Read Time: 09 minutes

The Supreme Court on Tuesday continued hearing the Arbitration case concerning Indus Biotech.

A Bench led by Chief Justice S.A. Bobde is currently hearing a matter seeking appointment of Arbitrator, where Application under Section 7 IBC has already been moved. 

On the previous hearing, Senior Advocate(s) Mr. Shyam Divan, Mr. C.A. Sundaram and Mr. Mukul Rohatgi had argued that the dispute at hand is Arbitrable and that NCLT had no jurisdiction to entertain an application under Section 7, IBC as the very ingredients of it are not met.

In today’s hearing, submissions were made by Senior Advocate(s) Mr. N.S. Nadkarni, Dr. Abhishek Manu Singhvi, Mr. Neeraj Kishan Kaul and Mr. Iqbal Chagla.  

Hearing commenced with Senior Advocate Nadkarni’s submissions. It was his brief contention that the dispute herein is Arbitrable and therefore should be referred to the Arbitration Tribunal.

Dr. Singhvi made elaborate submissions, placing reliance on statutory provisions and settled precedents. It was submitted that Kotak investments had subscribed for OCPRS; Optionally Convertible Preference Shares, payable on termination of redemption date. It is the failure to pay the said redemption value that the debt required for section 7 proceedings has hereby accrued. Reference was drawn to the parent agreement, which said, “On and after the redemption date, the redemption value shall constitute a debt.”

It was further argued that the said clause creates an Estoppel over the opposite party and any submission to the contrary will be barred by the principle of Estoppel.

The next submission was that the invocation of Arbitration agreement under Section 8, was purely ‘counter blast’ to Section 7 application moved by Kotak Investments. “August 16, 2019 is my Section 7 application. My learned friend sends Arbitration invocation notice as a pure counter blast on September 20, 2019, after my petition is filed, only to render the provisions of IBC redundant”, emphasized Senior Counsel Dr. Singhvi.

Significant dates are read out to highlight the chain of events.

Broad submissions as classified by the learned counsel were (i) Dispute on a debt is not relevant under S.7 to take the matter to Arbitration (ii) Determination of default vests exclusively by IBC agencies; NCLT/NCLAT (iii) IBC, 2016 is both Special and Latter (iv) It is a Classic in Rem legislation, per se non-arbitrable (Vidya Drolia judgment).

Provisionary reading of Section 5(8) IBC, to submit that wide amplitude of debts are covered and payable as a “financial debt” followed by Section 63 to submit that the exclusive jurisdiction over matters as the present one, vests with the NCLT/NCLAT, was undertaken by the Learned Senior Counsel.

At this juncture, CJI enquired if Arbitration Tribunal can be referred as ‘Authority’ under Section 63 of the Code. Dr. Singhvi responded in affirmation, pleading that the Tribunal is an authority, for that matter sole arbitrator is also an authority for the purpose of Section 63. The bench extended the question to whether Conciliation can be referred as an authority, to which the learned counsel replied yet again in affirmation as the word ‘proceeding’ under Section 63 would include a ‘regulated proceeding’ as that of Conciliation.

Strong reliance was placed on Innoventive Industries v. icici bank limited, Vidya Drolia (3 judge bench, Para 60), Eros International v. Telemax (Bombay High court judgment by Justice Patel, Para 10), Booz Allen (Para 32, 36, 42), Swiss Ribbons judgment, Pioneer judgment (Para 29) and Bankruptcy Law Reforms Committee Report.

A very interesting question was raised at this point by Justice Ramasubramanian; “The dispute can be divided into two parts; dispute with respect to a debt, dispute with respect to the quantum of debt. If the application under S.7 IBC is accepted following which an IRP is appointed and the IRP decides the voting share of the creditor in proportion to quantum of debt, why can't the authority accepting application under Section 8 (Arbitration Tribunal) determine the debt.”

In essence, the bench through Justice Ramasubramanian questioned the exclusivity of jurisdiction with NCLT/NCLAT as submitted by the Learned Senior Counsel.

Senior Advocate Mr. Neeraj Kishan Kaul reiterated on existence of a debt.

“If at all there is an Arbitration, we are a Foreign entity for which S. 47, 48, 49 are attracted. Additionally my argument is on Party autonomy. The agreement provides for a panel of Arbitrators, no deviation to be granted”, submitted the learned counsel.

Senior Advocate Iqbal Chagla opposed Arbitration; submits, however if the Court proceeds to direct for an Arbitration, a common Arbitration cannot follow as there are four separate supplemental agreements with different schemes of appointment.

The bench gave time for submitting written submissions by Friday.