Calcutta High Court: In a revisional application directed against an order dated 17-01-2024, passed by the Commercial Judge at Rajarhat, North 24, Parganas in an anti-arbitration suit, a Single Judge Bench of Shampa Sarkar, J. dismissed the application and held that the suit was not required to be stayed since the plaint case and the reliefs claimed did not indicate that there was any monetary claim or any other claim that would be covered by Chapter 11 cases in the U.S. Bankruptcy Code.
Background
During the pendency of the anti-arbitration suit, the present petitioner filed an application under Section of the (‘CPC’) with a prayer for a stay on further proceedings of the suit, with liberty to mention, upon expiry of the moratorium in the U.S. Bankruptcy proceeding. An alternate prayer was also made for the adjournment of the suit for 180 days.
The Judge rejected the application and held that the moratorium order of the U.S. Bankruptcy Court was not applicable in India since U.S.A. had not been declared as a reciprocating territory for the purpose of Section of . It was also held that Sections and of were also not applicable since the bankruptcy order was not passed in a proceeding between the parties to the suit. This order has been assailed on various grounds in the present matter.
The petitioner filed an application under Section of the (‘A&C Act’) for an order to refer the parties to arbitration. The main contention of the petitioner was that the order dated 24-10-2023, issued by the Bankruptcy Court of the District of Delaware, U.S., under Chapter 11 of the U.S. Bankruptcy Code, operated as a worldwide temporary stay.
It was contended that the doctrine of Comity of Courts required that courts of one nation or jurisdiction should respect and recognize the decisions rendered by the competent courts of other jurisdictions.
The petitioner also submitted that the Judge had misconstrued the doctrine and that he had presumed that a prayer was being made for enforcement of the order of stay in the Indian Court as if the same was a decree of a foreign court. It was also contended that the application was rejected by applying Section as well as Sections and of due to a misconception of law.
The petitioner contended that he had invoked the court’s inherent power for judicial recognition of the proceedings before the US Bankruptcy Court and the grant of a worldwide stay.
Analysis and Decision
The Court found that the inherent power of the Court was invoked for the stay of the suit, although CPC had a specific provision for the same. The Court also said that only because the proceeding was going on in a foreign country, the suit was not bound to be stayed.
The Court stated that although reliance was placed on Section 14 of the (‘IBC’), the provision applies to claims of creditors and matters related thereto, against corporate debtors within the jurisdiction of the tribunals under the IBC.
Further, the Court stated that while the Indian courts do recognize foreign judgments and decrees of some reciprocating countries such as the UK and Singapore, no recognition had been accorded to foreign proceedings, particularly regarding insolvency proceedings such as reorganizations.
The Court mentioned Surya Vadanan v. State of Tamil Nadu, wherein it was held that the principle of comity of court was essentially a principle of self-restraint. Thus, if an order was passed in an earlier proceeding by a foreign court, by adopting the principle of judicial discipline and self-restraint, the domestic court should recognize and follow such orders to apply them as far as possible.
The Court also found it important to mention that the present suit was a prior suit, and an application was filed by the petitioner under Section of the during the hearing of which, the moratorium order was passed by the U.S. Court on 24-10-2023. The Court stated that it was not a pre-existing order of a foreign court and that the suit court was only required to take note of such proceedings in the U.S. Bankruptcy Court.
Further, the Court stated that the conclusion arrived at by the Trial Judge, by applying Sections , , and of the was regarding the enforcement of foreign decrees and orders of foreign courts with which India did not have reciprocity.
However, the Court stated that it could not be ignored that the principle of comity of nations and comity of courts had been recognized by the Indian Courts by giving adequate weightage to or by considering the existence of such order or decree of a foreign court while deciding any proceeding in the domestic court.
The Court noted that the plaint case and the reliefs claimed did not indicate that there was any money claim or any other claim that would be covered by Chapter 11 cases in the U.S. Bankruptcy Code and thus the suit could continue. Therefore, the Court held that the suit was not required to be stayed.
The Court stated that the suit was at the stage of hearing of application of Section of the and that the injunction hearing had not yet taken place. It was also stated that the order of the U.S. Bankruptcy Court was one of the factors that may be looked into by the Court if it is deemed necessary.
The Court stated that the said order could not bind the Trial Judge to stay the suit and that a reading of the moratorium order indicated that the order operated in the field of Chapter 11 cases under the code, especially regarding money claims or claims that would result in the depletion of assets.
While dismissing the application, the Court stated that the distinguishing factor with the moratorium order of the U.S. Court was that by the said order, the management of the petitioner had not been superseded and that the management could always contest the suit.
[Uphealth Holdings, Inc. v. Syed Sabahat Azim, C.O. No. 241 of 2024, Decided on 22-05-2024]
Advocates who appeared in this case :
For Petitioner — Sr. Advocate S.N. Mookherji, Sr. Advocate Ratnanko Banerji, Advocate Suddhasatva Banerjee, Advocate Anand S. Pathak, Advocate Vijay Purohit, Advocate Shivam Pandey, Advocate Avijit Mookherji, Advocate Anirudhya Dutta, Advocate Shyra Hoon, Advocate Nav Dhawan, Advocate Naman Choudhury
For Respondents — Sr. Advocate Abhrajit Mitra, Advocate Krishna Rai Thakkar, Advocate Debashis Karmakar, Advocate Sarvapriya Mukherjee, Advocate Arya Nandi, Advocate Pijush Agarwal, Advocate Parikshit Lakhotia, Advocate Satyam Ojha
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