This petition under Section 34 of the Arbitration and Conciliation Act, 1996 was filed by M/s McNally Bharat Engineering Company Limited (petitioner/corporate debtor) to challenge an arbitral award dated May 5, 2018, which had directed the petitioner to pay Rs. 5,52,00,000/- along with post-award interest to Metso India Pvt. Ltd. (respondent). During the pendency of the challenge, the petitioner was admitted to the Corporate Insolvency Resolution Process (CIRP) by the NCLT, Kolkata, and a resolution plan submitted by BTL EPC Limited was subsequently approved. Because the respondent failed to lodge its claim before the Resolution Professional (RP), the petitioner moved an application seeking dismissal of the Section 34 petition as infructuous and requested the refund of the awarded amount deposited as a Fixed Deposit Receipt (FDR) with the Registry of the High Court pursuant to an earlier stay order.
Upon reviewing the matter, the High Court of Delhi dismissed the Section 34 petition as having been rendered infructuous and allowed the petitioner’s application for a refund. Relying on landmark precedents including Ghanashyam Mishra & Sons and Tata Steel Ltd. v. Varsha, the court reaffirmed that upon the approval of a resolution plan under Section 31 of the Insolvency and Bankruptcy Code (IBC), all unsubmitted and unquantified claims stand extinguished, and the corporate debtor starts on a “fresh slate”. The court rejected the respondent’s contention that depositing money in court amounts to direct payment to a decree-holder, clarifying instead that court-deposited funds remain assets of the corporate debtor held as security pending litigation. Consequently, the petition was dismissed, and the Registry was directed to release the deposited amount along with accrued interest to the petitioner.
- Factual Background and Dispute Origin:
- The petitioner (MBECL) entered into an agreement with the respondent on July 12, 2011, for the design, manufacture, supply, and supervision of two barrel type blender reclaimers for BHEL.
- Following disputes, MBECL terminated the agreement on November 21, 2011, prompting the respondent to invoke arbitration under Section 21 of the Act.
- The arbitral tribunal passed an award on May 5, 2018, accepting the respondent’s claim of Rs. 5,52,00,000/- with post-award interest at 12% per annum.
- MBECL challenged the award under Section 34 (O.M.P. (COMM) 362/2018) and, pursuant to a court order dated August 23, 2018, deposited the awarded amount as an FDR with the Registrar General on September 1, 2021.
- Insolvency Proceedings (CIRP):
- On April 29, 2022, MBECL was admitted to CIRP by the NCLT, Kolkata.
- The resolution plan submitted by BTL EPC Limited was approved on December 19, 2023.
- The respondent failed to file or submit its claim before the Resolution Professional (RP) during the CIRP.
- Petitioner’s Contentions:
- Following the approval of the resolution plan, the respondent’s claim no longer survives and stands extinguished by operation of law under Section 31 of the IBC.
- The Section 34 petition has been rendered infructuous, and the amount deposited in court as a security asset must be refunded to the corporate debtor.
- Respondent’s Contentions:
- Depositing the awarded amount in court tantamounts to payment made to the decree-holder, meaning no claim was required to be filed before the RP.
- The deposited amount was not reflected in the information memorandum or the balance sheet as an asset, and grievances regarding the plan should be addressed under the IBC rather than Section 34.
- Court’s Analysis and Findings:
- Extinguishment of Claim: Under Section 3(6), 3(10), and Section 31 of the IBC, once a resolution plan is approved, all claims not part of the plan stand frozen and extinguished to ensure the corporate debtor starts on a “fresh slate” (Ghanashyam Mishra, Tata Steel v. Varsha). The respondent’s failure to lodge a claim before the RP renders the underlying arbitral claim non-existent, making the Section 34 challenge purely academic.
- Nature of Court Deposit: Relying on the Bombay High Court rulings in Siti Networks Limited and Reliance Naval and Engineering Ltd., the court held that cash deposited in court by a corporate debtor as security to stay execution remains an asset of the corporate debtor and does not constitute unconditional payment to the decree-holder. No vested right is created for the decree-holder to receive court deposits unconditionally if insolvency intervenes.
- Final Order:
- The petition under Section 34 of the Act was dismissed as having been rendered infructuous.
- The application (I.A. 30842/2024) filed by the petitioner was allowed, and the Registry was directed to release the deposited amount along with accrued interest to MBECL.
2026 DHC 6218
M/s McNally Bharat Engineering Company Limited v. Metso India Pvt. Ltd. (D.O.J. 03.08.2026)
