Case Note & Summary
The appeal arose from a dispute under the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), where the respondent filed claim petitions before the West Bengal Micro, Small and Medium Facilitation Council for outstanding amounts. Conciliation failed, leading to arbitration proceedings. During these proceedings, financial creditors invoked the Insolvency and Bankruptcy Code, 2016 (IBC), resulting in a moratorium imposed by the National Company Law Tribunal (NCLT). The respondent submitted its claim to the resolution professional, and a resolution plan was approved by NCLT under Section 31 IBC, settling operational creditors' claims at nil. After the moratorium lifted, the Facilitation Council resumed arbitration and passed an award directing the appellant to pay the respondent. The appellant did not challenge the award under Section 34 of the Arbitration and Conciliation Act, 1996. In execution proceedings, the appellant contended the award was a nullity due to lack of jurisdiction, as the claim was extinguished by the resolution plan. The Executing Court dismissed this petition, and the High Court, in a petition under Article 227 of the Constitution of India, framed questions on the maintainability of the nullity plea under Section 47 CPC and the Facilitation Council's jurisdiction post-resolution plan approval. The High Court held that a nullity plea is maintainable under Section 47 CPC but with narrow scope, and that the Facilitation Council did not lose jurisdiction as arbitral proceedings predated the insolvency resolution. The Supreme Court, in this appeal by special leave, considered these issues. The appellant argued that the resolution plan bindingly settled the claim at nil, extinguishing it and depriving the Facilitation Council of jurisdiction, citing precedents on the binding nature of approved plans under IBC. The court analyzed the interplay between the MSME Act and IBC, emphasizing that the Facilitation Council's jurisdiction to proceed with the arbitral award, initiated before insolvency, remained intact despite the resolution plan's determination of the claim as nil. The court upheld the High Court's decision, dismissing the appeal and affirming that the award was executable, as the nullity plea was insufficient and the jurisdiction was not ousted by the IBC process.
Headnote
A) Arbitration Law - Execution of Arbitral Award - Nullity Plea Maintainability - Code of Civil Procedure, 1908, Section 47 - Appellant contended arbitral award was a nullity due to lack of jurisdiction and hence non-executable at execution stage without challenge under Section 34 Arbitration and Conciliation Act, 1996 - High Court held plea of nullity can be raised under Section 47 CPC but scope of interference is very narrow, and rejected appellant's contention of patent lack of jurisdiction making award a nullity - Held that award not challenged under Section 34 becomes final and binding (Paras 18-19). B) Insolvency Law - Corporate Insolvency Resolution Process - Jurisdiction of Facilitation Council - Insolvency and Bankruptcy Code, 2016, Section 31 - Appellant argued resolution plan approved by NCLT settled respondent's claim at nil, extinguishing claim and depriving Facilitation Council of jurisdiction - High Court held Facilitation Council did not lose jurisdiction as arbitral proceedings were initiated prior to insolvency resolution, suspended during moratorium, and resumed after lifting, with resolution plan merely determining claim as nil - Held that approval of resolution plan under Section 31 IBC does not oust jurisdiction of Facilitation Council to proceed with pre-existing arbitral award (Paras 18-19).
Issue of Consideration
Whether the arbitral award could be assailed as a nullity and non-executable in execution proceedings under Section 47 CPC, and whether the Facilitation Council lost jurisdiction due to the approved resolution plan under Section 31 IBC
Final Decision
Supreme Court dismissed the appeal, upholding High Court's judgment that nullity plea is maintainable under Section 47 CPC with narrow scope, and Facilitation Council did not lose jurisdiction despite resolution plan approval under Section 31 IBC
Law Points
- Arbitral award nullity plea maintainable under Section 47 CPC in execution proceedings
- scope of interference narrow
- Insolvency and Bankruptcy Code
- 2016 resolution plan approval does not extinguish Facilitation Council's jurisdiction to proceed with pre-existing arbitral award
- award not challenged under Section 34 Arbitration and Conciliation Act
- 1996 becomes final and binding
