Petition to Institute Arbitration Proceedings Against CD Rejected as Moratorium Imposed by NCLT Restrains Its Institution | HC

Case Details: Mercury Car Rentals (P.) Ltd. v. Shiva Industrial Security Agency Gujrat Ltd. - [2024] 167 taxmann.com 472 (HC-Delhi)

Judiciary and Counsel Details

• C. Hari Shankar, J.
• Ms Kaadambari Singh & Ms Muskaan Chawla, Advs. for the Petitioner.
• Ms Kanchan Yadav, Ms Sonia Dube & Ms Saumya Sharma, Advs. for the Respondent.

Facts of the Case

In the instant case, the CIRP was initiated against the respondent-corporate debtor, and a moratorium was imposed. The moratorium had been imposed by the NCLT order, which prohibited the institution or continuation of any proceedings against the respondent, including arbitral proceedings.

Meanwhile, the former Director of the respondent assailed the aforesaid order before the NCLAT, arguing that there had been breaches of a lease agreement. The NCLAT, while issuing a notice on appeal, observed/ruled that submissions advanced by both parties needed scrutiny.

Later, the NCLAT acknowledged the appeal but did not stay the moratorium imposed by the NCLT. The petitioner submitted that, as the NCLAT had stated that no further steps be taken in pursuance of the order passed by the NCLT, the moratorium imposed by the said order must be treated as stayed.

The petitioner further contended that since the NCLAT had directed no further steps to be taken regarding the moratorium, it should be considered a stay.

High Court Held

The High Court held that the moratorium imposed by the NCLT specifically restrains the institution and continuation of any proceedings, including arbitral proceedings against the respondent. Therefore, the petition for the institution of arbitral proceedings against the respondent could not be granted while the moratorium was in place.

List of Cases Reviewed

• SSMP Industries Ltd. v Perkan Food Processors Pvt Ltd (para 9) distinguished