NCLAT Stays Insolvency Proceedings Against Container Corporation of India Ltd.

NCLAT Stays Insolvency Proceedings Against Container Corporation of India Ltd.

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member) has stayed the insolvency proceedings initiated against Container Corporation of India (CONCOR) which is a Navratna Enterprise of Government of India.

The New Delhi bench of the National Company Law Tribunal (NCLT) had admitted the insolvency application against the company on 12 July 2023.

The insolvency application against CONCOR was filed by Mumbai-based logistics company Roadwings International Pvt Ltd after the former defaulted on a payment of Rs. 87.5 crores.

The factual matrix of the case is that Container Corporation of India Ltd. (Corporate Debtor) is a public sector company and one of the Navratna enterprises. It is engaged in transportation and handling of containers and is listed with the NSE and BSE on stock exchange.

The Corporate Debtor had issued a tender for manufacture, supply and commissioning of Reach Stacker Machines. Roadwings International Pvt. Ltd. & Anr. (Operational Creditor) emerged as the successful bidder.

Accordingly, an Agreement was executed between the Parties in 2010 which also contained an Arbitration Clause. A commercial dispute between CONCOR and the operational creditor Roadwings International started after the latter was declared the successful bidder by CONCOR for a tender for manufacture, supply and commissioning along with operations and maintenance of Reach Stacker Machines.

Roadwings International had submitted before the NCLT that it had supplied and commissioned the reach stackers of the desired technical specifications as mentioned in Section IV of the contract. However, during the continuance of the contract, certain issues and differences arose between the parties and to resolve the dispute amicably, the parties went for Direct Informal Negotiations.

Roadwings further contended that since some of the issues could not be resolved amicably through Direct Informal Negotiations, it had initiated Arbitration Proceedings against the CONCOR.

The operational creditor submitted that the Arbitral Tribunal after hearing both the parties at length had concluded the proceedings and passed the final Award dated 1 June 2022 for an awarded amount of Rs. 81.36 crores at a simple interest rate of 10 per cent per annum along with the applicable tax.

Roadwings issued a demand notice on 15 July 2022 to the Corporate Debtor and claimed the awarded amount of Rs 87.50 crores. However, the corporate debtor failed to make any payment or reply to the demand notice issued within the prescribed timeline of 10 days of receiving the notice.

The operational creditor highlighted that on 22 July 2022, the corporate debtor had sent a reply to it raising that they are disputing the award and approaching the higher judicial forum for setting aside the Arbitral Award.

CONCOR had challenged the insolvency petition in NCLT arguing that the demand notice was served prematurely and even prior to receiving the complete award. However, the NCLT did not find merit in CONCOR’s submission, and it allowed the admission of the insolvency application.

The Corporate Debtor challenged the order dated 12 July, 2023 before NCLAT. It was submitted that the proceedings whereby the Award has been challenged a before the High Court and the next date is on 29 August, 2023.

The Operational Creditor claimed that the proceedings under Section 34 of Arbitration and Conciliation Act, 1996 was barred by limitation and hence NCLT has correctly initiated corporate insolvency resolution process (CIRP) under Insolvency and Bankruptcy Code, 2016 (IBC).

The NCLAT noted from the facts of the case that the High Court has taken cognizance of the Section 34 proceedings under Arbitration & Conciliation Act, 1996 and heard the submission of parties.

The NCLAT stayed the NCLT order as the High Court had seized off of the matter. However, the stay of CIRP proceedings would have no bearing on the proceedings before the High Court which may be preceded in accordance with law, clarified the bench.