India – Litigation Snapshots.

13 August, 2018

 

New Plea of Jurisdiction permitted to be raised for the first time during Set-Aside Proceedings for an Arbitration Award 

 

In M/s Lion Engineering Consultants v. State of Madhya Pradesh & Ors. , the respondent had filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act ’) against an award passed in favour of the appellant. The respondent sought to belatedly amend this petition, which was rejected by the trial court, but was allowed by the High Court of Madhya Pradesh. The petitioner approached the Supreme Court contending, inter alia , that the amendment should not have been permitted as it introduced new grounds at the stage of the petition under Section 34 of the Arbitration Act, which had not been raised under Section 16 of the Arbitration Act before the tribunal. The appellant relied on MSP Infrastructure Ltd. v. MPRDC Ltd.  (‘MSP Infrastructure ’).

 

The Supreme Court overruled the MSP  Infrastructure judgement to hold that there is no bar to the plea of jurisdiction being raised by way of an objection under Section 34 of the Arbitration Act, even if no such objection was raised under Section 16, as both stages are independent of one another. The MSP  Infrastructure judgement had also held that public policy of India means the policy of the Union i.e ., central law and not State law. The Supreme Court overruled the same to hold that ‘public policy of India’ refers to law in force in India, whether State law or central law.

 

NCLAT Ruling on Maintainability of Application under the IBC after Winding Up Proceeding is Initiated

 

In Indiabulls Housing Finance Limited v. Shree Ram Urban Infrastructure Limited , the National Company Law Appellate Tribunal (‘NCLAT ’) was faced with the issue of whether an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (‘IBC ’) is maintainable when winding up proceedings against the ‘Corporate Debtor’ have been already initiated. The impugned order, passed by the National Company Law Tribunal, Mumbai (‘NCLT Mumbai ’) had dismissed the application as not maintainable as the winding up proceeding against the ‘Corporate Debtor’ had already been initiated by the High Court of Bombay. The NCLAT  upheld the NCLT  decision and held that once the second stage i.e. , the initiation of liquidation process, is initiated, then there is no question of reverting to the first stage i.e. , initiation of corporate insolvency resolution process (‘CIRP ’).

 

NCLAT stays admission of an Insolvency Petition against Reliance entities based on an Out-of-court Settlement

 

By orders dated May 15, 2018 and May 18, 2018, the NCLT  Mumbai had admitted a petition filed under Section 9 of the IBC  by Ericsson India Private Limited (‘Ericsson ’) against Reliance Communications Limited (‘RCom ’), Reliance Infratel Limited (‘RIL ’) and Reliance Telecom Limited (‘RTL ’). RC om, RIL  and RTL , along with certain financial creditors / the Joint Lenders’ Forum, had approached the NCLAT , seeking a stay on the ground that the CIRP  would prejudice recovery. On May 30, 2018, the NCLAT passed an order staying the CIRP  till September 30, 2018, to enable RC om to pay Ericsson . 550 crore (approx. US$  80 million) (out of the . 1150 crore (approx. US$  167 million) due) and settle the matter (‘NCLAT Order ’). The NCLAT  has granted a stay on the orders dated May 15, 2018 and May 18, 2018 passed by the NCLT  Mumbai, taking into consideration the stand of the parties that if the CIRP  was allowed to continue, financial and operational creditors may suffer more loss. The NCLAT  Order mandates the resolution professionals to allow the managements of RC om, RIL  and RTL  to function and has stayed the CIRP  until further orders.

 

This is arguably a precedent on the proposition that even after an operational creditor’s petition is admitted by the NCLT  and the CIRP  commences, the process can be reversed / stayed if the dues of the operational creditors are settled.