on 31.03.2017 and an Interim Resolution Professional was appointed. Despite such moratorium, a letter was issued by the respondent no.1 to the respondent no.2 invoking the arbitration clause between the parties and an Arbitrator was appointed. The National Company Law Tribunal in its order dated 31.05.2017 referred to Section 14 of the I&B Code and stated that given the moratorium no arbitration proceedings could go on. A First Appeal was filed before the District Judge under Section 37 of the Arbitration and Conciliation Act 1996 and by an order dated 06.07.2017 the appeal was asked to be registered and notice was issued awaiting reply. It was this order which was challenged before the Supreme Court. The Supreme Court observed that the mandate of the new I&B Code is that the moment an insolvency petition is admitted, the moratorium comes into effect under Section 14 expressly interdicts institution or continuation of pending suits or proceedings against the corporate debtors. The Court set aside the order of the District Judge dated 06.07.2017 entertaining the appeal under Section 37 of the Arbitration Act 1996 and observed that the effect 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 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. - - -"

38. Also, with regard to the constitutional validity of Sections 4 and 6 of the Amending Act of 2019, the Learned Counsel for the petitioner has referred to Paragraph-71 onwards wherein the amendment of Section-12 by addition of two Provisos in Subsection (3) was considered which provided that the Corporate Insolvency Resolution Process shall mandatorily be completed within a period of 330 days from the insolvency commencement date, including any extension of the period of Corporate Insolvency Resolution Process granted under that section, and the time taken in legal proceedings in relation to such resolution process of the corporate debtor'. Provided also, that where the insolvency resolution process of a corporate debtor is pending and has not been completed within the period referred to in the Second Proviso, such resolution process shall be completed within a period of 90 days from the date of commencement of the Amendment Act of 2019.

39. The Supreme Court referred to the reason for introducing this proviso by way of amendment. Experience with Sick Industrial Companies Act, Recovery of Debts Act 1993, and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002, all of which provided for expeditious determination and timely detection of sickness in industrial companies, yet, legal proceedings under the same dragged on for years as a result of which all the statutory measures proved to be abject failures in resolving the stressed assets. The Supreme Court considered the arguments raised against the validity of Section 4 and found that the only one argument against the amendment is that the time taken in legal proceedings should not be put against parties before the NCLT and NCLAT based upon a latin maxim which sub serves the cause of justice namely, "actus curiae neminem gravabit".

The Supreme Court observed thereafter in paragraph 79 thus : -

"given the fact that the time taken in legal proceedings cannot possibly harm a litigant if the Tribunal itself cannot take up the litigant's case within the requisite period for no fault of the litigant or the provision which mandatorily requires the CIRP 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 time taken in legal proceedings is largely due to factors owing to which fault cannot be ascribed to the litigant before the Adjudicating Authority and/or the Appellate Tribunal, the delay or large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or the Appellate Tribunal to extend time beyond 330 days - - - it is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation."

40. In Ghanshyam Mishra and Sons Private Limited (through Authorised Signatory Versus Edelweiss Asset Reconstruction Company Ltd. (through the Director) and others (Civil Appeal No.8129 of 2019) decided by the Supreme Court it was dealing with the questions- "whether any creditor including the Central Government, the State Government or any local authority is bound by the Resolution Plan once it is approved by Adjudicating Authority under Subsection (1) of Section 31 of the I&B Code 2016? "

And as to "whether after approval of Resolution Plan by the Adjudicating Authority a creditor including the Central Government, the State Government or any local authority is entitled to initiate any proceedings for recovery of any of the dues from the corporate debtor, which are not part of the Resolution Plan approved by the Adjudicating Authority?"

41. It referred to the facts of the case regarding NCLT admitting a petition under Section 7 of the I&B Code on 25.07.2017 and initiating the CIRP. On 28.07.2017 the Resolution Professional made a public announcement inviting claims from all the creditors of the corporate debtor as is required under Section 15 of the I&B Code. The last date for submission of claims was 8.8.2017. The Resolution Professional upon receipt of the claims maintained a list of creditors alongside the amount claimed by them and the security interest. The Resolution Professional thereafter also invited Expression of Interest. Resolution Plans were submitted thereafter. Pursuant to the approval by Committee of Creditors of one plan, NCLT also granted approval. Despite various communications addressed to the Tax Authorities informing 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 authority and the High Court had rightly dismissed the petition as not maintainable in view of the alternative remedy of filing a Second Appeal before the Commercial Tax Appellate Tribunal.

