MILLENNIUM EDUCATION V. EDUCOMP INFRASTRUCTURE
COURT: The Supreme Court of India
CORAM: Justice Sanjeev Sachdeva
DATE OF JUDGEMENT: 13 May 2022
On 20.10.2014, Millennium Education Foundation (“Petitioner”) and EducompInfrastructure and School Management Limited (“Respondent”) entered into a collaboration agreement (“Agreement”).
That certain disputes have arisen between the Petitioner and Respondent in respect of payments to be made as per the terms of the agreement. Accordingly, on 31.12.2021 a demand notice/letter was issued by the Respondent, demanding the payment of certain operational dues from the Petitioner.
The Petitioner vide its reply-cum-notice of dispute dated 13.01.2021 disputed the claim of Respondent and demanded payment of Rs. 1,97,70,192/- from the Respondent. The Petitioner also contended that the disputes had arisen between the parties and consequently proceeded to appoint an Arbitrator under clause 17 of the Agreement. However, considering the view taken in the judgement of Supreme Court in Perkins Eastman Architects DPC Vs.
HSCC (India) Ltd. the Petitioner moved subject petition under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).
The Respondent has filed a petition under Section 9 of the Insolvency and Bankruptcy Code (“IBC”) and the same was pending before the National Company Law Tribunal (“NCLT”). The Petitioner has filed subject petition under section 11 of the Arbitration Act during the pendency of petition under section 9 of IBC.
Whether court has power to decide petition under section 11 of Arbitration Act during the pendency of petition under section 9 of the IBC?
The Court observed that there is no dispute in regards to execution of the Agreement or in respect of arbitration clause in the agreement. The court also opined from the perusal of demand notice/letter and reply to the same, it is clear that there are disputes between the Petitioner and Respondent.
The court was of the view that reliance placed on Indus Biotech by the Respondent is misplaced as the Hon’ble Apex Court in said judgment has held that the proceedings under IBC will take precedence and the NCLT is required to adjudicate the petition filed before it on its merits without being influenced by the pendency of the application filed under section 8 of Arbitration Act.
Finally, relying upon the apex court judgement in Indus Biotech, the Hon’ble high court held that if the petition under IBC is admitted by the NCLT, then automatically moratorium will come into play and accordingly, proceedings under Arbitration Act will be suspended during the moratorium. However, mere pendency of a petition which has not been admitted and no moratorium has been issued, no embargo can be placed on the proceedings under the Arbitration Act and the Petitioner can seek reference of disputes and appointment of Arbitrator.