Company may continue arbitration despite approval of CIRP : Supreme Court
The issue whether a company involved in arbitration proceedings may continue the arbitration proceedings even after CIRP has been been approved by COC of the company was considered by the division bench of Supreme Court consisting of Justice AM Khanwilkar and Dinesh Maheswari in the matters between Fourth Dimension Solutions Ltd. v. Ricoh India Ltd. Civil Appeal No. –5908 of 2021 decided on 21.1.2022.
The facts of this are defendant Ricoh owed the appellant Rs.511 crores. It is stated that NCLT has approved a resolution plan that dismisses the appellant’s (Fourth Dimension Solutions Ltd.) claims, even though the appellant is the highest operational creditor of the respondent company Ricoh India. The Supreme Court also upheld the resolution plan, despite the appellant’s objection that the same decision was pending before NCLAT. However, while the higher court approved the plan, it directed NCLAT to decide on the merits of appellant’s objection to the substantive resolution plan. Despite this, NCLAT said it would be impossible for the court to do so, as the Supreme Court approved the resolution plan. The NCLAT took a contrary position and rejected the appellant’s objection to the resolution plan. Thus forcing the appellant approached the Supreme Court.
The counsel on behalf of the Appellant contended that they would be left with no “recourse to satisfy his legitimate claims” even though it is the highest operational creditor and has Rs. 511 crores owed to it. It has also invoked arbitration proceedings against Ricoh but it was adjourned sine die after filing insolvency petition.
The counsel on behalf of the Respondent contended that the operational creditors of the company seek permission under the insolvency proceedings to continue the arbitration proceedings even though the COC of the company have already approved the CIRP.
The Supreme Court held continuance of arbitration proceeding is permitted and dismissed the appeal, giving the parties the freedom to pursue all claims brought to them in the proceedings pending at the relevant time. It was stated that arbitration proceeding are continuing between the parties. If so, all disputes available to both parties will be settled on its own merits in accordance with the law in the proceedings in question.
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Judgement reviewed by Bhaswati Goldar