ARTICLE
17 January 2025

Dispute Resolution & ADR Newsletter - January 2025

Fox & Mandal

Contributor

Our focus on responsive and collaborative engagement with our clients is motivated by a desire to seek alignment of values, purpose and ambition. Our extensive clientele extends across varied industry sectors, Fortune 500 companies, domestic conglomerates, startups, PSUs, MNCs, and non-profits. We have grown and expanded to keep pace with our clients and have a team of 20 partners and over 120 professionals across our offices in Kolkata, Mumbai and New Delhi. Even as our footprint continues to grow in India, F&M’s team supports our clients’ global operations and cross-jurisdictional requirements through a network of international law firms and advisors.
The January 2025 edition of Fox & Mandal's Dispute Resolution & ADR newsletter examines the scope for an arbitral tribunal to clarify its award after lapse of the period prescribed for such purpose; continuation of assessment proceedings by statutory authorities during CIRP and liquidation; guidelines for interim release of vehicles seized under the NDPS Act for carrying contraband; and other recent decisions of the Supreme Court, various High Courts and Tribunals.
India Litigation, Mediation & Arbitration

Extension of statutory period to seek clarification and rectification of arbitral award

NDMC v. SA Builders Ltd

Supreme Court of India | December 17, 2024

2024 SCC OnLine SC 3768

The Supreme Court has clarified that in certain circumstances such as conduct of the parties (i.e. participation in clarificatory proceedings before the arbitral tribunal) or permission by the supervisory court, an arbitral tribunal can issue clarifications and rectify errors in an award despite lapse of the statutory period of 30 days under Section 33 of the Arbitration and Conciliation Act, 1996 (Act). By implication, an agreement between the parties to waive the statutory period contemplated under Section 33(1) is not required to be a written agreement. Notably, the judgment highlights a practical, party-driven approach to procedural flexibility in arbitration, and reinforces the principle that arbitral tribunals maintain a certain degree of autonomy in correcting errors or providing clarifications even beyond the typical statutory period, provided the parties are not prejudiced and have actively participated in the process.

SUMMARY OF FACTS

In an arbitration between SA Builders and North Delhi Municipal Corporation (NDMC), the arbitral tribunal rendered its award granting a sum of INR 1.7 crore to SA Builders with post-award interest at 18% per annum (Award).

During execution of the Award, a dispute arose regarding the computation of post-award interest, i.e. whether the same should be calculated only on the principal sum awarded or on the aggregate of the principal and the pre-award interest.

The Delhi High Court allowed SA Builders to seek clarification from the arbitral tribunal on this point, and the tribunal clarified that the post-award interest should run on the aggregate of the principal and pre-award interest (Clarification).

Aggrieved, NDMC approached the Supreme Court against the Clarification.

DECISION OF THE COURT

On the issue of whether post-award interest, granted under Section 31(7)(b) of the Act, should be calculated only on the principal sum or on the aggregate of the principal and the pre-award interest, the Supreme Court affirmed the Clarification relying on its own decision in Hyder Consulting (UK) Ltd v. Governor, State of Orissa1.

On the jurisdiction of the arbitral tribunal to issue clarifications or rectify errors in the Award after the lapse of the 30-day period specified in Section 33(1) for such purpose, the Court held that this statutory period is not inflexible and can be extended if so agreed upon by the parties.

The Court noted that despite the lapse of the statutory period, the High Court had expressly allowed the parties to approach the arbitral tribunal and seek clarification, and NDMC had actively participated in the clarification proceedings before the tribunal, and concluded that both these circumstances fell within the phrase 'unless another period of time has been agreed upon by the parties' appearing in Section 33(1) as a qualification to the statutory period, which can be waived by the parties.

