JSA successfully represented Karaikal Port Private Limited (“KPPL”) before the Madras High Court, in a challenge to an arbitral award dated 17.2.2021. The arbitration was initiated by Coastal Consolidated Structures Private Limited (“CCSPL”) against Marg Limited (“Marg”) and KPPL. The parties had executed a tripartite agreement (“TPA”) in which KPPL had undertaken to discharge certain liabilities of Marg arising under a sub-contract between KPPL and CCSPL. In the arbitration, CCSPL had made separate claims against KPPL and Marg. The award held KPPL liable for a portion of the amounts claimed. All three parties challenged the award before the Madras High Court.
During the pendency of the challenge before the High Court, an order came to be passed by the National Company Law Tribunal (“NCLT”) commencing corporate insolvency resolution process (“CIRP”) of KPPL and appointed a resolution professional (“RP”) in terms of the Insolvency and Bankruptcy Code, 2016 (“IBC”). CCSPL did not submit any claim to the RP based on the award. The resolution plan of Adani Ports and SEZ Limited came to be approved by the committee of creditors and NCLT.
On resumption of proceedings before the High Court after conclusion of the CIRP, it was contended on behalf of KPPL that CCSPL by not submitting its claim to the RP had forfeited its right to enforce the award against KPPL. Reliance was placed on the judgement of the Supreme Court in Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, and other judgements, in support of the contention that failure to submit claim during CIRP will disentitle a party from pursuing the claim once a resolution plan is approved.
The Madras High Court by its judgement dated 14.10.2024 upheld the above contentions of KPPL and held that CCSPL cannot enforce the award against KPPL.
This judgement reinforces that once a resolution plan under the IBC is approved, any prior or pending claims against the debtor that are not part of the information memorandum are extinguished, giving the resolution applicant a “clean slate“. This judgement is particularly significant in the context of arbitral proceedings and enforceability of an award, as it deals with the interplay between the law of arbitration and the IBC.
Vinod Kumar, Partner, argued the matter for KPPL and was assisted by Saibarath, Senior Associate.
Vinod’s practice focuses on Dispute Resolution. He has an extensive experience of handling general civil and commercial Litigation, Arbitration and public law remedies.