Bombay High Court: NCLAT Cannot Impose Any Restriction On High Court To Entertain Section 9 or any other Plea under Arbitration Act

Bombay High Court: NCLAT Cannot Impose Any Restriction On High Court To Entertain Section 9 or any other Plea under Arbitration Act

The Bombay High Court (HC) on 9 April 2021, in the case titled Bay Capital Advisors Pvt. Ltd. (Petitioner) v. IL & FS Financial Services Ltd & Ors. (Respondents) held that the words 'court of law' can't be 'read down', because other than the National Company Law Tribunal (NCLT), there is no other judicial authority over which the National Company Law Appellant Tribunal (NCLAT) exercises such superintending power.

The Court dealt with the issue- Is a stay order by the (NCLAT) on institution or continuation of suits or other proceedings against a company and its entities binding on High Courts?

Justice GS Patel answered the question negatively while hearing an application for interim relief under Section 9 of the Arbitration and Conciliation Act (Arbitration Act).

The HC emphasized that there was an order of the NCLAT in another case staying proceedings against IFIN, and hence, the plea by Bay Capital is not maintainable.

In the instant matter, the Appellate Tribunal invoked the provisions of the Companies Act 1956 and had passed an order in the larger public interest.

The NCLAT directed that there would be a stay on the institution or continuation of suits or any other proceedings against IL&FS and its 348 group companies in any court of law, tribunal, arbitration panel, or arbitration authority.

The Appellant argued that the Companies Act does not give the NCLAT a power of superintendence specifically over courts that are neither subordinate to the NCLAT nor subject to its superintendence.

Justice Patel concluded that the NCLAT has no jurisdiction over the HC even on its original side (as it was a chartered High Court) hence the HC does not fall within the Appellate Tribunal's jurisdiction or superintendence.

Justice Patel stated that the NCLAT cannot pass orders under Section 9 and other such Sections under the Arbitration Act which as per the statute fall before the HC itself. Neither are the provisions of the Arbitration Act specifically subjected to the provisions of the Companies Act.

As per Section 35 of the Code of Civil Procedure which mandates costs unless the Court otherwise decides, the Court imposed an amount of Rs 7.5 lakh payable by Bay Capital to IFIN within two weeks from today. If not paid, it will carry interest at the rate of 9 percent per annum (interest on costs as permitted by Section 35).

The HC while dismissing the petition ordered that the NCLAT order cannot and does not come in the way of the High Court making an appropriate order under Section 9 of the Arbitration Act.