1. Dispute over purchase order termination — Application for appointment of arbitrator under Section 11(6), Arbitration and Conciliation Act, 1996 — Impact of moratorium under Insolvency and Bankruptcy Code. (Para 2 , 3 )
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2022 Supreme(SC) 1432
SUPREME COURT OF INDIA
K.M. Joseph, Hrishikesh Roy, JJ.
New Delhi Municipal Council – Appellant
Versus
Minosha India Limited – Respondent
Civil Appeal No. 3470 of 2022 (Arising Out of SLP (C) No. 830 of 2021)
Decided On : 27-04-2022
Advocates appeared:
Mr. Gourab Banerji, Sr. Advocate, Mr. Harsha Peecharra, Advocate, Mr. Yoginder Handoo, Advocate, Mr. Rakesh Talukdar, Advocate, Mr. Ashwin Kataria, Advocate, Mr. Garvit Solanki, Advocate, For the Appellant / Mr. Neeraj Kishan Kaul, Sr. Advocate, Mr. Mahesh Agarwal, Advocate, Ms. Sayree Basu Mullik, Advocate, Mr. Rishabh Parikh, Advocate, Mr. Rohan Talwar, Advocate, Mr. Deepak Joshi, Advocate, Mr. Raghav Agrawal, Advocate, Ms. Aarzoo Aneja, Advocate, Mr. E. C. Agrawala, Advocate, For the Respondent.
Mr. Gourab Banerji, Sr. Advocate, Mr. Harsha Peecharra, Advocate, Mr. Yoginder Handoo, Advocate, Mr. Rakesh Talukdar, Advocate, Mr. Ashwin Kataria, Advocate, Mr. Garvit Solanki, Advocate, For the Appellant / Mr. Neeraj Kishan Kaul, Sr. Advocate, Mr. Mahesh Agarwal, Advocate, Ms. Sayree Basu Mullik, Advocate, Mr. Rishabh Parikh, Advocate, Mr. Rohan Talwar, Advocate, Mr. Deepak Joshi, Advocate, Mr. Raghav Agrawal, Advocate, Ms. Aarzoo Aneja, Advocate, Mr. E. C. Agrawala, Advocate, For the Respondent.
Section 60(6) of the IBC mandates the exclusion of the moratorium period when computing the limitation period for any suit or application filed by or against a corporate debtor, regardless of whether the moratorium actually prohibited the institution of that specific proceeding.
Headnote:
Section 60(6) - Insolvency and Bankruptcy Code - [Impact of Section 60(6) of the Insolvency and Bankruptcy Code on the Arbitration and Conciliation Act, 1996] - [Section 60(6) of the Insolvency and Bankruptcy Code] - The court discussed the impact of Section 60(6) of the Insolvency and Bankruptcy Code on the Arbitration and Conciliation Act, 1996, and whether the provision gives rise to a new lease of life to a proceeding at the instance of the corporate debtor on the basis of a moratorium. The court analyzed the provisions of the IBC and the implications of the moratorium on the corporate debtor's ability to bring an application under Section 11(6) of the Arbitration and Conciliation Act, 1996. The court highlighted key legal provisions, their interpretations, and how they influenced the court's decision, ultimately concluding that Section 60(6) of the IBC contemplates the exclusion of the entire period during which the moratorium was in force in respect of a proceeding at the hands of the corporate debtor.
Fact of the Case:
The appellant placed a purchase order with the respondent, but later issued a termination notice due to alleged inaction. The respondent approached the High Court, and after rejection of its representation, invoked the provision for arbitration. The National Company Law Tribunal admitted an application under the IBC and declared a moratorium. The respondent filed an application under Section 11(6) of the 1996 Act, which was allowed by the High Court, appointing a former Chief Justice of a High Court as the arbitrator.
Finding of the Court:
The court found that Section 60(6) of the IBC contemplates the exclusion of the entire period during which the moratorium was in force in respect of a proceeding at the hands of the corporate debtor. The court dismissed the appeal, emphasizing the clear words used in the statute and the purport of the Insolvency and Bankruptcy Code.
Issues: The issues involved the impact of Section 60(6) of the Insolvency and Bankruptcy Code on the Arbitration and Conciliation Act, 1996, and whether the provision gives rise to a new lease of life to a proceeding at the instance of the corporate debtor on the basis of a moratorium.
Ratio Decidendi: The court's decision was influenced by the clear words used in Section 60(6) of the IBC, which contemplate the exclusion of the entire period during which the moratorium was in force in respect of a proceeding at the hands of the corporate debtor.
Final Decision: The appeal was dismissed, and there were no orders as to costs.
