Kotak India Venture Fund vs. Indus Biotech Pvt Ltd.
Facts of the case
Kotak India Venture Fund had bought into Optionally Convertible Redeemable Preference Shares ["OCRPS"] gave by Indus Biotech Private Limited. Certain questions emerged between the gatherings concerning the valuation of OCPRS when the equivalent was tried to be changed over to value shares. While this contest was progressing, Kotak looked to trigger the early reclamation provision gave under the Share Subscription and Shareholders Agreement ["SSSA"] compliant with which the OCRPS were given. At the point when Indus neglected to reclaim the OCRPS, Kotak moved toward the NCLT under area 7 of the IBC looking for the inception of the corporate bankruptcy goals process ["CIRP"] against Indus. Before the application under the area, 7 could be chosen by the NCLT, Indus had summoned the discretion condition under the SSSA. From there on, Indus documented an interval application under segment 8 of the Arbitration Act, before the NCLT looking for that the application recorded under area 7 of the IBC be excused due to the presence of an assertion understanding between the gatherings.
The issue in the case
Whether the provisions of national company law tribunal prevail over the provisions of Insolvency and Bankruptcy code, 2016?
The contention of the parties
Indus contended that SSSA contained a particular and definite mediation condition that represented the current debate. It was guaranteed that while the gatherings occupied with correspondence concerning the question relating to change, in December 2018, the Financial Creditor singularly proposed to fix another end date of December 31, 2018, for the OCRPS and called upon the Corporate Debtor to give an exit on a similar date.
Subsequent to recording the "trial of arbitrability" as clarified by the Supreme Court in Booz Allen and Hamilton Inc v SBI Home Finance Limited and others, the NCLT saw that where an intervention provision existed, the court had an obligatory obligation to allude the question to the mediator.
The NCLT from that point alluded to the NCLAT's choice in Innoventive Industries Limited v ICICI Bank and another to express the affirmation or dismissal of the use of a budgetary lender under Section 7 by the Adjudicating Authority relied upon its fulfillment with the reports to show a default. NCLT said that the resolution commands the Adjudicating Authority to discover and record fulfillment concerning the event of default before conceding the application. Simple case by the budgetary leaser that the default has happened isn't adequate. Along these lines, in a segment 7 request, there must be a legal assurance by the Adjudicating Authority concerning whether there has been a 'default' inside the significance of segment 3(12) of the IBC.
In the current case, the NCLT expressed that the contest revolved around things that were significant determinants in arriving at a legal decision that a default had happened and such questions were arbitrable. Despite the fact that the NCLT hosted guided the gatherings to determine their questions through intervention, note that the NCLT didn't hold that the Arbitration Act would beat the IBC. the presence of a discretion understanding between the gatherings would not limit the NCLT from starting CIRP against the corporate indebted person. Along these lines, area 8 of the Arbitration Act would not beat segment 7 of the IBC.