The learned Senior counsel appearing for the Tax Authorities also stated that adjudicatory authorities acting under the relevant statutes not being part of the Committee of Creditors were not bound by the decision of the Committee of Creditors which was approved by the NCLT. He further submitted that merely continuation of adjudicatory proceedings cannot be a part of coercive action.

The counsel for the appellant however submitted that various courts have held that statutory dues prior to the date of admission of Section-7 application, which are not part of the Resolution Plan, shall stand extinguished and the proceedings in respect thereof would no more survive. He submitted that the respondent authorities failed to file claims in response to statutory public notice issued by the Resolution Professional. The first demand by the authorities was raised only after the plan was approved by the Committee of Creditors. It was argued on behalf of the appellant that if such a view is accepted then it will frustrate the entire object of the I&B Code and the revival of the debtor companies would be impossible if the successful Resolution Applicants are sprung with the surprise dues which are not part of the Resolution Plan.

42. The Supreme Court in Paragraph-49 onwards of its decision in Ghanshyam Mishra and Sons (supra) referred to several judgements passed by it earlier considering various provisions of the I&B Code including judgement in Innoventive Industries Ltd. Versus ICICI Bank and Another (2018) 1 SCC 407, where it was held that one of the important objectives of the I&B Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up the insolvency process. The Scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the Insolvency Resolution Process begins. Such debt maybe financial debt or an operational debt. Application under Section-7 or Section-9 can be filed and the moment the Adjudicating Authority is satisfied that a default has occurred the application must be admitted. Such debt may be in the form of a payment which actually became due or in the form 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 corporate body back on its feet may submit a Resolution Plan to the Resolution Professional who may then place them before the Committee of Creditors. Once the Committee of Creditors approves such Resolution Plan, it becomes binding on the corporate debtor as well as its employees, members, creditors, guarantors and other stakeholders. The moment the Adjudicating Authority approves the Resolution Plan, the moratorium order passed by the Authority under Section 14 shall cease to have effect.

43. The Supreme Court went on to observe that the commercial wisdom of the Committee of Creditors has been given paramount status without any judicial intervention for ensuring the completion of the stated processes within the timelines prescribed by the I&B code. The legislature has consciously not provided any ground to challenge the commercial wisdom of individual financial creditors or their collective decision before the Adjudicating Authority which is made non-justiciable.

44. The Supreme Court in paragraph 58 thereafter observed thus: -" ...

"........A bare reading of Section 31 of the I&B Code would make also make it abundantly clear, that once the Resolution Plan is approved by the Adjudicating Authority, after it is satisfied that the Resolution Plan as approved by the COC meets requirements as referred to in Subsection (2) of Section 30, it shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I&B Code is revival of corporate debtor and to make it a running concern."

The Supreme Court in paragraph 64 of the said judgement observed thus: -

"As held by this Court in the case of Principal Commissioner of Income Tax Versus Monnet Ispat and Energy Ltd., in view of the provisions of Section 238 of the I&B Code, the provisions thereof will have an overriding effect, if there is any inconsistency with any of the provisions of the law for the time being in force or any instrument having effect by virtue of such law. As such , Vide Section 7 of Act No.26 of 2019, with effect from 16 August 2019 , the following words have been inserted in Section 31 of the I&B Code-" including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time 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 is clarificatory and declaratory in nature and therefore will be effective from the date on which the I&B Code has come into effect. Consequently, all dues including the statutory dues owed the Central Government, any State Government, or any local authority, if not part of the Resolution Plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under section 31 could be continued."

46. In Committee of Creditors of Essar steel India Ltd. Versus Satish Kumar Gupta and others, learned counsel for the petitioners has placed reliance upon paragraph 107 and 127 of the said judgement. However no judgement can be read ignoring the context in which it was delivered. The facts as are necessary to determine the context in which observations in paragraph 107 and 127 of the judgement have been made in brief are; that several appeals and petitions were before the Supreme Court with respect to the role of Resolution Applicants, Resolution Professional, the Committee of Creditors which are constituted under the I&B Code. The Court also considered the question of jurisdiction of the Adjudicating Authority and the Appellate Authority i.e. the National Company Law Tribunal and National Company Law Appellate Tribunal qua Resolution Plans that have been approved by the Committee of Creditors. The constitutional validity of Section 4 and 6 of the I&B Code (Amendment Act of 2019) had also been challenged. Several petitions with respect to the Resolution Plans of various companies'' Corporate Insolvency Resolution Process were dealt with individually. The Court first considered the role of Resolution Professional who had to verify and determine the claims by operational creditors, financial creditors, other creditors, workmen and employees and guarantors.

