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Bombay High Court: No provision in the A & C Act, 1996 for splitting up of arbitration proceedings

A writ petition filed before the Bombay High Court challenged the order of the Arbitrator that the proceedings before him be kept in abeyance as long as the moratorium under Section 95 of the IB Code 2016 operates in respect of the debts owed by the respondent No.2  is concerned and the subsequent order refusing to vacate the aforesaid order.  


The account of the Respondent was classified as NPA by the Petitioner, a Finance company, who initiated arbitration proceedings for recovery of its dues.  


During the arbitration proceedings, another creditor of the Respondents filed proceedings under the IBC and NCLT granted a moratorium in respect of  Respondent Nos. 2 and 3 before the arbitrator.  


It was the Petitioners case that as the moratorium was granted  only against respondents No.2 & 3 before the arbitrator,  the arbitration proceedings, could not have been kept in abeyance by the learned arbitrator, but ought to have been continued against the rest of the respondents. The petitioner submitted that the order passed by the Arbitrator ought to be quashed and set aside.  


The Respondents argued that the moratorium under Section 96, of the IB Code was debt centric, and would cover the entire debt. It was immaterial, whether it was the liability of the parties to the in the capacity of a guarantor or otherwise, and the entire proceedings have rightly been kept in abeyance by the learned Arbitrator.  


The court held the arbitration proceedings will have to be decided in their entirety against all the parties and the entitlement of the claimant and the liabilities of the respective respondents, will be determined on the basis of evidence which may be led therein, which cannot be on a piecemeal basis. 


The court agreed with the order of the Arbitral Tribunal and dismissed the petition as not maintainable.  

 

 

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