Fact of the Case 

In the case of KK Ropeways Ltd. v. Billion Smiles Hospitality (P) Ltd, The appellant-Operational Creditor received an arbitration award on November 29, 2018, for failure to pay lease rentals, water and power bills, common area maintenance fees, diesel generator fees, and TDS. The respondent-Corporate Debtor was the target of the appellant’s request to begin the Corporate Insolvency Resolution Process (CIRP). The respondent objected, asserting that the defaulted amount resulted from the Arbitral Award. Before the Delhi High Court, the respondent filed an appeal in accordance with Section 34 of the Act, 1996. The operational debt was deemed a “dispute” by the adjudicating authority, who rejected the appellant’s claim. The order was contested in the appellant’s appeal to the NCLAT.

Issue 

Is the Operational Creditor’s application under Section 9 of the IBC, read in conjunction with Rule 6 of the Insolvency and Bankruptcy (AAA) Rules, 2016 per se “maintainable” to carry out the Arbitral Award?

Analysis of Tribunal Decision 

An application submitted under Section 9 of the Insolvency and Bankruptcy Code, 2016, was rejected by a division bench made up of Justice M. Venugopal and Justice Ms. Shreesha Merla Technical Member of NCLAT, who determined that an appeal brought under Section 34 of the Arbitration and Conciliation Act, 1996, against an ex-parte arbitral award is a “pre-existing dispute” and, as such, a valid basis for the rejection of the application.

The NCLAT noted that the respondent had chosen to appeal the Arbitral Award under Section 34 of the Act, 1996 and that the fact that the respondent had chosen to appeal the ex-parte award indicates that there is at least a “pre-existing dispute. The NCLAT additionally noted that while an award was made in the current instance about a “rental dispute, it would only be regarded as a “dispute” and not an “Operational Debt” when it is contested in an appeal.

The NCLAT comes to the inescapable ‘inevitable’, and ‘irresistible’ conclusion that the Adjudicating Authority’s order is free from any legal error and that the Section 9 application filed for recovering the Sum awarded in an arbitration proceeding was rightly dismissed in light of the facts and circumstances of the current case.

CASE NAME – KK Ropeways Ltd. v. Billion Smiles Hospitality (P) Ltd., Comp. App (AT) (CH) (INS) No. 246 / 2021.