47. In paragraph 67 it set aside the impugned NCLAT judgement where it had left it open for claims that may have existed apart from those decided on merits by the Resolution Professional and by the Adjudicating Authority/Appellate Tribunal to be decided now by an appropriate forum in terms of Section 60 Subsection (6) of the I&B Code saying that such observation made by the NCLAT militates against the rationale of Section 31 of the I&B Code. It 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 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 time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation".

49. The Supreme Court in Ebix (supra) was considering the rejection by the NCLAT of the permission for withdrawal of Resolution Plan submitted by the Resolution Applicant in respect of Educomp, the corporate debtor, given by the NCLT. While considering the purpose of law on insolvency the Supreme Court referred to the earlier provisions which were used by defaulting companies to enjoy extended moratorium periods and failure to enforce timelines meant legal proceedings would drag on for years and not result in recovery of stressed assets. It observed that "....an analysis of the framework of the Statute and Regulations provides an insight into the dynamic and comprehensive nature of the Statute. Upholding the procedural design and sanctity of the process is critical to its functioning. The interpretative task of the Adjudicating Authority, the Appellate Authority, and even this Court, must be cognisant of, and allied with that objective..."

50. In paragraph 126 of its judgement the Supreme Court observed that the CIRP is a time bound process with the specific aim of maximising the value of assets. The IBC and the regulations made under it laid down strict timelines which need to be adhered to by all the parties, at all stages of the CIRP. The CIRP is expected to be completed within 180 days under Section 12 (1) of the IPC in terms of subsection (2) and (3) of Section 12 and extension can be sought from the Adjudicating Authority for extending this period up to 90 days. The First Proviso to Section 12 (3) clarifies that such an extension can only be granted once.

It observed thus:-

"....In Arcelor Mittal (India) (P) Limited versus Satish Kumar Gupta (2019) 2 SCC 1, this Court had held that the time taken in legal proceedings in relation to the CIRP must be excluded from the timeline mentioned in Section 12. Since this could extend the CIRP indefinitely, the Insolvency and Bankruptcy Code (Amendment) Act 2019 inserted a Second Proviso to Section 12 (3) with effect from 16.08.2019 to state that the CIRP in its entirety must be mandatorily completed within 330 days from the insolvency commencement date, including the time taken 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 quoted paragraph 119 of the judgement in Essar Steel (supra ) and then went on to observe that:- "the decision in Essar Steel (supra) while reiterating the rationale of the IBC for ensuring timely resolution of stressed assets as a key factor, had to defer to the principles of actus curiae neminem gravabit i.e. no person should suffer because of the fault of the court or the delay in the procedure. ".....In spite of this Court's precedents which otherwise strike down provisions which interfere with the litigants fundamental right to non-arbitrary treatment under Article 14 by mandatory conclusion of proceedings without providing for any exceptions, this Court refused to strike down the Second Proviso to Section 12 sub-clause (3) in its entirety. It noted that the previous statutory experiments for insolvency had failed because of the delay as a result of extended legal proceedings and chose to only strike down the word "mandatorily", keeping the rest of the provision intact. Therefore the law as it stands, mandates the conclusion of the CIRP - Including time taken in legal proceedings, within 330 days with a short extension to be granted only in exceptional cases.

52. However, the Court had warned that this discretion must be exercised sparingly and only in the following situations:

"However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or 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 the stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the delay cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal the delay or a large part of being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend the time beyond 330 days. - - - - it is only in such exceptional cases that the time can be extended, within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation."

53. The Supreme Court observed 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 important actors in the CIRP are clearly defined under the IBC and its regulations. In Innoventive industries Ltd versus ICICI Bank (2018) 1 SCC 407, a three-judge Bench of this Court observed that "one of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process". ...Recently, in Gujarat Urja Vikas Nigam Ltd 2020 (1) SCC online 194 a three-judge bench of this court observed that a "delay in completion of the insolvency proceedings would diminish the value of the debtor's assets and hamper the prospects of a successful reorganisation or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner." The stipulation of timelines and a detailed procedure under the IBC ensures a timely completion of CIRP and introduces transparency, certainty and predictability in the Insolvency Resolution process.....".

