ELECTROSTEEL STEEL LIMITED (NOW M/S ESL STEEL LIMITED) v. ISPAT CARRIER PRIVATE LIMITED
Discusses the interplay between IBC, MSME Act, Arbitration Act, and CPC, providing insights into resolution plans and arbitral awards.
Court: Supreme Court of India
Citation: 2025 INSC 525
Decision Date: 21-04-2025
List of Laws
Constitution of India, 1949; Insolvency and Bankruptcy Code, 2016 (‘IBC’); Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act); Arbitration and Conciliation Act, 1996; Civil Procedure Code, 1908 (CPC); Companies Act, 2013
- Constitution of India, 1949: Article 227 was invoked by the appellant before the High Court to challenge the order of the Executing Court. The Supreme Court notes that the High Court dismissed the appellant's petition filed under Article 227.
- Insolvency and Bankruptcy Code, 2016 (‘IBC’): - Section 7: Financial creditors of the appellant invoked Section 7 before the National Company Law Tribunal (NCLT). - Section 30: Discussed in detail. Section 30 provides for the submission of a resolution plan. Sub-section (1) allows a resolution applicant to submit a plan with an affidavit stating eligibility under Section 29A. Sub-section (2) requires the resolution professional to examine the plan for compliance. Sub-section (3) mandates the resolution professional to present conforming plans to the committee of creditors. Sub-section (4) allows the committee to approve a plan with a 66% vote share. - Section 31: Discussed in detail. Section 31 deals with the approval of the resolution plan. Sub-section (1) states that if the adjudicating authority is satisfied that the resolution plan meets the requirements of Section 30(2), it shall approve the plan, making it binding on the corporate debtor, employees, members, creditors, and other stakeholders. The judgment also mentions that the NCLT approved the resolution plan under Section 31. The senior counsel for the appellant argued that claims of operational creditors were settled at nil when the NCLT approved the resolution plan, becoming binding as per Section 31(1). The court also refers to Ajay Kumar Radheshyam Goenka Vs. Tourism Finance Corporation of India Ltd., stating that the creditor has no option but to join the process under the IBC, and once the plan is approved, it would bind everyone. - Section 32: States that any appeal from an order approving the resolution plan shall be in the manner and on the grounds laid down in sub-section (3) of Section 61. - Section 61: Provides for appeals and appellate authority. Sub-section (1) says that any person aggrieved by an order of the adjudicating authority may prefer an appeal to the National Company Law Tribunal (NCLT) within thirty days as provided in sub-section (2). Sub-section (3) deals with an appeal against an order approving a resolution plan under Section 31. - Section 63: The senior counsel for the appellant submitted that Section 63 makes it clear that no civil court shall have jurisdiction to entertain any suit over which NCLT or NCLAT has jurisdiction under the IBC. - Section 238: The senior counsel for the appellant submitted that the Facilitation Council could not have continued with the arbitration proceedings in view of Section 63 read with Section 238 of the IBC. Section 238 clarifies that the provisions of the IBC shall have effect notwithstanding anything inconsistent therewith contained in any other law.
- Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act): The judgment mentions that the respondent filed claim petitions under the provisions of the MSME Act. The Facilitation Council directed the appellant to pay a sum along with interest in terms of Section 16 of the MSME Act. The senior counsel for the respondent submits that there is no inconsistency between IBC and the MSME Act. The judgment also notes that as an independent arbitration agreement existed, the Facilitation Council should not proceed under Section 18(3) of the MSME Act.
- Arbitration and Conciliation Act, 1996: - Section 14: An order was passed under Section 14 of the 1996 Act. - Section 34: The appellant did not challenge the award under Section 34. The High Court framed a question of whether the arbitral award having not been challenged under Section 34, whether the objection to execution of the arbitral award referrable to Section 47 of the Civil Procedure Code, 1908 (CPC) was maintainable. The High Court rejected the contention of the appellant that since the award suffered from patent or inherent lack of jurisdiction, objection to the award can be taken at the stage of execution without challenging the award under Section 34. Section 34 is the only acknowledged remedy available to challenge an award. - Section 36: Section 36 deals with the enforcement of arbitral awards. Sub-section (1) says that where the time for making any application to set aside an arbitral award under Section 34 has expired, then subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of CPC in the same manner as if it were a decree of the court.
- Civil Procedure Code, 1908 (CPC): - Section 47: The High Court framed a question of whether the arbitral award having not been challenged under Section 34 of the Act of 1996, whether the objection to execution of the arbitral award referrable to Section 47 of the Civil Procedure Code, 1908 (CPC) was maintainable. The High Court concluded that the plea of nullity qua an arbitral award can be raised in a proceeding under Section 47 CPC but such a challenge would lie within a very narrow compass. Section 47 CPC deals with questions to be determined by the court executing decree. Objection to execution of an award under Section 47 CPC is not dependent or contingent upon filing a petition under Section 34 of the 1996 Act.
- Companies Act, 2013: Section 408 is mentioned in the judgment. National Company Law Tribunal (NCLT) constituted under Section 408 of the Companies Act, 2013 is the adjudicating authority as defined in Section 5(1) of IBC.
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