Matter: Hasan Shafiq v. CT – Technologies Aps and Anr.
Order dated: 14 February 2022
In the present case, B.Y. Agro and Infra Ltd. (B.Y. Agro) entered into an agreement with CT-Technologies Aps (CT-Tech) for purchasing certain products. The agreement contained an arbitration clause that all disputes between the parties shall be referred for settlement to the court of Arbitration of Switzerland. On account of failure of B.Y. Agro to make payments to CT-Tech towards goods supplied, CT-Tech filed an application before the NCLT for initiating CIRP of B.Y. Agro, and B.Y. Agro was admitted into CIRP by the NCLT. B.Y. Agro challenged the NCLT’s order before the NCLAT on the ground that the NCLT ought to have referred the matter to arbitration to the court of Switzerland as per the arbitration clause in the agreement.
NCLAT held that the Code has been given an overriding effect over inconsistent provisions of other laws, including any instrument having effect by virtue of such law. Using this reasoning, the NCLAT held that if an application under the Arbitration and Conciliation Act, 1996 is filed before the NCLT for referring the matter to arbitration, the NCLT shall first proceed to find out whether any default is there. If the NCLT is satisfied that there is a default, it will initiate CIRP of the corporate debtor and reject the prayer for arbitration. As in the present case the debt and default were admitted by B.Y. Agro, the NCLAT held that the NCLT had correctly initiated
CIRP of B.Y. Agro. As NCLAT found no error in NCLT’s order, the appeal was dismissed.