55. The Supreme Court observed further after noticing the swift amendments made to the Act and the Regulations following the Covid 19 pandemic on 20 April 2020, 5 June 2020, and on 23 September 2020, excluding delays for the purpose of adherence to the otherwise strict timeline and the IBC amendment Ordinance of 2021 promulgated with effect from 04.04.2021,that

"despite the clamour on behalf of successful Resolution Applicants who no longer wish to abide by the terms of the submitted Resolution Plans that are pending approval under Section 31, on account of the economic slowdown that impacted every business in the country, no legislative relief for enabling withdrawals or renegotiation as has been provided, in the last 18 months. In the absence of any provision under the IBC allowing for return of the Resolution Plan while a successful Resolution Applicant, vesting the Resolution Applicant with such a relief through a process of judicial interpretation would be impermissible. Such a judicial exercise would bring in the evils which the IBC sort to obviate through the back door.."

56. Having heard the learned counsel for the parties this Court has carefully gone through the order impugned and finds that, the learned counsel for the respondent in support of his case for consideration of its counter claim simultaneously with the petitioner's claim 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 counsel for the claimant had argued that since no counterclaim was filed during the period when the IRP had asked for such claims to be filed before it through public notice, no such claim could be filed before any other authority including the Tribunal. The IRP had issued a public notice that he had to collect all claims submitted by all creditors. If the respondent had any claim it should have submitted the same to the IRP. The IRP on collation of all claims was required to constitute a Committee of Creditors under Section 21 of the I&B Code. Such time having lapsed, it was not open for the respondent to file a counterclaim and for the Learned Tribunal to adjudicate upon it as the Resolution Plan has already been approved by the Committee of Creditors and submitted before the adjudicating authority for its orders.

58. The learned counsel for the respondent had argued that in reply to the claimant's demand of more than 45 crores of rupees not only the defence of the respondent but also its counterclaim of more than 144 crores rupees was permissible under the Scheme of Section 23 of the Act of 1996, it has to be taken on record and it has to be adjudicated upon and it cannot be rejected. The learned counsel for the respondent relied upon observations made by the National Company Law Appellate Tribunal in Jharkhand Bijli Vitaran Nigam Limited (supra) that the claim of the corporate debtor can be determined only after determination of counter claim made by the appellant in the very same arbitral proceedings and if the counterclaim or a part of it is set off with the claim made by the corporate debtor, both the claim and counterclaim of the parties should be heard together by the Arbitral Tribunal in the absence of any bar under the I&B Code. However, if on determination of such counterclaim it is found that corporate debtor is liable to pay certain amount, in such a case no recovery can be made during the period of moratorium.

59. The learned counsel for the petitioner had argued before the Tribunal that (i) connected arbitration proceeding pending before another sole Arbitrator a preliminary objection has been raised by the respondent itself that such arbitration cannot proceed in view of the provisions under Section 9 read with Section 14 of the I&B Code. Such a finding was also recorded by the sole Arbitrator on 25.03.2021 in such other proceedings. (ii)Section 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 provision would otherwise remain intact except the word "mandatorily" used under Section 12 as it would be manifestly arbitrary under Article 14 of the Constitution, being an excessive and unreasonable restriction on the litigants right to carry on business under Article 19 (1)g of the Constitution.

60. After considering the arguments raised by the counsel for the parties the Learned Tribunal considered whether a counterclaim can be rejected as prayed by the claimant in the circumstances of the case. It dealt with Section 23 of the Act of 1996 which provides for Statement of Claim and for Statement of defence by the respondents. It quoted Section 23 in its entirety and then found that under Section 23 (2-A), added by way of Amendment in the Act, the respondent in support of his case, may also submit a counterclaim or plead a setoff which shall be adjudicated upon by the Arbitral Tribunal. Such counterclaim or setoff falls within the scope of the arbitration agreement. The learned Tribunal came to the conclusion that the Section itself provides that first of all the claimant shall file a claim. Thereafter the respondent shall file his defence. After Section 23(2-A) being added with effect from 23.10.2015 the respondent in support of his case may also submit a counterclaim which has to be also adjudicated upon by the Tribunal. It held therefore that the language of Section 23 (2-A) of the Act made it clear that both claim and counterclaim should be decided together by the Arbitral Tribunal. It also observed that in a proceeding before the Arbitral Tribunal, if the respondent wants to file a counterclaim it can only file the same before the Arbitral Tribunal along with 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.

