OC’s Claim Based on an Unquashed or Unstayed Arbitration Award Requires RP Approval | NCLAT

Case Details: Kanoria Chemical & Industries Ltd. v. Vijendra Kumar Jain - [2023] 152 taxmann.com 406 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Rakesh Kumar, Judicial Member & Dr Alok Srivastava, Technical Member
  • Aaditya Vijay Kumar & Akshit Mohan, Advs. for the Appellant.
  • Ms Udita Singh, Adv. & Aatreya Singh, Adv. for the Respondent.

Facts of the Case

In the instant case, the CIRP against the corporate debtor was initiated upon admission of a petition filed under section 9 and RP was appointed. The RP made a public announcement calling upon creditors to file their claims. The appellant as an operational creditor submitted its claim to RP, wherein the appellant had made a clear disclosure that its claim pertained to an arbitration award.

The RP filed an application u/s 30(6) of the IBC seeking approval of the resolution plan, which had been approved by a 100% voting share of the Committee of Creditors (CoC) and also by the Adjudicating Authority (NCLT).

Thereafter, an appeal was made to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT. The appellant contended that its claim, which was borne out of an arbitral award in its favour, had not been considered in accordance with section 30(2)(b) of the IBC. It was noted that the appellant, had been given zero payment even though there was no stay or varying of the arbitral award.

NCLAT Held

The NCLAT observed that once the appellant had submitted complete details about the arbitration award and the calculation of the claimed amount in an excel sheet and KYC documents, admitted amount of the claim should have been communicated to the appellant.

The NCLAT, further observed that since the arbitration award by the Competent Court was neither quashed, stayed nor varied and there was no contrary order against the award, the appellant’s claim should have been appropriately admitted by the RP and considered for payment in the approved resolution plan.

The NCLAT held that the appellant should have been paid an amount equal to the amount permissible to an operational creditor who received the maximum percentage of payment against the admitted claim, from among all categories of operational creditors in the said resolution plan.

List of Cases Reviewed

• • Vijendra Kumar Jain, Resolution Professional v. Transparent Energy-Systems (P.) Ltd. [2021] 127 taxmann.com 553/166 SCL 298 (NCLT – Mum.) (Para 30) reversed.
  • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 21)
  • Gail India Ltd. v. Ajay Joshi, RP of Alok Industries Ltd. [2021] 133 taxmann.com 142 (NCLAT – New Delhi) (para 28)
  • Excel Engineering v. Vivek Murlidhar Dabhade, RP of New Phaltan Sugar Works Ltd. [MANU/NL/0884/2022] (para 28) distinguished.

List of Cases Referred to

• • Committee of Creditors of Essar Steels v. Satish Kumar Gupta [2019] 111 taxmann.com 234 (SC) (para 9)
  • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC)/4 SCC 17 (para 9)
  • Gail India Ltd. v. Ajay Joshi, RP of Alok Industries Ltd. [2021] 133 taxmann.com 142 (NCLAT – New Delhi) (para 10)
  • Excel Engineering v. Vivek Murlidhar Dabhade, RP of New Phaltan Sugar Works Ltd. [MANU/NL/0884/2022] (para 11)
  • Bank of Baroda v. MBL Infrastructures Ltd. [2022] 134 taxmann.com 190/170 SCL 640 (SC)/[MANU/SC/0060/2022] (para 11).