Mere Initiation Of Arbitration Proceedings Does Not Bar Corporate Debtor From Pursuing His Other Remedies Under Insolvency Bankruptcy Code: Delhi HC

The Court was hearing a petition under Section 11(6) of the Arbitration & Conciliation Act, 1996 seeking the appointment of an independent Arbitrator.

The bench of Justice Neena Bansal Krishna observed, “Merely initiation of the arbitration proceedings does not bar the corporate debtor from pursuing his other remedies including those under the Insolvency Bankruptcy Code.”

Senior Advocate B.B. Gupta appeared for the Appellant and Advocate Ankit Sareen appeared for the Respondent.

Brief Facts-

Pitambar Solvex Pvt. Ltd., an edible oil manufacturer now owned by OAgri Farms Private Limited, was sold to OAgri by the original shareholders. They projected an average EBITDA of Rs. 17.92 crore for FY 2021-22, but the actual EBITDA was around Rs. 4.5 crore. Despite this discrepancy, OAgri proceeded with the purchase based on assurances from the sellers, signing a Share Purchase Agreement.

OAgri later discovered the accounting figures were falsified, and the promised EBITDA was misleading. OAgri served a notice of arbitration after serving a notice of invocation, which the respondents replied to without appointing an arbitrator. Consequently, OAgri filed a petition under Section 11(6) for the appointment of an arbitrator.

The Court observed that the Arbitrator shall be at liberty to register the two arbitrations separately in respect of the two Agreements if it is found that these two Agreements constitute separate causes and cannot be clubbed together in one arbitration.

The Court noted that several disputes are evident from the Legal Notice and Notice of Invocation of Arbitration, as well as the respondent's Reply to the Notice of Invocation also includes claims for certain amounts from the petitioner.

The Court said that prima facie it cannot be said that there are no inter-se disputes between the parties.

The Court said that the claim of the respondent that this petition for appointment of arbitrator is malafide, is not tenable as the Court noted that the disputes had arisen followed by Legal Notice much prior to the filing of the petition under Section 7 IBC.

Accordingly, the Court, without prejudice to the rights and contentions of the parties, which they are at liberty to agitate before the Arbitrator, appointed Justice Mukta Gupta as the Sole Arbitrator to adjudicate the disputes between the parties.

Finally, the Court disposed of the Petition.

Cause Title: Pitambar Solvex Pvt. Ltd. v. Manju Sharma (Neutral Citation: 2024:DHC:4450)

Appearance:

Appellant: Sr. Adv. B.B. Gupta, Adv. Arundhati Kajju, Adv. Sanyam Khetarpal, Adv. Achal Gupta and Adv. Lekha

Respondent: Adv. Ankit Sareen, Adv. Prakul and Adv. Yash Tandon

Click here to read/download Judgment