61. 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. 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 sub-section (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 under Section 34 are a step prior to the execution of an Award. 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 continuation of proceedings results in endangering, dissipating or adversely affecting the assets of the corporate debtor, it would not be prohibited under Section 14 (1) (a) of the I&B Code 2016. In the case of Jharkhand Bijli Vitaran Nigam Ltd (supra) the NCLAT had also observed that unless and until the counterclaim is itself determined, the claim could not be determined and, hence both deserved to be heard and disposed off together.

62. The learned Tribunal in the order impugned has gone on to observe that in the case of SSMP industries Ltd (supra) the Delhi High Court observed in paragraphs 8 and 9 that not only the plaint/claim but also the written statement/counterclaim have to be considered as a whole in order to determine as to whether the suit or the counterclaim would be liable to be decreed. A counterclaim would be in the nature of a suit against the plaintiff which was the corporate debtor. The Tribunal also observed that strictly speaking thus under Section 14 (1) (a) of the Code a counterclaim would be covered by the moratorium which prohibits the institution of suit or continuation of pending suits or proceedings against the corporate debtor, and counterclaim would be a proceeding against the corporate debtor, however, the counterclaim raised against the corporate debtor is integral to the recovery sought by the Corporate Debtor and is related to the same transaction. Section 14 has created a piquant situation i.e. the corporate debtor undergoing Insolvency proceedings can continue to pursue its claim but the counterclaim would be barred under Section 14 (1)(a). When such situations arise, the Court has to see whether the purpose and intent behind the imposition of the moratorium is being satisfied or defeated. A blinkered approach cannot be followed and the Court cannot blindly stay the counterclaim and refer the defendant to 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 corporate debtor. When the counterclaim is adjudicated and the amount to be paid/recovered is determined, at that stage or in an execution proceeding, Section 14 could be triggered. Till such adjudication of claim and counterclaim is carried out by the appropriate forum i.e. the Arbitral Tribunal, Section 14 would not come into play.

63. The Learned Tribunal rejected the argument raised by the learned counsel for the claimant that after the judgement in PGCIL (supra) which was also relied upon in SSMP Industries Ltd (supra) was set aside by the Supreme Court in the case of P. Mohan Raj (supra), the Learned Tribunal cannot place reliance upon it. It was observed by the Learned Tribunal that the Delhi High Court in SSMP Industries had only referred to the PGCIL case and the High Court had not based its findings totally upon it. The High Court of Delhi decided the SSMP case on a totally different reasoning. Though it observed that strictly speaking from the language of Section 14 (1)(a) of the I&B Code it appears that the counterclaim which is in the nature of a suit, cannot be considered during the operation of the moratorium, but it also observed that the claim and counterclaim are interlinked with with each other and relate to the same transaction hence they need it to be decided together. It cannot be said that the claim alone should be continued to be determined but the counterclaim would be barred. Just as a claim required proper pleadings and evidence in support of its case, in the same way a counterclaim also required proper pleadings and evidence in support of the case. Points of determination have to be decided after all evidence is led. The NCLT in summary proceedings, or the Interim Resolution Professional, are not capable of conducting a trial.

64. The Learned Tribunal also observed that mere consideration of claim and counterclaim and adjudicating the facts as claimed there in, would not violate the moratorium. It is only after determination of counterclaim when the amount is determined or the execution proceedings are initiated, the provisions of Section 14 of the I&B Code 2016 would come into play.

65. It was also observed by the Tribunal that under sub-section (4) of Section 14 the order of moratorium does not continue indefinitely but has effect only from the date of order initiating CIRP till completion of the said process which in turn 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 under Article 226/227, there have to be exceptional circumstances;

iv) though interference is permissible, unless and until the order is so perverse that it is patently lacking in inherent jurisdiction,the writ court would not interfere;

v) interference is permissible only if the order is completely perverse,that is, that the perversity must stare in the face;

vi) High Court ought to discourage litigation which necessarily interferes with the arbitral process;

vii) excessive judicial interference in arbitral process is not encouraged;

viii) It is prudent not to exercise jurisdiction under Article 226/227;

ix) the power should be exercised in exceptional rarity or if there is bad faith which is shown;

x) efficiency of arbitral process ought not to be allowed to diminish and hence interdicting the arbitral process should be completely avoided."

