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Arbitration Clause In Agreement Is Not An Embargo On Filling Under Insolvency Code

Cause Title : Mr. Shahi Md. Karim vs M/s. Kabamy India LLP, Company Appeal (AT) (CH) (Ins.) No. 16 of 2023, National Company Law Appellate Tribunal At Chennai

Date of Judgment/Order : 25/01/2023

Corum : Justice M. Venugopal, Member (Judicial) & Ms. Shreesha Merla, Member (Technical)

Citied: 

Background

An appeal against order of the NCLT, Hyderabad admitting an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, was filed by the Suspended Director of the Corporate Debtor.

The Appellant, has challenged the Admission Order on the ground that there was an Arbitration Clause in the C & F Agreement and that the Respondent ought to have invoked this Clause.

Judgment

The NCLAT dismissing the appeal decided that there is no embargo on the Operational Creditor, to file a Section 9 Petition, under I & B Code, 2016, even if there is an Arbitration Clause, in the Agreement. The scope and objective of the Code is Resolution, and not a Recovery Mode / Forum. In the instant case, the Adjudicating Authority, based on the material on record, had arrived at a conclusion that there were recurring defaults on behalf of the Corporate Debtor and that the Operational Creditor, has requested for full and final payment of the outstanding dues. The Corporate Debtor vide Reply dated 01.02.2022, requested for dispatch of the inventory stocked in the warehouse in Mumbai. The Operational Creditor in reply to the email, sent an email dated 02.02.2022, highlighting the outstanding dues, along with the Ledger attached. But, there was no response and the Operational Creditor sent one more email dated 29.03.2022, demanding the outstanding total dues of Rs.3,12,81,028/- and therefore issued a Legal Notice dated 28.06.2022, for which, the Corporate Debtor sent a ‘Reply’ dated 12.07.2022, but the amounts were not paid. Therefore there is no illegality or infirmity in the impugned order of the Adjudicating Authority.

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