Judgment Summaries (NCLT) – In the matter of Indus Biotech

  December 22, 2021

In the matter of Indus Biotech Private Limited Limited (Mumbai Bench (09.06.2020))

 

Facts

In this case, the Applicant filed an interlocutory application before the AA under Section 8 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The Applicant’s prayed to the AA for referring the parties to arbitration for settling their disputes, instead of admitting the application filed by the FC under Section 7 of the Code. The Applicant contended that the Optionally Convertible Redeemable Preference Shares, as subscribed to by the FC in terms of the Share Subscription and Shareholders Agreement, had an arbitration clause; and therefore, the parties must be referred to arbitration. The main issue to be decided was – “Will the provisions of the Arbitration Act prevail over the provisions of the Code?”

Order

Relying on the cases P Anand Gajapathi Raju & others v. PVG Raju (dead) & others and Hindustan Petroleum Coproration Limited v. Pinkcity Midway Petroleums, the tribunal observed that the Arbitration Act was a special act and where an arbitration clause existed, it was mandatory for the court to refer the dispute to arbitration. Further, the tribunal observed that the CD was “a solvent, debt free and profitable company. It will unnecessarily push an otherwise solvent, debt-free company into insolvency, which is not a very desirable result at this stage.” Also, the subject matter of the petition involved valuation of shares, calculation and conversion formula and fixing the Qualified Initial Public Offering date, which were all arbitrable disputes. Therefore, the Tribunal, observing that an attempt must be made to reconcile the difference between the parties and no meaningful purpose would be served by pushing the CD into CIRP, allowed the application and referred the parties to arbitration.

 

Full text of the order accessible here.

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