In the present case, the Hon’ble Delhi High Court ruled that mere initiation of arbitration proceedings does not preclude a Corporate Debtor from pursuing other legal remedies, including those available under the Insolvency and Bankruptcy Code, 2016 (“IBC”)
The present dispute is between the Petitioners (the shareholders and buyers of the shares) and the Respondents (the promoters and the founders of the Petitioner No. 1). The Respondents had approached OFB Tech Private Limited and the Petitioner No. 2 (Agri Farms Private Limited) to sell their 100% shares in Petitioner No. 1 company to the Petitioner No. 2. Thereafter, the Respondent signed and executed a term sheet wherein they projected an average EBITDA of around Rs. 17,92,00,000/- for the Financial Year 2021-2022 based on the turnover of Rs. 501 Crores and 390 Crores for the years 2021-2022 and 2022-2023 respectively. However, the actual average EBITDA was approximately around Rs. 4,50,36,307 which was much lower than projected EBITDA (Rs. 17.92 Crores).
The erstwhile shareholders had assured and represented to the Petitioner No. 2 that the EBITDA reflected in the books of accounts was not the true indicator of their valuation, and that actual EBITDA was around Rs. 17,92,00,000/- and the same had been achieved by utilizing only 75% of the plant capacity and there was scope of growth for the Petitioner No. 2. Based on the Respondents representations, the Petitioner No. 2 and the Respondents entered into Share Purchase Agreement dated 7th October 2022 which was subsequently amended. Also, the Petitioner No. 1 and the Respondents entered into Credit Facility Agreement. Subsequently, it came to the knowledge of the Petitioners that the Respondents had falsified previous years accounting figures. Further, the Respondents even failed to provide transitional services. As the disputes and difference arose between the parties, the Petitioners issued notice under section 21 of the Arbitration & Conciliation Act, 1996 (“the Act”) and invoked arbitration.
The Respondents contended that the two separate agreements and signatories resulted in misjoinder of cause of action and that there is no dispute inter se the parties and the amounts due from the Petitioners are admitted and consequently the Respondents had filed a Petition under section 7 of the IBC in the Hon’ble National Company Law Tribunal, Jaipur. The Hon’ble Delhi High Court held that various disputes were mentioned in the legal notices and the invocation notice addressed to the Respondents and the Respondents had acknowledged certain amounts as due. Further, the Ld. Arbitrator has the liberty to register the two arbitrations separately if it is determined that the agreements cannot be consolidated. Accordingly, the Hon’ble Delhi High Court allowed the application filed by the Petitioner seeking appointment of the arbitrator and appointed an arbitrator and referred the parties to the arbitration.