Bay Capital Advisors Pvt. Ltd. ... vs Il And Fs Financial Services ...
2021 Latest Caselaw 7100 Bom

                                                                             2-appl-10472-2021.doc




                IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                   ORDINARY ORIGINAL CIVIL JURISDICTION

                        APPEAL (L) NO. 10472 OF 2021
                                     WITH
                  INTERIM APPLICATION (L) NO. 10649 OF 2021
                                      IN
                         APPEAL (L) NO. 10472 OF 2021
                                      IN
                  ARBITRATION PETITION (L) NO. 10089 OF 2020

Bay Capital Advisors Private Limited                                 ...Appellant

            Versus

IL & FS Financial Services Limited & Ors.                            ...Respondents
                                 ......

Mr. Nikhil Sakhardande, Senior Advocate along with Mr.
Ravichandra Hegde, Mr. Ashish Venugopal ,Ms. Ankita Roy, Ms.
Parinaz Bharucha i/by M/s. Parinam Law Associates, Advocates for
the    Appellant in APPL/10472/2021 and the Applicant in
IAL/10649/2021.

Dr. Birendra Saraf, Senior Advocate along with Mr. Rohan Savant,
Mr. Sachin Chandrana, Mr. Chandrajit Das i/by M/s. Manilal Kher
Ambalal & Co., Advocates for Respondent No.1 in APPL/10472/2021

Mr. Aman Vijay Dutta i/by M/s. Chambers of Aman Vijay Dutta,
Advocate for the Respondent No.2.

Mr.Debopriya Moulik, Advocates for the Respondent No.5.

                                        CORAM : R.D. DHANUKA &
                                                V.G.BISHT, JJ.

DATE : 4th May, 2021

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P.C.:

1. We have heard the learned Counsel for the parties.

2. By this Appeal filed under Section 37 of the Arbitration and

Conciliation Act, 1996 (for short, "the Arbitration Act"), the

appellant (original petitioner) has impugned the order dated 9 th

April, 2021 dismissing the Arbitration Petition filed by the appellant

with costs quantified at Rs. 7,50,000/-.

3. The appellant has prayed for an injunction restraining

respondent No.1 and/ or its servants, agents, administrators,

successors, representatives, assigns and/ or any other persons

claiming through, under or in trust for them, from any manner,

directly or indirectly acting upon and/ or acting in furtherance of the

event of default notice dated 23 rd July, 2019, pledge Invocation

Notice dated 20th August, 2020 and all ancillary/ incidental

correspondence issued in furtherance thereof.

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4. The learned Single Judge has recorded various reasons in the

impugned order while rejecting the Petition filed by the appellant

under Section 9 of the Arbitration Act.

5. A perusal of the prayers indicates that the appellant has sought

an injunction against the respondent No.1 from taking any further

steps pursuant to those two notices issued by the respondent No.1

under the agreement entered into between the appellant and

respondent No.1. The respondent No.1 have only issued those two

notices which are strongly disputed by the appellant. The

respondent No.1 has already invoked the arbitration clause against

the appellant. The learned Single Judge has made various prima

facie observations against the appellant.

6. Mr.Sakhardande, learned Senior Counsel for the appellant,

states that the appellant has no objection to defend the proceedings

as would be filed by the respondent No.1 before the Arbitral

Tribunal. However, if any proceedings are filed by the respondent

No.1 before the National Company Law Tribunal (for short, "the

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NCLT"), though the appellant has several defences to the notices

issued by the respondent No.1, the appellant would not be able to

raise those defences before the NCLT. The apprehension of the

appellant is based on the judgment of the Hon'ble Supreme Court in

case of Innoventive Industries Limited Versus ICICI Bank and

Another 1.

7. The learned Senior Counsel invited our attention to paragraph

Nos. 29 and 30 of the said judgment and would submit that the

respondent No.1 if files any proceedings alleging the default on the

part of the appellant of a financial debt on the basis of the records of

an information utility or other evidence produced by the financial

creditor under sub-section, the NCLT may not permit the appellant to

dispute the correctness of the those two notices issued by the

respondent No.1.

