NDLI: M/s. Jai Balaji Industries Vs. D.k. Mohanty & Anr.

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	9 Insolvency and Bankruptcy Code 62 2016 – ss. 8
Content Type	Text
Resource Type	Law Order
Jurisdiction	India
Act(s) Referred	Arbitration and Conciliation Act, 1996 (26 of 1996) Insolvency and Bankruptcy Code, 2016 (31 of 2016)
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Dismissed
Headnote	Insolvency and Bankruptcy Code, 2016 – ss. 8, 9, 62 – Arbitration and Conciliation Act, 1996 – The appellant and respondent no.2 entered into Memorandums of Understanding, whereby the respondent no.2 agreed to supply, 1 lakh and 7 lakh metric tons of iron ore per month to the appellant – Dispute arose between the parties as regards the requisite supply and payment – Arbitration clause was invoked – In arbitral awards the respondent company was held liable to make payment – Respondent company filed petition u/s. 34 of the 1996 Act, which were dismissed by the District Court – Appeals were filed before the High Court u/s.37 of the 1996 Act – On 22.11.2019, the appeals were dismissed in default for non-appearance of the respondent – On 17.12.2019, the respondent filed restoration applications – These applications were allowed on 02.03.2020 by the High Court – Before such restoration of appeals, the appellant had sent two demand notices u/s.8 of the 2016 Code on 14.02.2020 – Appellant moved NCLT u/s. 9 seeking initiation of CIRP against respondent company – NCLT took the view that on the day the appellant served demand notices to the respondent u/s. 8 and the date when the application u/s. 9 was filed, no proceedings were pending and hence no dispute was pending – Therefore, the NCLT admitted applications made by the appellant u/s.9 of the Code in its capacity as an operational creditor; initiated CIRP in relation to the respondent company – However, the NCLAT held that a dispute was in existence prior to the issuance of demand notices and applications for restoration were filed with advance notice to the appellant- operational creditor – On appeal, held: On facts, it remains indisputable that even if appeals were dismissed in default on 22.11.2019, the respondent company indeed moved an applications for restoration on 17.12.2019 with advance notice to the appellant – Thus, on date of issuance of demand notices (i.e.14.02.2020), the appellant was well aware that appeals u/s. 37 of the 1996 Act had not been decided on merits – This moving of application for restoration of appeal u/s.37 of the 1996 Act and bringing it to the notice of the operational creditors is sufficient to bring the matter within the four corners of ‘pre-existing dispute’, so as to negate any attempt by the operational creditor to seek insolvency resolution – Also, the default dismissal of the appeal could only be regarded as a partial eclipse, which momentarily puts dispute in hibernation – When restoration of appeal is granted, it definitely re-activates the dispute – For the purpose and in scheme of the Code, even pendency of an application for restoration is sufficient to bring the matter within the four corners of “pre-existing dispute” – The applications moved by the appellant for initiation of CIRP were required to be rejected in terms of s.9(5)(ii)(d) of the 2016 Code – The NCLAT had rightly set aside the orders passed by the NCLT.
Judge	N/A
Neutral Citation	2021 INSC 590
Petitioner	M/s. Jai Balaji Industries
Respondent	D.k. Mohanty & Anr.
SCR	[2021] 11 S.C.R. 350
Judgement Date	2021-11-01
Case Number	5899

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M/s. Jai Balaji Industries Vs. D.k. Mohanty & Anr.

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M/s. Jai Balaji Industries Vs. D.k. Mohanty & Anr.

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