Case Note & Summary
The case involves a Notice of Motion taken out by Mr. Harshad Moorlidhar Shah, Judgment Debtor No. 3, to set aside Insolvency Notice No. N/19 of 2012 dated 29 June 2012. The insolvency notice was issued by the Insolvency Registrar based on an Award dated 2 May 2005 in Arbitration Petition No. 543 of 2003. The background facts are that on 24 September 2003, an Award for Rs.3,72,78,897 plus interest at 15% p.a. from 1 December 2002 was passed against Shivam MultiServices Private Limited, but the claim against the directors (Judgment Debtors) was rejected. The Judgment Creditors filed Arbitration Petition No. 545 of 2003 challenging the rejection, which was admitted on 6 January 2004 under Section 34 of the Arbitration and Conciliation Act, 1996. On 2 May 2005, the court modified the Award, directing the Judgment Debtors to pay Rs.3,72,78,897 plus interest at 15% p.a. from 1 December 2002 and costs of Rs.66,150. On 7 July 2005, Judgment Debtor Nos. 1, 3, and 4 preferred Appeal No. 625 of 2005 under the Arbitration Act challenging the modified award. The legal issue was whether the insolvency notice could be set aside when an appeal against the award was pending but no stay of execution had been granted. The court held that the pendency of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 does not operate as a stay unless specifically granted. Therefore, the insolvency notice based on the award which is not stayed is valid. The court directed the judgment debtor to furnish security for the awarded amount of Rs.3,72,78,897 along with interest at 15% p.a. from 12 June 2005. The motion was dismissed.
Headnote
A) Insolvency Law - Setting Aside Insolvency Notice - Arbitral Award - The court considered whether an insolvency notice based on an arbitral award can be set aside when an appeal against the award is pending but no stay of execution has been granted. The court held that the pendency of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 does not operate as a stay unless specifically granted, and therefore the insolvency notice based on the award which is not stayed is valid. The court directed the judgment debtor to furnish security for the awarded amount. (Paras 2-5) B) Arbitration Law - Stay of Execution - Section 37 of Arbitration and Conciliation Act, 1996 - The court held that mere filing of an appeal under Section 37 does not automatically stay the execution of the award. A specific order of stay is required. (Paras 3-4)
Issue of Consideration
Whether the Insolvency Notice based on an arbitral award can be set aside when an appeal against the award is pending but no stay of execution has been granted.
Final Decision
Motion dismissed. Judgment Debtor directed to furnish security for the awarded amount of Rs.3,72,78,897 along with interest at 15% p.a. from 12 June 2005.
Law Points
- Pendency of appeal does not operate as stay
- Insolvency notice based on award not stayed is valid
- Security for decretal amount can be directed
