Case: Transmission corporation of Andhra Pradesh ltd. vs. equipment conductors & cables ltd

Date of Judgement: October 23, 2018

Citation: CIVIL APPEAL NO. 9597 OF 2018

Bench: Hon’ble Justice A Bhushan and Hon’ble Justice A Sikri

Appellant: Transmission corporation of Andhra pradesh ltd.

Respondent: Equipment conductors & cables ltd.

Statutes referred:

  • Arbitration and Conciliation Act, 1996
  • Insolvency and Bankruptcy code, 2016

Facts:

1. The “Appellant company” is engaged in the activities relating to transmission of electricity.

2. Several contracts were awarded to the Respondent by the Appellant for supply of certain goods and services. But, when disputes arose between the parties, Arbitration proceedings were initiated by the Respondent.

3. The proceedings ended up with award being passed in favour of Respondent for invoice no. 58-82. But, the Arbitral council rejected claim for invoice no. 1-57 discovering them to be time barred.

4. The Respondent filed an execution Petition under Order XXI Rule 21 of the Civil Procedure Code for execution of the judgment passed by the Arbitral Council. The Respondent’s claim for the invoice nos. 58-82 and invoices nos. 1-57 also were allowed and the execution was awarded.

5. These order was challenged by the Appellant by filing a Revision Petition before the Hyderabad High Court. The Honourable Court allowed the Revision Petition holding that there was no award in respect of claim towards invoices 1-57.

6. The Respondent then approached the NCLT and NCLAT by means of a Company Petition under Section 9 of Insolvency and Bankruptcy code, 2016 read with Rule 6 of Insolvency and Bankruptcy code, 2016. But, this petition was dismissed by the NCLT and NCLAT.

Issue involved:

  • Whether the Respondent is allowed to appeal for the execution of disputed invoice no. 1-57?

Rationale:

1. As the operational creditor has filed an application, the adjudicating authority must reject the application under Section 9(5) (2) (d) if notice of dispute has been received by the operational creditor or there is a record of dispute. Such notice must bring to the notice of the operational creditor, the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties.

2. The Respondent had no valid claim under those invoices. There is neither any award of the Arbitral Council with respect to invoice no. 1-57 nor was there an order of any other court regarding these invoices. The Arbitral Council especially rejected the claim of the Respondent as time barred.

Section 9(5) (ii) (d) of the insolvency and Bankruptcy code, 2016 states that;

The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order reject the application and communicate such decision to the operational creditor and the corporate debtor, if:-

Notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility.

Section 34 of arbitration and conciliation act states that an arbitral award may be set aside by the Court only if:-

(a) The party making the application furnishes proof that—

(i) A party was under some incapacity, 

(ii) The arbitration agreement is not valid under the law, to which the parties have subjected it,

(iii) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case.

Section 36 Enforcement:- Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.”

Judgement:

  • As per the consequence the Apex court disallowed the appeal and no order as to costs.

Conclusion:

This case emphasize the insolvency process, relating to operational creditors and other adjudicatory procedures under various statutes.

The Court has held that a debt can be known as an operational debt only when there is no dispute regarding the amount in question. It is only after the concluding adjudication in case of the disputed amount that a debt can be considered as an operational debt.

Drafted By: Param Mansinghka

Edited By: Tanvi Mahajan, Publisher, Law Insider

Published On: February 19, 2022 at 23:00 IST

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