Page 22 - Banking Finance May 2019 N

LEGAL UPDATE

LEGAL

CASES
CASES
CASES
CASES
CASES

MMTC challenge to SC ruling does not impair creditors' rights to insolvency
award dismissed proceedings: Sahoo
The Supreme Court's judgement on the RBI circular does not disturb the rights
The Delhi High Court last week dis-
missed the of creditors to insolvency proceedings and
would bring in behavioural changes, making
appeal of
creditors more responsible for their actions
MMTC,
and inactions, said M S Sahoo, chie, Insolvency
challeng-
ing an ar- and Bankruptcy Board of India.
bitral award that went against it and On April 2, the apex court quashed a circular
in favour of Karam Chand Thapar & issued by the RBI wherein defaulting companies would be referred to the NCLT
Bros. The National Thermal Power for insolvency proceedings in case of non-resolution in 180 days from the day of
Corporation had placed orders on default. This was applicable in cases involving loans worth over Rs 2,000 crore.
MMTC for import of coal for supply to Sahoo said the court's judgement does not disturb rights of creditors to initiate
its power stations. MMTC issued a insolvency proceeding or any provision in the Insolvency and Bankruptcy Code (IBC).
tender inviting offers for importing "In view of this judgement, a bank-creditor now needs to ask itself when it
coal to Indian ports. should initiate the proceeding and justify itself why it is initiating or not initiat-
Karam Chand Bros, engaged in the ing the proceeding in case of a defaul. This will bring in behavioural changes
business of handling, was selected. among the creditors, making them more responsible for their actions and inac-
Disputes arose over various points tions," he told PTI.
and the unanimous award was in
favour of the contractor. MMTC chal- Related person cannot name arbitrator
lenged the award on six grounds but After the 2015 amendment to the Arbitration and Conciliation Act, any person
in vain. The court reiterated its having a relationship with the parties or counsel or
jurisdication to intervene in arbitra- the subject of dispute becomes ineligible to be an ar-
tion matters was limited. It rejected bitrator. Such a person cannot nominate an arbitra-
the argument of the government tor either. "His mandate automatically terminates,
corporation that the claim could not and he shall then be substituted by another arbitra-
have been granted in US dollars and tor," the Supreme Court underlined in its judgment
the rate of interest granted at 12 last week in the case, Bharat Broadband Network Ltd vs United Telecoms Ltd.
per cent was highly excessive and The amendment was carried out after a report from the Law Commission fol-
the interest should have been at lowing controversies over the independence and impartiality of arbitrators.
LIBOR rates. Public sector firms had insisted on their executives becoming arbitrators.

22 | 2019 | MAY | BANKING FINANCE