Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Rakesh Kumar Jain (Member-Technical), Justice Mohammad Faiz Alam Khan (Member-Technical), and Mr. Naresh Salecha (Member-Technical), has held that the Adjudicating Authority has jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, to entertain an interlocutory application filed by a Resolution Professional seeking enforcement of an arbitral award. The Tribunal clarified that once the CIRP is initiated, any question relating to the corporate debtor’s liabilities, assets, or enforcement of rights must be decided by the NCLT alone, and the jurisdiction of all other forums stands eclipsed.

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The appellant argued that the arbitration proceedings initiated by the corporate debtor under the MSME Act, 2006, were conducted ex parte against the erstwhile entity and that the appellant never received a copy of the award until the service of the demand notice. It contended that the award was unenforceable owing to limitation under Article 136 of the Limitation Act, 1963, and that the arbitral award, being rendered pursuant to Section 18(3) of the MSME Act, could only be enforced in accordance with Section 36 of the Arbitration and Conciliation Act, 1996. The appellant stressed that the adjudicating authority had no jurisdiction to execute the award and argued that the award itself was invalid as it was passed beyond the ninety-day period prescribed in Section 18(5) of the MSME Act.

Per contra, the respondent relied on the decisions in K.S. Oils Ltd. v. State Trade Corporation of India Ltd. and Ugro Capital Ltd. v. Bangalore Dehydration & Drying Equipment Co. Pvt. Ltd., asserting that the IBC prevails over the Arbitration Act by virtue of Section 238 and that the NCLT has wide powers under Section 60(5) to adjudicate matters arising during CIRP, including enforcement of arbitral awards. It was further submitted that a final decree or award constitutes a valid basis for initiating or sustaining proceedings under the IBC and that the award remained enforceable for twelve years as per Article 136 of the Limitation Act. The respondent also relied on Avery Cycle Industries Ltd. v. Parkash Metal Industries, contending that the ninety-day period under Section 18(5) of the MSME Act is directory and not mandatory.

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The NCLAT observed that Section 60(5) of the IBC is couched in broad terms and empowers the Adjudicating Authority to decide any question of law or fact arising out of or in relation to the insolvency of the corporate debtor. Once CIRP commences, the NCLT becomes the exclusive forum for adjudicating such matters. The Tribunal also noted that the arbitral award had attained finality, as the appellant had never challenged it under Section 34 of the Arbitration Act. Therefore, the Resolution Professional was justified in seeking enforcement of the award before the Adjudicating Authority to revive and protect the assets of the corporate debtor.

The appellate tribunal further held that the ninety-day period prescribed in Section 18(5) of the MSME Act for completion of the arbitration proceedings is not mandatory; non-compliance does not render the award void. The NCLAT found no infirmity in the NCLT’s direction to the appellant to discharge its liability under the award and reiterated that Section 238 of the IBC gives the Code overriding effect over other laws, including the Arbitration Act, wherever inconsistency arises.

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In conclusion, the NCLAT upheld the impugned NCLT order, affirming that the Adjudicating Authority is fully empowered to enforce an arbitral award on an application made by the Resolution Professional during the CIRP under Section 60(5) of the IBC and dismissed the appeal.

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. Vs. 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)