67. The learned counsel for the petitioner on the basis of these observations of the Delhi High Court has tried to convince this Court that since the learned Tribunal's order is perverse as the Tribunal is patently lacking the jurisdiction in the light of Section 14 (i) (a) of the I& B Code, this Court should interfere in the order impugned the direct the Tribunal only to consider the claim of the petitioners during the pendency of the CIRP and the moratorium and ignore the counterclaim submitted by the respondent.

68. However, this Court finds that in Surendra Kumar Singhal (supra), the Delhi High Court relied upon Punjab State Power Corporation Limited versus Emta Coal Ltd and another, (SLP decided on 18.09.2020) where after referring to the observations made in the Deep Industries' case, the Supreme Court had observed - -

"we are of the view that a foray to the writ court from a Section 16 application being dismissed by the Arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack of inherent jurisdiction. Here patent lack of inherent jurisdiction requires no argument whatsoever - it must be the perversity of an order that must stare one in the face. Unfortunately, parties are using this expression mentioned in our judgement in Deep Industries Ltd to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the grounds stated, 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 in its favour for an extended period till the moratorium exists and it shall be unable to recover its dues thereby further impeding its financial condition. It was in this context the Court interpreted the word "proceedings" used in Section 14 (1) a of the Code restrictively to mean only a particular type of legal proceedings for example Debt recovery action which may have an effect of dissipating or diminishing the debtors assets during the period of its insolvency resolution. It observed that the object of the Code is to provide relief to the corporate debtor through a standstill period during which its assets are protected from dissipation and during which it can strengthen its financial position. The meaning and purpose of subclause (a) of Section 14 (1) of the I&B Code has to be considered along with and in the context of subclause (b),and (c) and (d) of Section 14 (1) of the I&B Code also. All these are clauses related to encumbering, relating to recovery from any assets,security interest, or property of the corporate debtor. It held that Section 14 of the I&B Code would not apply to proceedings which are in the benefit of the corporate debtor as the conclusion of such proceedings would not endanger, diminish, dissipate or impact the assets of the corporate debtor in any manner whatsoever. The important question that the Court needs to consider is the nature of the proceedings i.e. whether it is in favour or against the corporate debtor. Proceedings against an Award in favour of the corporate debtor would be like stalling the Corporate debtor's efforts to recover its money and hence would not fall within the embargo of Section 14 (1) a of the I&B Code. If a counterclaim is allowed then section 14 (1) (a) of the Code would immediately come into play and the decree would not be Executable against the corporate debtor.

70. The Delhi High Court considered the order of the National Company Law Appellate Tribunal in Jharkhand Bijli Vitaran Nigam Ltd. Versus IVRCL Ltd and Another (Company Appeal (Insolvency) 285/2018 decided on 3 August 2018). It also considered the judgement of the coordinate bench of the Delhi High Court in Power Grid Corporation of India Versus Jyoti Structures Ltd. Manu/DE/5162/2017. It thereafter observed that the claim of the plaintiff was much higher than that of the defendant but both the claim and counterclaim arose out of the same 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 such, proceeding under Section 34 which was meant for determination of objections against the Award could continue and in case the objections are settled against the corporate debtor the enforceability of the Award against the corporate debtor would then certainly be covered by the moratorium of Section 14 (1) a.

71. Similarly in Jharkhand Bijli Vitran Nigam Limited, the NCLAT had held that until and unless the counterclaim is itself determined, the claim and the counterclaim deserve to be heard together and there is no bar to the same being adjudicated in the Court.

