Adjudicating Authority is not required to order of Arbitration: NCLAT

adjudicating-authority-is-not-required-to-order-of-arbitration-nclat

Status as on- 17/07/2021

Facts

The Appellant filed an application under Section 9 of the IBC for repayment of its debt which was due and payable. The Adjudicating Authority dismissed this application on the main ground of pre-existence of dispute regarding the pending debt. The Respondent argued that the agreements were for a period of two years, which expired, and thereafter they were not extended through written mutual agreement of both the parties. Respondent claimed that the agreements were not in force for the period the dues are being claimed for payment by the Appellant and hence no payments are due to be made to the Appellant. The Appellant alleged that the Respondent defaulted in payment. Since the Appellant was not getting any satisfactory resolution in the issue of pending payments, the Appellant issued demand notice under Section 8 of the IBC which did not elicit any reply from the Respondent.

Judgment

The Hon’ble NCLAT held as follows:

  1. That the Appellant’s application under Section 9 of IBC satisfies all the ingredients as laid down in law and same deserves to be admitted.
  2. The Impugned order by the NCLT was set aside and the matter was remitted back to the Adjudicating Authority.
  3. Even though there was no explicit written mutual agreement for the extension of the agreement, the conduct of both the parties shows that both the parties were working together as if the agreements continued to be in force.
  4. The Demand Notice has to be responded to within 10 days, as required in Section 8(2) for the purpose of bringing to the notice of the operational creditor the existence of a dispute or evidence of repayment of operational debt.
  5. On one hand the respondent kept on promising to make the payment, while on the other he raises the issue of existence of a dispute when the application under Section 9 of IBC is filed before the Adjudicating Authority. These actions raise doubt regarding the veracity of the dispute and its pre-existence.

“The law is very clear that it is enough if under Section 4 of IBC the unpaid debt is more than the threshold value of Rs. One Lakh for acceptance of application under section 9 of IBC. While there is dispute about the rate of interest claimed by the Appellant it does not significantly alter the quantum of unpaid debt, which will remain to be above Rs. One Lakh. We, thus find, that the application is maintainable on account of the unpaid debt being more than Rs. One Lakh, the threshold amount.”

  1. In regards to referring the dispute to arbitration the Hon’ble Appellate Tribunal held the following
  • “Regarding submitting the dispute to arbitration, we find that the matter was not referred for arbitration by either of the parties. This issue of possibility of arbitration has been raised at the appeal stage. It is not for this tribunal to direct the parties to go for arbitration.”

Conclusion-

It may be to the point and fart relief to jump to the IBC proceeding instead of arbitration depending upon the fact and circumstances of the case. 

Disclaimer – The above article is based on interpretation of the related judicial pronouncement and related laws which may differ person to person. The readers are expected to take expert opinion before placing reliance on it. For more information, please reach us at support@centrik.in or call us at 8383011629

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