8. Dr.Saraf, learned Senior Counsel for the respondent No.1, on

the other hand, strenuously urged that the learned Senior Counsel

for the appellant is not right in his apprehension. He invited our

1 (2018) 1 SCC 407

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attention to paragraph No. 28 of the said judgment and would

submit that the NCLT will have to adjudicate upon the issue whether

any default had occurred or not or whether debt demanded by the

respondent No.1 would be due or not.

9. In our prima facie view, the learned Single Judge has rightly

recorded various prima facie observations against the appellant

while dismissing the Petition filed under Section 9 of the Arbitration

Act. The respondent No.1 cannot be prevented from exercising

remedy in law if any. It is, however, made clear that all these

observations made by learned Single Judge and by this Division

Bench are prima facie. The Arbitral Tribunal or the NCLT would

decide the matter on its own merits without being influenced by the

observations made by learned Single Judge and by us in this order.

10. A conjoint reading of paragraph Nos. 28 to 30 of the said

judgment would clearly indicate that at the stage of Section 7 (5) of

the Insolvency and Bankruptcy Code 2016, the adjudicating

authority is required to be satisfied that a default has occurred and

that the corporate debtor is entitled to point out that a default has

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not occurred in the sense that the "debt", which may also include a

disputed claim, is not due. A debt may not be due if it is not payable

in law or in fact. The moment the adjudicating authority is satisfied

that a default has occurred, the application must be admitted unless

it is incomplete.

11. In our view, Mr. Sakhardande, learned Senior Counsel for the

appellant, is not right in his submission that no sooner the

proceedings are filed by the respondent No.1 before the NCLT under

the said provisions against the appellant, merely on the basis of the

records of the respondent No.1 or other evidence produced by the

respondent No.1, the NCLT is bound to grant reliefs in favour of the

respondent No.1 even without considering the defence of the

appellant.

12. The NCLT will have to consider the defence of the appellant

and to render a finding whether in fact any default has occurred or

not as alleged in the Event of Default notices and pledge Demand

Notice and whether in fact any debt is due by the appellant to

respondent No.1 or not.

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                                                                      2-appl-10472-2021.doc

13. By consent of the parties, a former Judge of this Court Shri

Justice J. P. Deodhar is appointed as the Sole Arbitrator to adjudicate

upon the disputes between the appellant and the respondent No.1

arising out of the agreement dated 31st March, 2017 between the

appellant and the respondent No.1 and other associated documents

referred in the notice dated 22 nd April, 2021 invoking arbitration

agreement by the respondent No.1. Both the parties have agreed to

pay the fees and expenses of the learned Arbitrator equally at the

first instance, subject to the final order that would be passed by the

learned Arbitrator.

14. The learned Arbitrator shall decide the dispute without being

influenced by the prima facie observations made by learned Single

Judge and by us in this order.

15. If any proceedings are filed by the respondent No.1 before the

NCLT, the NCLT shall also decide the matter without being

influenced by the prima facie observations made by the learned

Single Judge and by us in this order.

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16. With the aforesaid observations and direction, we are not

inclined to interfere with the impugned order passed by learned

Single Judge. Insofar as, the costs of Rs. 7,50,000/- awarded by the

learned Single Judge is concerned, in our view, in the facts of this

case, the costs of Rs. 3,00,000/- would be appropriate and shall be

paid by the appellant to respondent No.1 within a period of one

week from today.

17. We make it clear that we have heard the learned Senior

Counsel for the appellant and the respondent No.1 and dismissed

this appeal without going into the issue whether the Petition filed by

the appellant under Section 9 of the Arbitration Act before the

learned Single Judge itself was maintainable or not.

18. In view of dismissal of the Appeal, nothing survives in the

Interim Application and the same is accordingly disposed of.

         (V.G.BISHT, J.)                 (R.D.DHANUKA, J.)




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