Steel Authority Of India Limited vs Mr. Ravi Sethia, Resolution Professional Of McNally Bharat Engineering Company Limited

Per: Rohit Kapoor, Member (Judicial)

The instant application has been filed under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 by Steel Authority of India Limited, which is an Operational Creditor of the Corporate Debtor wherein the applicant seeks that permission be accorded by this Tribunal to allow the applicant to continue with the arbitration proceedings against the Corporate Debtor.

Brief Facts of the Case are summarised herein below:

The applicant states that the Financial Creditor had filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor and the same was admitted by this Hon'ble Tribunal on 29.04.2022.

The applicant is the Operational Creditor of the Corporate Debtor and has filed this Application in order to seek permission from this Hon'ble Tribunal to allow it to continue with the arbitral proceedings that are pending before Hon'ble Mr. Justice T.S. Thakur, Hon'ble Mr. Justice Badar Durrez Ahmad and Dr. Vinod Kumar Agarwal, numbered as AC-2182 (M/s Steel Authority of India Limited (SAIL) versus M/s McNally Bharat Engineering Company Limited & Southern Cooling Tower Private Limited).

Applicant states that arbitral proceedings had commenced between the Corporate Debtor and Applicant on account of disputes arising under arbitration agreement dated 22.09.2012. It is further stated that the Corporate Debtor failed to mobilize enough resources and persistently failed to execute the work in accordance with the specified timelines under the contract. Due to non-adherence to the specified timelines for the completion of contract, the Applicant on 20.05.2016 had terminated the contract and informed the Corporate Debtor that the additional cost for execution of balance work would be recoverable from it against other liabilities.

The Applicant states that its claim may be classified as contingent since arbitral proceedings with respect to the dues are pending. It states that the arbitral proceedings be allowed to continue in the interests of justice for an award to be passed. It also undertakes not to execute any award passed in its favour while the moratorium continues to remain in effect.

The Applicant prays for the following reliefs: -

Heard the Learned Counsel appearing for both the parties and perused the records.

The limited issue that requires determination by this Adjudicating Authority is: - Whether the arbitral proceedings can continue in view of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 that came into force while admitting the Corporate Debtor into Corporate Insolvency Resolution Process (CIRP) on 29.04.2022?

While answering the issue raised before us we refer to the judgment of the Hon'ble Supreme Court in Alchemist Asset Reconstruction Pvt Ltd v. M/s Hotel Gaudavan Pvt. Ltd. & Ors.^{11.Civil Appeal No. 16929 of 2017 on 23.10.2017} where the Apex Court observed:

We also refer to Section 14 (1) (a) of the Insolvency and Bankruptcy Code, 2016 as reproduced hereinafter: -

A plain reading of Section 14 (1) (a) read with observations of the Hon'ble Supreme Court referred above leaves this Adjudicating Authority with no doubt to conclude that the arbitral proceedings under reference cannot continue after 29.04.2022, when the Corporate Debtor was admitted to CIRP along with declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 by this Adjudicating authority. Continuation of arbitral proceedings falls within the scope of moratorium under Section 14 (1) (a).

In view of the above legal position we are of the view, relief as asked for cannot be allowed and therefore this application is accordingly dismissed.