NCLAT says it isn't obliged to direct parties to go for arbitration

NCLAT says it isn't obliged to direct parties to go for arbitration

The tribunal held that the Appellant's application satisfies all the ingredients and it deserved to be admitted

The National Company Law Appellate Tribunal (NCLAT) observed that it is not for this tribunal to direct the parties to go for arbitration as the possibility of arbitration was raised at the appeal stage and neither parties had referred the matter for arbitration.

The NCLAT at New Delhi set aside the order of the National Company Law Tribunal (NCLT) regarding rejecting the application filed for initiation of the corporate insolvency resolution process (CIRP) by the Operational Creditor.

The NCLAT Corum comprising of Justice A.I.S. Cheema and Dr Alok Srivastava observed that the application is maintainable on account of the unpaid debt being more than Rs 1 lakh, which is the threshold amount. It further noted that the Corporate Debtor did not respond to the notice issued by the Operational Creditor u/S 8(2) of the Insolvency Bankruptcy Code, 2016 (IBC). It also found doubts regarding the veracity of the dispute and its pre-existence, as claimed by the Corporate Debtor.

The factual matrix of the case is that the Appellant who is the Operational Creditor – M/s Manipal Media Network Ltd and the Respondent who is the Corporate Debtor – M/s Vishwakshara Media Pvt. Ltd had entered into three agreements wherein the Appellant became the printing partner of the Corporate Debtor for printing three newspaper editions and supplements of these newspapers. These three separate agreements were signed on 4 December 2015 by both the parties and the expiry of the term of the agreements was on 3 December 2017.

However, the Respondent-Corporate Debtor kept on making requests through emails for printing jobs even after the expiry of the term of the agreements and the Appellant-Operational Creditor kept on raising invoices for printing charges every fortnight as was required under the agreement. Later, the Respondent claimed that the agreements were not in force for the period for which the Appellant claimed its dues for payment and hence no payments were made to the Appellant.

Therefore, the application was filed under Section 9 of the IBC by the Appellant before NCLT at Bengaluru which was dismissed on the ground of pre-existing dispute and therefore, the Appellant moved to the NCLAT at New Delhi against the said order.

The Corporate Debtor claimed that the actions taken after the lapse of the said agreements are invalid and he is not obliged to make payments for such print jobs. The NCLAT, however, observed that there is a catena of e-mail communications between the parties where the Operational Creditor is seeking payment and the Corporate Debtor is asking for time to clear the pending payments.

Clause 24 of the said agreements were also raised by the Corporate Debtor, which provided that the matter has to be referred to an arbitrator under the Arbitration and Conciliation Act in case of any dispute. However, the issue of the possibility of arbitration was raised at the appeal stage and neither of the parties had referred the matter for arbitration.

Therefore, it observed that it is not for this tribunal to direct the parties to go for arbitration.

The NCLAT concluded that the Appellant and the Respondent continued in their relationship of Corporate Debtor and Operational Creditor even after 3 December 2017 by giving orders by email and hence effectively the agreements continued to bind the parties. It observed that the Corporate Debtor accepted the invoices raised in various emails by promising to make payments and buying time for making these payments.

The NCLAT held that the Appellant's application under Section 9 of the IBC satisfies all the ingredients as laid down in law and it deserved to be admitted. It remitted the matter back to NCLT for admitting the application unless parties settle the dispute before such an order.