The Delhi High Court referred with approval the observations made by the NCLAT that as the claim of the corporate debtor can be determined only after determination of counterclaim in the very same arbitral proceedings, and if the counterclaim or a part of it is set off with the claim made by the corporate debtor, then alone question would arise as to whether the corporate debtor was liable to pay certain amount. Indeed no recovery can be made during the period of moratorium. After considering the arguments made by the learned counsel for the plaintiff and the defendant the Court took a pragmatic view of the matter and observed that the plaint and the written statement/counterclaim had to be adjudicated together and to be considered as a whole in order to determine as to whether the suit or the counterclaim would be liable to be decreed. Strictly speaking, even though a counterclaim would be a "proceeding" against the corporate debtor, it had to be considered in view of the recovery sought by the plaintiff as it related to the same transaction. If the court holds that Section 14 only allowed institution of claim by the corporate debtor and did not allow institution of Suit/ Counterclaim by the defendant, it would result in a very iniquitous situation. The counterclaim had to be considered and a blinkered approach could not be followed by the Court and the Court could not blindly stay a counterclaim and refer the defendant to NCLT/RP for filing its claims. The Delhi High Court also observed in paragraph 9 that the nature of the counterclaim is such that it required proper pleading to be filed and the defences and stance of both the parties had to be considered, evidence had to be recorded and then issues had to be adjudicated. It observed that the proceedings before the NCLT are summary in nature 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 recovery of Rs.1,61,47,336. The defendant filed its written statement/counterclaim in which it averred that no amount was due and payable by it to the plaintiff and in fact it was entitled to recover Rs.59,51,548 from the plaintiff. The plaintiff company had since gone into insolvency and a Resolution Professional had been appointed. The question that arose was whether the adjudication of the counterclaim would be liable to be stayed in view of Section 14 of the I&B Code. The learned counsel had argued that the plaintiffs' claim and that of the defendant was intertwined and interlinked. It was not an independent claim by the defendant but had to be adjudicated in the light of the claims made by the plaintiff in the suit. Since the claim itself had not yet been adjudicated it was not even clear whether any amount would be recoverable by the plaintiff, hence the suit and the counterclaim ought to be adjudicated together instead of the defendant being forced to approach the Resolution Professional for recovery of its claims.

73. In P Mohan Raj and others versus Shah Brothers Ispat Private Limited, AIR 2021 Supreme Court 1308, a three judges bench of the Supreme Court was considering whether criminal complaints filed by the respondent against the Company and the appellants under Section 138 read with Section 141 of the Negotiable Instruments Act could be allowed to continue during the moratorium period. The NCLAT had held 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. So long as there is a judgement by any court of law which results in coercive steps being taken against the assets of the corporate debtor, all such "proceedings" are necessarily subsumed within the meaning of Section 14(1)(a). It observed in paragraph 10 that the language of Section 14 (1) makes it clear that subject to the exceptions contained in Sub-section (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall mandatorily, by order, declare a moratorium to prohibit what follows in clauses (a) to (d). Importantly, 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 hereinabove, it is clear that it was a criminal proceeding that is contained in Chapter 17 of the Negotiable Instruments Act would, given the object and context of Section 14 of the I&B Code, amount to a proceeding within the meaning of Section 14 (1)(a), the moratorium therefore attracting to such proceedings".

75. After referring to various sections of the I&B Code which were also in the nature of a moratorium on various actions being brought against corporate debtor and negating in the arguments made by the counsel appearing on behalf of the Respondent which had initiated action against the appellant for dishonouring of more than 50 cheques due to insufficient funds under Section 138 of the Negotiable Instruments Act, on most of the case laws cited by him, the Supreme Court also referred to the argument raised by Shri Mehta (ASGI) on the basis of PGCIL versus Jyoti Structures as aforesaid where the Delhi High Court had held that a Section 34 application to set aside an Award under the Act of 1996 would not be covered by Section 14 of the I&BC, the Supreme Court observed that the said- "...judgement does not state the law correctly as it is clear that a Section 34 proceeding is certainly a proceeding against the corporate debtor which may result in an Arbitral Award against the corporate debtor being upheld, as a result of which, monies would then be payable by the corporate debtor. Section 34 proceeding is a proceeding against the corporate debtor in a court of law pertaining to a challenge to an Arbitral Award and would be covered just as an appellate proceeding in a decree from a suit would be covered. This judgement does not, therefore, state the law correctly..."

76. It is evident from the careful consideration of the entire judgement rendered in P Mohan Raj (supra) 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 Appellants for the reason that the Insolvency Resolution Process did not involve a new management taking over and the moratorium period had come to an end.

77. This Court having considered all the judgements cited by learned counsel for the parties and also the impugned order of the Tribunal finds that Article 227 of the Constitution of India, the supervisory role assigned to this Court is extremely limited. The Supreme Court has repeatedly emphasised in its judgements the importance of keeping handsoff approach where arbitration matters are concerned. This Court finds that the learned Tribunal has decided an application made to it by the petitioner and the orders squarely falls under the provisions of Section 16 of the Act of 1966. Therefore, it cannot be said to be an order patently lacking in jurisdiction and therefore perverse and liable to be interfered with by this Court under Article 227 of the Constitution.

78. This petition is dismissed as not maintainable.

79. No order as to Costs.

Order Dated: 24 /08/2022

PAL/ Rahul

[Justice Sangeeta Chandra]