M/S. JAI BALAJI INDUSTRIES versus D.K. MOHANTY & ANR.

Citation: [2021] 11 S.C.R. 350 · Decided: 01-10-2021 · Supreme Court of India · Bench: DINESH MAHESHWARI, VIKRAM NATH · Disposal: Dismissed
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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 11 S.C.R.
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M/S. JAI BALAJI INDUSTRIES
v.
D.K. MOHANTY & ANR.
(Civil Appeal No. 5899 of 2021)
OCTOBER 01, 2021
[DINESH MAHESHWARI AND VIKRAM NATH, JJ.]
Insolvency and Bankruptcy Code, 2016 – ss. 8, 9, 62 –
Arbitration and Conciliation Act, 1996 – The appellant and
respondent no.2 entered into Memorandums of Understanding,
whereby the respondent no.2 agreed to supply, 1 lakh and 7 lakh
metric tons of iron ore per month to the appellant – Dispute arose
between the parties as regards the requisite supply and payment –
Arbitration clause was invoked – In arbitral awards the respondent
company was held liable to make payment – Respondent company
filed petition u/s. 34 of the 1996 Act, which were dismissed by the
District Court – Appeals were filed before the High Court u/s.37 of
the 1996 Act – On 22.11.2019, the appeals were dismissed in default
for non-appearance of the respondent – On 17.12.2019, the
respondent filed restoration applications – These applications were
allowed on 02.03.2020 by the High Court – Before such restoration
of appeals, the appellant had sent two demand notices u/s.8 of the
2016 Code on 14.02.2020 – Appellant moved NCLT u/s. 9 seeking
initiation of CIRP against respondent company – NCLT took the
view that on the day the appellant served demand notices to the
respondent u/s. 8 and the date when the application u/s. 9 was filed,
no proceedings were pending and hence no dispute was pending –
Therefore, the NCLT admitted applications made by the appellant
u/s.9 of the Code in its capacity as an operational creditor; initiated
CIRP in relation to the respondent company – However, the NCLAT
held that a dispute was in existence prior to the issuance of demand
notices and applications for restoration were filed with advance
notice to the appellant- operational creditor – On appeal, held: On
facts, it remains indisputable that even if appeals were dismissed in
default on 22.11.2019, the respondent company indeed moved an
applications for restoration on 17.12.2019 with advance notice to
the appellant – Thus, on date of issuance of demand notices
(i.e.14.02.2020), the appellant was well aware that appeals u/s. 37
of the 1996 Act had not been decided on merits – This moving of
application for restoration of appeal u/s.37 of the 1996 Act and
[2021] 11 S.C.R. 350
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bringing it to the notice of the operational creditors is sufficient to
bring the matter within the four corners of ‘pre-existing dispute’,
so as to negate any attempt by the operational creditor to seek
insolvency resolution – Also, the default dismissal of the appeal
could only be regarded as a partial eclipse, which momentarily puts
dispute in hibernation – When restoration of appeal is granted, it
definitely re-activates the dispute – For the purpose and in scheme
of the Code, even pendency of an application for restoration is
sufficient to bring the matter within the four corners of “pre-existing
dispute” – The applications moved by the appellant for initiation of
CIRP were required to be rejected in terms of s.9(5)(ii)(d) of the
2016 Code – The NCLAT had rightly set aside the orders passed by
the NCLT.
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt.
Ltd.: (2018) 1 SCC 353 : [2017] 10 SCR 1006; Swiss
Ribbons Private Limited & Anr. v. Union of India &
Ors.: (2019) 4 SCC 17: [2019] 3 SCR 535 – relied on.
K. Kishan v. Vijay Nirman Company Pvt. Ltd.: (2018)
17 SCC 662 : [2018] 10 SCR 959; Vareed Jacob v.
Sosamma Geevarghese & Ors.: (2004) 6 SCC 378 :
[2004] 1 Suppl. SCR 534; Addagada Raghavamma &
Anr. v. Addagada Chenchamma & Anr.: AIR 1964 SC
136 – referred to.
Case Law Reference
[2018] 10 SCR 959
referred to
Para 7.3
[2017] 10 SCR 1006
relied on
Para 8.2
[2004] 1 Suppl. SCR 534
referred to
Para 8.2
[2019] 3 SCR 535
relied on
Para 12
CIVIL APPELLATE JURISDICTION: Civil Appeal No.5899 of
2021.
From the Judgment and Order dated 17.08.2021 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Insolvency) No.889 of 2020.
With
Civil Appeal No.5904 of 2021
Diwakar Maheshwari, Karun Mehta, Advs. for the Appellant.
M/S. JAI BALAJI INDUSTRIES v. D.K. MOHANTY & ANR.
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SUPREME COURT REPORTS
[2021] 11 S.C.R.
The following Order of the Court was passed :
ORDER
1. By way of these appeals under Section 62 of Insolvency and
Bankruptcy Code, 2016,1 the appellant, said to be an operational creditor
of the respondent No. 2 company, seeks to questi
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