NCLAT: Adjudicating Authority Empowered To Enforce Arbitral Award On RP’s Application Under Section 60(5) IBC
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Rakesh Kumar Jain (Member-Judicial), Justice Mohammad Faiz Alam Khan (Member-Judicial), and Mr. Naresh Salecha (Member-Technical), has held that the Adjudicating Authority has jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) to entertain an application filed by a Resolution Professional (RP) seeking enforcement of an arbitral award.
Background of the Case
The appeal was filed by Jindal Lifestyle Limited challenging the order dated 30.04.2024 of the NCLT, Chandigarh Bench, which allowed the RP of Arkin Creations Pvt. Ltd. to enforce an arbitral award against the appellant. Prior to the initiation of the Corporate Insolvency Resolution Process (CIRP) against Arkin Creations in October 2022, the corporate debtor had initiated arbitration under the MSME Act, 2006, claiming ₹21,50,332 towards supply of goods along with interest. The matter was referred to a sole arbitrator by the Haryana Micro and Small Enterprises Facilitation Council, culminating in an ex parte award dated 23.01.2017 against the appellant’s erstwhile company, JSL Architecture Ltd. The appellant argued that it never received the award at the relevant time and only came to know of it upon receipt of a demand notice from the RP in January 2023, seeking recovery of ₹44,99,365 (including principal and interest).
Appellant’s Contentions
The appellant contended that:
The arbitral award was invalid as it was passed beyond the 90-day limit prescribed under Section 18(5) of the MSME Act, 2006.
The sole arbitrator had not submitted the report to the Facilitation Council as required under the Haryana MSME Rules, rendering the award non-binding.
The award was not properly stamped and thus unenforceable.
Enforcement of the award could only be sought before a civil court under Section 36 of the Arbitration and Conciliation Act, 1996, not before the Adjudicating Authority.
The award was barred by limitation under Article 136 of the Limitation Act, 1963, as no execution proceedings were taken for more than five years.
Respondent’s Submissions
The Resolution Professional argued that the IBC is a self-contained code with overriding effect under Section 238, and therefore, Section 60(5) empowers the Adjudicating Authority to enforce arbitral awards during CIRP.
He relied upon K.S. Oils Ltd. v. State Trading Corporation of India Ltd., Ugro Capital Ltd. v. Bangalore Dehydration & Drying Equipment Co. Pvt. Ltd., and MBL Infrastructures Ltd. v. Manish Kumar Bhagat, to submit that arbitral awards or decrees can be enforced within 12 years under Article 136 of the Limitation Act. It was also argued that the 90-day period under Section 18(5) of the MSME Act is only directory and not mandatory, as held in Avery Cycle Industries Ltd. v. Parkash Metal Industries, and that insufficiency of stamping is curable in law.
Findings of the NCLAT
The Bench observed that Section 60(5) of the IBC confers exclusive jurisdiction on the Adjudicating Authority to deal with claims by or against the corporate debtor, including those arising out of arbitral awards. Once seized of the matter, no other forum has jurisdiction.
The tribunal referred to Section 238 of the IBC and reiterated that the Code overrides other laws in case of conflict. Citing its earlier ruling in K.S. Oils Ltd., the Bench emphasized that the IBC framework cannot be stalled by directing parties to civil courts for execution, which would frustrate the time-bound process of insolvency resolution.
The NCLAT further held that since the arbitral award dated 23.01.2017 was never challenged, it had attained finality and could be pursued by the RP to aid in the revival of the corporate debtor. The objection regarding insufficiency of stamp duty was rejected as curable, and the plea of limitation was held to be without merit, since awards are enforceable within 12 years. It also ruled that the 90-day mandate under Section 18(5) of the MSME Act is not mandatory and its non-compliance cannot render an award a nullity.
The Appellate Tribunal concluded that the NCLT was correct in entertaining the RP’s application under Section 60(5) of the IBC for enforcing the arbitral award. Finding no merit in the appellant’s contentions, the NCLAT dismissed the appeal and upheld the order of the Adjudicating Authority.
Appearance
For Appellant: Mr. Sarad Kumar Sunny & Mr. Madhan Binzani, Advocates.
For Respondent: Mr. D. Pathak, Ms. Shweta Sharma, Ms. Vaibhavi Pathak, Mohd. Nazim Khan & Mr. Satyendra Sharma, for RP
Cause Title: Jindal Lifestyle Ltd. V. Mr. Satyendra Sharma, RP of Arkin Creations Pvt. Ltd. and Ors.
Case No: Comp. App. (AT) (Ins.) No. 1180 of 2024
Coram: Justice Rakesh Kumar Jain [Member-Technical], Justice Mohammad Faiz Alam Khan [Member-Technical], Mr. Naresh Salecha [Member-Technical]
