NCLAT has no power to stay hands of High Court in hearing Section 9 petition or any other plea under Arbitration Act: Bombay High Court

Is a stay order by the National Company Law Appellant Tribunal (NCLAT) on institution or continuation of suits or other proceedings against a company and its entities binding on High Courts? The Bombay High Court has answered in the negative..The Bench of Justice GS Patel answered the question while hearing an application for interim relief under under Section 9 of the Arbitration and Conciliation Act by Bay Capital Advisors against IL&FS Financial Services (IFIN)..It was pointed out to the Court that there was an order of the NCLAT dated October 15, 2018 in another case staying proceedings against IFIN, and hence, the plea by Bay Capital is not maintainable..Invoking the provisions of the Companies Act 1956, the NCLAT had passed an order apparently in the larger public interest directing that there would be stay on the institution or continuation of suits or any other proceedings against IL&FS and its 348 group companies in any court of law, tribunal, arbitration panel or arbitration authority..Senior Advocate Nikhil Sakhardande, arguing for Bay Capital, opposed this order on the ground that NCLAT is neither a tribunal, a judicial authority nor a constitutional court empowered to issue high prerogative remedy..Relying upon Section 242 of the Companies Act (powers of tribunal), he argued that the Act does not give NCLAT a power of superintendence over other courts, specifically over courts that are neither subordinate to the NCLAT nor subject to its superintendence."An order of this kind may be made by the Supreme Court, or by the High Court in regard to Courts over which the High Court has judicial superintendence, but certainly not the NCLAT," Sakhardande submitted as a corollary..Observing that NCLAT has no jurisdiction over the Bombay High Court even on its original side (as it was a chartered High Court) Justice Patel concluded that the High Court does not fall within the NCLAT's jurisdiction or superintendence. "I do not not see how the words 'court of law' can be 'read down', because other than the NCLT, there is no other judicial authority over which the NCLAT exercises such superintending power," Justice Patel observed..While I do not think I need to go quite that far with the NCLAT order, it seems to me plain that when the NCLAT passed such an order it did something it could not possibly have done.Bombay High Court.Justice Patel further reasoned that NCLAT cannot pass orders under Section 9 and other such Sections under the Arbitration Act which as per the statute fall before the High Court itself. Neither are the provisions of the Arbitration Act specifically subjected to the provisions of the Companies Act, the Court observed."Even assuming for a moment that the NCLAT has the power to stay arbitrations, it certainly does not have the authority to stay the hands of this Court in hearing a petition under Section 9 or any other petition that properly comes before this Court under the Arbitration and Conciliation Act 1996," the order reads..Having held that an NCLAT order cannot and does not come in the way of the High Court making an appropriate order under Section 9, the Court held that the Section 9 petition was maintainable. .As per Section 35 of the Code of Civil Procedure which mandates costs unless the Court otherwise decides, the Court imposed an amount of Rs. 7.5 lakhs payable by Bay Capital to IFIN within two weeks from today. If not paid, it will carry interest at the rate of 9% per annum (interest on costs as permitted by Section 35)..Sakhardande was instructed by Advocates Ravichandra S Hegde and Ashish Venugopal from Parinam Law Associates. Senior Advocate Dr Birendra Saraf, instructed by Rohan Sawant and Chandrajit Das from Manilal Kher Ambalal, appeared for IFIN. Advocate Aman Datta appeared for promoter of Bay Capital..[Read order here]