Assessment proceedings to determine statutory dues cannot continue during CIRP

Employees' Provident Fund Organisation v. Jaykumar Pesumal Arlani

National Company Law Appellate Tribunal, New Delhi | January 3, 2025 Company Appeal (AT) (Insolvency) No. 1062 of 2024

The National Company Law Appellate Tribunal (NCLAT) held that assessment proceedings to determine the liability of the Corporate Debtor (CD) can continue during liquidation but not during the Corporate Insolvency Resolution Process (CIRP) due to the bar under Section 14 of the Insolvency and Bankruptcy Code, 2016 (Code). However, while diffrentiating the language used in Section 14 ('suits or proceedings') and Section 33(5) ('suits or other legal proceedings), the NCLAT has completely misconstrued the Supreme Court's judgment in Sundresh Bhatt Liquidator v. Central Board of Indirect Taxes and Customs2, which addressed the moratorium under both Section 33(5) (liquidation) and Section 14 (CIRP) and held that assessment proceedings could continue during the moratorium under Section 14, although no recovery proceedings could be initiated. The reasoning provided by the NCLAT, to the effect that even assessment proceedings could not continue during the moratorium under Section 14, prima facie appears logical since Section 14 bars 'other proceedings' and not just 'legal proceedings', as is the case in Section 33(5). However, the NCLAT failed to consider that the purpose of the moratorium under Section 14 is to preserve the assets of the CD during the CIRP by curtailing parallel proceedings to avoid conflicting outcomes, and the judgment, to the extent it holds that even assessment proceedings or inquiries under Section 7A of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act) could not be initiated during the moratorium under Section 14, is not consistent with the ruling in Sundresh Bhatt. By halting statutory assessment, this decision effectively curtails the right to file claims and may directly impact the rightful dues of employees and workers, a class the Code seeks to protect with the highest priority.

SUMMARY OF FACTS

After the commencement of CIRP against Decent Laminates Pvt Ltd and imposition of moratorium under Section 14 of the Code, the Employees' Provident Fund Organisation (EPFO) initiated assessment proceedings under Sections 7A, 7Q, and 14B of the EPF Act for PF dues, interest and damages.

EPFO's claim was rejected for being submitted after the resolution plan had been approved by the Committee of Creditors (CoC).

Similarly, in a separate CIRP against Apollo Soyuz Electricals Pvt Ltd, EPFO's claim towards PF dues was rejected as the order under Section 7A of the Act was passed during the moratorium and no claim was lodged prior to CoC's approval of the resolution plan.

Aggrieved, EPFO approached the NCLAT in both CIRPs.

DECISION OF THE TRIBUNAL

In a common order, the NCLAT held that proceedings to assess/determine the liability of the CD cannot continue during the moratorium under Section 14 imposed during CIRP. Hence, no claim based on such an assessment carried out during the Section 14 moratorium can be urged in the CIRP.

2 (2023) 1 SCC 472

The word 'proceeding' in Section 14 of the Code is not confined to proceedings before the Civil Court and covers all proceedings having an effect on the assets of the CD. No proceeding which depletes the assets or creates new liabilities on the CD can continue after imposition of the moratorium.

The NCLAT differentiated the decision in Sundresh Bhatt, where the Supreme Court recognised the limited jurisdiction to merely assess/determine the CD's liability after imposition of moratorium without taking steps for enforcement, on the ground that Sundresh Bhatt applied to Section 33(5) of the Code (moratorium during liquidation) which employs a language different than Section 14 (moratorium during CIRP), concluding that:

  • Section 33(5) applies only to 'legal proceedings', and there is no bar against assessment proceedings.
  • The word 'proceeding' in Section 14 is unqualified and covers all proceedings, including proceedings to assess/determine the liability of the CD under Sections 7A, 7Q and 14B of the Act.

The NCLAT finally held that proceedings to assess/determine the liability of the CD can continue during liquidation but not during CIRP.

Footnotes

1. 2015 (2) SCC 189.

2. (2023) 1 SCC 472.

Dispute Resolution & ADR newsletter - January 2025

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More