Moratorium under IBC not applicable if proceedings do not endanger Corporate Debtor’s assets
In the matter of Power Grid Corporation of India Ltd. v. Jyoti Structures Ltd., the High Court of Delhi (“Court”), on December 11, 2017, held that proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”), for setting aside the arbitral award (in the nature of a money decree) passed in favour of the corporate debtor by the arbitral tribunal did not attract the provisions of Section 14 of the Insolvency and Bankruptcy Code, 2016 (“Code”).FACTS
An arbitral award in the nature of a pure money decree was awarded in favour of Jyoti Structures Ltd. (“Corporate Debtor”), in a dispute between the Corporate Debtor and Power Grid Corporation of India Ltd. (“Petitioner”). Subsequently, the petitioner filed a petition challenging the award under Section 34 of the Act.
During the pendency of the proceedings under Section 34 of the Act, an application was filed by a financial creditor of the Corporate Debtor under Section 7 of the Code, before the National Company Law Tribunal, Mumbai (“NCLT”), seeking initiation of the corporate insolvency resolution against the Corporate Debtor and by an order dated July 04, 2017, the NCLT admitted such application and declared a moratorium in terms of Section 14 of the Code.
Whether the petition challenging the award is liable to be stayed on account of the moratorium declared under Section 14(1)(a) of the Code.
The Corporate Debtor contended that if the proceedings were stayed, the Corporate Debtor would be unable to execute the award given in its favour for an extended period till the moratorium exists and would be unable to recover its dues.
The Court held that the proceedings before it under Section 34 of the Act would not be hit by the embargo of Section 14(1)(a) of the Code for the following reasons: