Transgulf Frozen Food Containers Pvt Ltd v. Shriram Transport Finance Co Ltd

1. The present petitions challenge the impugned order dated March, 2018 by which the Appellate Court i.e. the Id. ADJ,granted a stay subjectto the deposit ofRs. 4,00,000/- qua each ofthe impugned awards in the form of an FDR. This order was challenged before this Court and on 7^^ March, 2019, the condition was modified from Rs. 4,00,000/- to a sum of Rs. 2,00,000/- to be deposited by the Petitioner.

2. The brief background of these petitions is that the Petitioner had availed ICICI's loan facility, which stood transferred to the Respondent. Some instalments were paid by the Petitioner, however, some remained outstanding. In order to recover the outstanding amounts, a sole arbitrator was appointed in the year 2016 to adjudicate upon the disputes and determine the amount payable by the Petitioner. The Petitioner participated in the said arbitration proceedings.However,the sole arbitrator-Mr.Rajesh Kumar(Retd.ADJ)passed away.

3. The case of the Petitioner is that, thereafter, when Mr. B.L Garg (Retd. ADJ) was appointed as the sole arbitrator by the Respondent, no notice was ever given to the Petitioner and only a publication wasclaimed to have been made in a newspaper called Bande Mataram. Accordingly, it is claimed that Mr.B.L Garg passed the award ex parte, without notice being served upon the Petitioner, and hence, petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter, "Section 54petition") CM(M)261/2019&connectedmatters ^ N were filed before the Id.Trial Court.Initially,in the Section 34petitions,the Id. ADG had granted a conditional stay subject to the deposit of Rs. 4,00,000/- which condition was later modified to Rs. 2,00,000/- by this Court.

4. Mr. Nagrath, Id. counsel for the Respondent,submits that the NCLT is now seized of the insolvency proceedings in respect of the Petitionercompany and vide order dated 17^^ September,2019,a moratorium order has been passed in respect of the Petitioner-company. Thus, in any event, the amount ofeither Rs. 2,00,000/- or Rs. 4,00,000/- cannot be recovered from the Petitioner so long as the NCLT is seized ofthe insolvency proceedings. Mr. Sunil Diwan, Chairman and Managing Director of the Petitionercompany, submits that the Section 34 petition has been heard on 2"'' September, 2019 and orders have been reserved. Mr. Nagrath,Id. counsel, however,submits that he is not aware ofthe proceedings before the Id. ADJ. He further submits that the Petitioner's claim ofnon-service ofnotice ofthe appointment of a second arbitrator is incorrect as the notice was sent by speed-post but was received back as unserved,as would be evidentfrom the arbitral record. Notice was then served through publication.He submits that as per his instructions,the Id.ADJ has heard the matter and wasinformed of the order passed bythe NCLT dated 17^^ September,2019.

5. Submissions have been heard on behalfofboth parties. The admitted position on record is that the Petitioner-company is now under insolvency. According to Mr. Sunil Diwan, Chairman and Managing Director of the Petitioner-company, who appears in person, the business ofthe Petitioner has been shutdown and therefore the Petitionerhas not deposited the sum of Rs. 2,00,000/- before this Court. He submits that he has moved an CM(M)261/2019&connectedmatters Page3of[6] Is application seeking waiver,however,the said application is not on record as, according to him, he did not pay the fee of his lawyer and hence, the application was notlisted before the Court.

6. After hearing both the parties, it is clear that the Petitioner is now undergoing insolvency proceedings and moratorium has already been declared as per order dated 17'^ September,2019. The relevant portion of the order ofthe NCLT reads as under: "34. In the aforesaid background it is seen that the applicant clearly comes within the definition of Financial Creditor. Respondent has neither denied the ailment of various loans granted by the financial creditor, nor denied the execution of Loan cum Hypothecation Agreements. Besides there is an enforceable award in favour of the applicant. The materialplaced on record confirms thatthe respondent corporate debtor committed defaultin repaymentofthe financial debt. On a bare perusal of Form-Ifiled under Section 7 ofthe Code read with Rule 4 ofthe Rules shows that theform is complete and there is no infirmity in the same. It is also seen that there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete in all respect and the applicant financial creditor is entitled to claim its outstandingfinancial debtfrom the corporate debtor and thatthere has been defaultinpaymentofthefinancialdebt.

35. As a sequel to the above discussion and in terms of Section 7(5) (a) of the Code, the present application is admitted.

36. Mr. Navjit Singh having registration number IBBI/IPA-001/IP-P00314/2017-18/10578 resident of 218-a, Floor,Shop No.4,Rama Market,Pitampura, Delhi-110034 with email-id naviit92ca(d).2mail.com is appointedas anInterim ResolutionProfessional.

37. We direct the applicantFinancial Creditor to CM(M)261/2019&connectedmatters ^ deposit a sum ofRs. 2Lac with the Interim Resolution Professional namely Mr. Navjit Singh to meet out the expenses to perform thefunctions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Processfor Corporate Person)Regulations, 2016. The needfulshall be done within three daysfrom the date of receipt of this order by the Financial Creditor. The said amount however be subject to adjustmenttowards Resolutionprocess costasper applicable rules.

38. Inpursuance ofSection 13(2)ofthe Code, we direct that public announcement shall be made by the Interim Resolution Professionalimmediately(3days as prescribed by Explanation to Regulation 6(1) of the IBBI Regulations, 2016) with regard to admission of this application under Section 7ofthe Insolvency and Bankruptcy Code,2016.

39. We also declare moratorium in terms of Section 14 ofthe Code. The necessary consequences of imposing the moratoriumflowsfrom the provisions of Section 14(1)(a), (b), (c), and(d)ofthe Code. Thus, thefollowingprohibitions are imposed:- "(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution ofanyjudgement, decree or order in any court oflaw, tribunal, arbitration panelor other authority; (b) transferring, encumbering, alienating or disposingofby the corporate debtor any ofits assets or any legalrightor beneficialinteresttherein;

(c) any action toforeclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction ofFinancial Assets and Enforcement of Security Interest Act, 2002;

(d) the recovery ofany property by an owner or lessor where such property is occupied by or in the CM(M)261/2019& connectedmatters Page5of[6] possession ofthe corporate debtor." The Petitioner submits that he has challenged the order dated 17^^ September, 2019 before the NCLAT. But it is not disputed that the moratorium under Section 14 ofthe Insolvency and Bankruptcy Code,2016 continues.

7. Insofar as the question ofservice ofnotice regarding the proceedings before the second arbitrator is concerned,that is a question to be examined by the Id. ADJ in the Section 34 petition and not by this Court.Since the last hearing before the Id. ADJ was stated to be on 2^^ September,2019,which is prior to the order ofthe NCLT,it is directed that the NCLT order dated 17'" September,2019 be placed by the parties before the Id. ADJ.

8. The Petitioner has not deposited the amounts as directed by this Court. The NCLT order would have to be considered by the Appellate court and appropriate orders would have to be passed. No purpose is served in keeping the present petitions pending. Accordingly, the petitions and all pending applications are disposed of. Copy of this order be sent by the Registry to the Ld. ADJ hearing Arbitration Case Nos. 1252/17, 1273/17, 1258/17, 1260/17, 1266/17, 1267/17, 1272/17, 1263/17, 1265/17, 1257/17, 1254/17, 1277/17, 1256/17, 1262/17, 1268/17, 1274/17, 1278/17, 1253/17, 1264/17,1269/17,1270/17,1276/17,1255/17,1259/17,1275/17 and 1261/1 titled Transgulf Frozen Food Containers Pvt. Ltd. v. Shriram Transport Finance CompanyLtd.&Anr.