The NCLT Kolkata Bench on April 20, 2022 in the matter of Viom Infra Ventures Ltd. v. Bahula Infotech Pvt. Ltd., while deciding a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) held that CIRP can be initiated based on an arbitral award, if the said Award has not been challenged.

Bahula Infotech Pvt. Ltd (“Corporate Debtor”) was in process of entering into contracts with the Government Authorities in respect of the scheme of ‘Smart City and Data Centre Projects’, hence was in requirement of various types of equipments. Viom Infra Ventures Ltd. (“Operational Creditor”) agreed to provide equipments lying in its possession and also agreed to acquire certain equipments and provide them on monthly lease/rental basis to the Corporate Debtor. A Master Lease Agreement (‘Agreement‘) was executed between the parties. When disputes had arisen in terms of the Agreement, the matter was referred to arbitration. In 2021 the Operational Creditor issued a Demand Notice under Section 8 of the IBC to the Corporate Debtor for the remaining amount. Thereafter, a petition under Section 9 of the IBC was filed before the Adjudicating Authority by the Operational Creditor, seeking initiation of CIRP against the Corporate Debtor for defaulting payment.

The Adjudicating Authority observed that the Corporate Debtor has neither raised any dispute with respect to the services of the Operational Creditor nor challenged the arbitral award by way of Section 34 petition under the Arbitration and Conciliation Act, 1996. Therefore, the debt is not disputed.

It was further observed that in a petition under Section 9 of IBC, the prime point of defense is the existence of the dispute and/or pendency of a suit or arbitration prior to the receipt of the demand notice under Section 8 of the IBC. However, in the instant case both these defenses are not present.

The Adjudicating Authority placed reliance on the Supreme Court judgment in K. Kishan v. Vijay Nirman Company Private Limited, (2018) 17 SCC 662, wherein it has been held that in order to initiate CIRP in case of arbitral award under Section 9 of IBC, the debt needs to be undisputed.

Hence, Adjudicating Authority admitted the petition filed under Section 9 of IBC and initiated CIRP against the Corporate Debtor.