Alchemist Asset Reconstruction Company Limited Vs. M/s. Hotel Gaudavan Private Limited & others (Civil Appeal No. 16929 of 2017) - Synopsis
Team SoOLEGAL 16 Oct 2020

In this case that is Alchemist Asset Reconstruction Company Limited Vs. M/s. Hotel Gaudavan Private Limited & others (Civil Appeal No. 16929 of 2017)  Supreme Court of India was of the view that after the initiation of the moratorium period, neither fresh proceedings nor any pending suit can be conducted against a Corporate Debtor.  A brief fact of the case is that the respondent company had taken a loan of a certain sum from State Bank of India, but the respondent company/corporate debtor had failed to repay the loan to the bank. A notice was given by the bank to the corporate debtor. The bank also had filed a petition before the Debt Recovery Tribunal for the recovery of the loan amount. State Bank of India (SBI) transferred the debt of the Corporate Debtor to a corporation called Alchemist Asset Reconstruction Corporation Limited by way of an assignment arrangement under Section 5 of the Securities and Reconstruction of Financial Assets and Regulation of Security Interest Act, 2002. Hence, the financial creditor is now the Alchemist Asset Reconstruction Corporation Limited.
A petition was filed at NCLT by the financial creditor for making an application under section 7 of IBC and this application was accepted by the bench and also a moratorium was declared by the bench against the corporate debtor that is the respondent. After the initiation of the moratorium, the respondent appealed for arbitration proceedings and also had appointed an arbitrator for that particular proceeding. According to NCLT, this arbitration is unlawful hence, it is not maintainable. Aggrieved by the decision of the bench, the corporate debtor filed an appeal in the District Court of Jaisalmer, Rajasthan. The Court had allowed the appeal. Being aggrieved the petitioner company/financial creditor had appealed to the Apex Court.
According to the Supreme Court, if an arbitration process is initiated after the initiation of the moratorium, then this is illegal.  Supreme Court of India was of the view that after the initiation of the moratorium period, neither fresh proceedings nor any pending suit can be conducted against a Corporate Debtor. Hence the Supreme Court had allowed the appeal.

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