Adjudicating Authority Can Enforce Arbitral Award Upon Application By Resolution Professional U/S 60(5) Of IBC: NCLAT New Delhi

Contention of the Appellant

The appellant submitted that the corporate debtor had initiated arbitration proceedings against the appellant under the MSME Act, 2006, for non-payment of Rs. 21,50,332 plus interest. It highlighted that the proceedings were conducted ex parte against the appellant's erstwhile company, and it never received the copy of the award. It only received the award for the first time, along with the demand notice. Also, after the passing of the award, no action was taken by the corporate debtor to execute it, and its enforcement is barred by virtue of Article 136 of the Limitation Act, 1963.

The appellant contended the adjudicating authority has erred in giving effect to the award, as the award was merely a report on the findings referred to arbitration and is not enforceable under the MSME Act, 2006. It also argued that by virtue of section 18(3) of the MSME Act, the award is governed by the Arbitration and Conciliation Act, 1996, and can only be enforced by a civil court u/s 36 of the latter act. The appellant also highlighted that the award was passed beyond the 90-day mandate prescribed u/s 18(5) of the MSME Act, 2006.

The appellant contended that the recovery amount and interest don't constitute a question "arising out of" or "in relation to" the corporate debtor within the meaning of section 60(5) of the IBC.

Submission of the Respondent

The respondent relied on the rulings of K.S. Oils Ltd. vs. The State Trade Corporation of India Ltd. & Anr. (Company Appeal (AT) (Insolvency) No. 284 of 2017) to submit that the IBC prevails over the arbitration act and submitted that u/s 60(5) of the IBC, the adjudicating authority has the jurisdiction to enforce the award during CIRP.

Relying on the ruling of Ugro Capital Ltd. vs. Bangalore Dehydration & Drying Equipment Company Pvt. Ltd. (Company Appeal (AT) (Insolvency) No. 984 of 2019), the respondent argued that the final decree or award gives the right to initiate IBC proceedings. And the judgment of MBL Infrastructures Ltd. vs. Manish Kumar Bhagat (Company Appeal (AT) (Insolvency) No. 769 of 2020) has confirmed that awards are enforceable within 12 years of enforcement by virtue of Article 136 of the Limitation Act.

The respondent also relied upon Avery Cycle Industries Ltd. vs. Parkash Metal Industries (FAO (COMM) 71/2019) to highlight the directory nature of section 18(5) of the MSME Act and argued that the non-compliance does not render the award a nullity and awards passed beyond 90 days are very much valid if no prejudice is caused.

Findings of the NCLAT

The tribunal observed that the reading of section 60(5) of the IBC makes it clear that once the adjudicating authority has taken up any matter, the jurisdiction of all other forums to take up the matter ceases. Hence, the adjudicating authority is the correct forum to entertain the IA regarding the enforcement of the arbitral award.

The bench referred to the ruling of K.S. Oils Limited vs. The State Trade Corporation of India Limited and Anr and discussed the overriding effect of the code given under section 238 of the IBC.

NCLAT observed that the award has attained finality as it was not challenged by the appellant, and the same needs to be prosecuted for the revival of the company. Also, under section 60(5) of the IBC, the adjudicating authority is empowered to direct the judgment debtor to pay the outstanding amount.

The tribunal also observed that the 90-day limit prescribed under the MSME Act to pass the award is not mandatory, and its non-compliance cannot be treated as a nullity.

Lastly, the tribunal upheld the impugned order passed by the adjudicating authority and rejected the appeal.

Case Name: Jindal Lifestyle Ltd. Vs. Mr. Satyendra Sharma, RP of Arkin Creations Pvt. Ltd. and Ors.

Case No.: Comp. App. (AT) (Ins.) No. 1180 of 2024

Bench: Justice Rakesh Kumar Jain (Member-Technical), Justice Mohammad Faiz Alam Khan (Member-Technical), and Mr. Naresh Salecha (Member-Technical),

For Appellant: Mr. Sarad Kumar Sunny & Mr. Madhan Binzani, Advocates.

For Respondent: Mr. D. Pathak, Ms. Shweta Sharma, Ms. Vaibhavi Pathak, Mohd. Nazim Khan & Mr. Satyendra Sharma, for RP

Judgment Date: 21.08.2025