Legal Category Hierarchy
- insolvency and bankruptcy law
- arbitration law
- practice and procedure
Table of Contents
2. Whether Section 60(6), IBC excludes the moratorium period for applications filed by a corporate debtor, given that Section 14 does not prohibit the debtor from initiating proceedings. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 )
3. Analysis of literal and purposive interpretation of Section 60(6), IBC — Displacement of management during CIRP — Intent to provide a period of calm for corporate revival. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 )
4. Section 60(6) of the IBC mandates exclusion of the moratorium period in computing limitation for any suit or application filed by or against a corporate debtor. (Para 28 )
5. Appeal dismissed. (Para 29 )
6. Does Section 60(6) of the IBC apply to suits or applications filed by the corporate debtor?
Yes. The court held that Section 60(6) explicitly excludes the moratorium period in computing the limitation period for any suit or application filed by or against a corporate debtor. (Para 17 , 25 , 27 , 28 )
7. Does the fact that a corporate debtor is not barred from filing suits during a moratorium negate the benefit of Section 60(6)?
No. While Section 14 prohibits proceedings against the debtor, Section 60(6) is a separate provision for computing limitation that applies regardless of whether the debtor was legally barred from initiating the proceeding. (Para 24 , 25 )
8. What is the rationale for excluding the limitation period for a corporate debtor during the moratorium?
During the Corporate Insolvency Resolution Process, the erstwhile management is displaced and replaced by a Resolution Professional. The exclusion ensures the debtor's rights are protected even if the professional fails to initiate proceedings. (Para 24 )
JUDGMENT
K.M. Joseph, J. - Leave granted.
2. The foremost question which falls for determination by this Court is the impact of Section 60(6) of the Insolvency and Bankruptcy Code (hereinafter referred to as 'IBC' for brevity) and whether the aforesaid provision gives rise to a new lease of life to a proceeding at the instance of the corporate debtor on the basis of a moratorium which is put in place by virtue of the order passed under section 14 of the IBC and whether corporate debtor can take advantage of the same to bring the application in this case filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the 1996 Act').
3. Pursuant to an agreement dated 20.02.2015, the appellant placed a purchase order of Rs. 16,20,00,000/- with the respondent.
The appellant, however, issued a termination notice to the respondent on account of its alleged inaction and conduct which is described as non-responsive. This led to the respondent approaching the High Court of Delhi which finally culminated in a direction by the High Court to afford an opportunity of hearing to the respondent and to consider its representation. The appellant, however, rejected the representation by communication dated 17.05.2016. Invoking the provision in the contract providing for arbitration, the respondent addressed communication dated 07.06.2016. The appellant sent its reply on 20.7.2016 where it, inter alia, did not consent for either of the names suggested by the respondent and instead proposed to proceed for arbitration through the Delhi International Arbitration Centre (DIAC). On 14.5.2018 the National Company Law Tribunal (NCLT) Mumbai admitted an application under Section 10 of the IBC and declared the moratorium. On 28.11.2019, a resolution plan was approved by the NCLT. On 25.11.2020, the respondent filed an application under Section 11(6) of the 1996 Act. By the impugned order dated 14.12.2020, the High Court of Delhi has allowed the application filed under Section 11(6) and appointed a former Chief Justice of a High Court to be the arbitrator. It is apposite at this point itself to notice certain parts of the impugned order in this regard:
"6. Learned counsel are also ad idem that, in view of Section 12(5) of the 1996 Act read with the Seventh Schedule thereto, the arbitral mechanism, contemplated by the afore-extracted Clauses from the Purchase Order and the Agreement, cannot be allowed to operate, as the Chairperson of the NDMC would be disabled from appointing the arbitrator. This position stands crystallized in a number decisions, including the judgments of the Supreme Court in Bharat Broadband Network Ltd. v. United Telecoms Ltd. (2019) 5 SCC 755 and Perkins Eastman Architects DPC v. IISCC (India) Limited AIR 2020 SC 59, and of this Court in Proddatur Cable TV DIGI Services v. SITI Cable Network Limited MANU/DE/0178/2020.
7. The petitioner wrote to the respondent on 7th June, 2016, suggesting the names of two retired Judges of this Court as the sole arbitrator to arbitrate on the dispute.
8. The respondent, however, vide its response, dated 20th July, 2016, suggested that the matter could be referred to the Delhi International Arbitration Centre (DIAC), for being arbitrated.
9. Today, before me, learned counsel request the Court to appoint an independent arbitrator, who would conduct the arbitration under the aegis of the DIAC, and in accordance with the procedure established in that regard.
10. Learned counsel are also agreeable to pay the fees of the learned sole arbitrator in accordance with the Fourth Schedule to the 1996 Act."
It is in view thereto that the appointment of the arbitrator was made.
4. We have heard Shri Gourab Banerjee, learned senior counsel for the appellant, and Shri N. K. Kaul, learned senior counsel on behalf of the respondent.
Shri Gourab Banerjee, learned senior counsel, would contend that being a plea relating to limitation and since the aspect of limitation pertains to jurisdiction th
