Whether approval of Resolution Plan under IBC results in an extinguishment of a claim which was admitted for a notional amount of Re. 1 only because of arbitration was already invoked prior to admission of CIRP and Whether after approval of Resolution Plan, the claim can be said to be unenforceable in law and the dispute falls within the genre of non-arbitrability – Indian Oil Corporation Ltd. Vs. Arcelor Mittal Nippon Steel India Ltd. – Delhi High Court
October 20, 2023
In this case, IOCL invoked arbitration on 11.07.2017. On 02.08.2017 CIRP was initiated against Essar Steel. IOCL filed its claim. RP allotted Re. 1 as notional amount stating that the remaining claim amount is not admitted because of pending dispute with respect to this claim as the arbitration proceedings were initiated by IOCL. Post CIRP, IOCL filed this petition u/s 11 of the Arbitration Act.
Hon’ble High Court held that:
(i) The Successful Resolution Applicant is only bound to meet the claims as may have been accepted and ultimately form part of the approved Resolution Plan. This issue assumes seminal importance since the Successful Resolution Applicant cannot be left open to defend or oppose claims which are either not factored in the Resolution Plan nor can it be left to fend off actions that may be brought with respect to alleged or asserted dues of the Corporate Debtor which were not admitted.
(ii) Approval of the Resolution Plan clearly amounts to the extinguishment of all debts that were owed by the Corporate Debtor except to the extent as was admitted in the Resolution Plan. The IBC and the resolution process does not contemplate matters being left inchoate. In fact, and to the contrary it exhorts one to accept the seal of finality and quietitude which stands attached to the approval of a Resolution Plan.
(iii) Jurisdiction also bids High Courts to ensure that dead disputes are not revived and parties forced to undertake arbitration.
(iv) The Court while considering the issue of reference would refuse to do so only in situations where either the arbitration agreement is found to be non-existent, where the claim can ex facie be said to be unenforceable in law say for instance where it is barred by the statute of limitation or where the dispute of which reference is sought falls within the genre of non-arbitrability.
(v) A refusal to refer would be justified when there is not “even a vestige of doubt” with respect to non-arbitrability or where it is evident that the matter is “demonstrably non-arbitrable”.
(vi) A reference of the disputes as sought by the petitioner would clearly amount to a reopening of the Resolution Plan and which is clearly impermissible in light of the finality which was accorded by the decision of the Supreme Court in CoC of Essar Steel India Ltd. (2019) ibclaw.in 07 SC.
(vii) The petition fails and shall stand dismissed.
