Case: Indus Biotech Private Limited Vs. Kotak India Venture (Offshore) Fund (earlier known as Kotak India Venture Limited) &amp; Ors

only the conclusion reached by the Adjudicating Authority, NCLT insofar as the order on the petition under Section 7 of the IB Code at this juncture based on the factual background is justified but also the prayer made by Indus Biotech Private Limited for constitution of the Arbitral Tribunal as made in the petition filed by them under Section 11 of the Act, 1996 before this Court is justified. 33. In that circumstance though in the operative portion of the order dated 09.06.2020 the application filed under Section 8 of the Act, 1996 is allowed and as a corollary the petition under Section 7 of the IB Code is dismissed; in the facts and circumstances of the present case it can be construed in the reverse. Hence, since the conclusion by the Adjudicating Authority is that there is no default, the dismissal of the petition under Section 7 of IB Code at this stage is justified. Though the application under Section 8 of the Act, 1996 is allowed, the same in any event will be subject to the consideration of the petition filed under Section 11 of the Act, 1996 before this Court. The contention as to whether payment of investment in preferential shares can be construed as financial debt was raised in the written submissions. However, we have not adverted to that aspect since the same was not the basis of the impugned order passed by the Adjudicating Authority. 34. Since we have arrived at the above conclusion, the next aspect relates to the appointment of the Arbitral Tribunal as sought in the petition. Essentially the main contention that has been urged is with regard to the proceedings before the NCLT and, therefore, the dispute not being arbitrable. However, in the present position the parties would be left with no remedy if the process of arbitration is not initiated and the dispute between the parties are not resolved in that manner as the proceedings before the NCLT has terminated. Mr. Shyam Divan, learned senior counsel for Indus Biotech Private Limited has contended that the transaction between the parties is a common one and as such it would be efficient if the dispute is resolved by a single Arbitral Tribunal. Further in view of the objection raised on behalf of the respondent No.4 (Kotak India Venture) that the arbitration clause has not been invoked in accordance with the requirement therein, since the promoters have to suggest one arbitrator and not the Company, Mr. ANS Nadkarni, learned senior counsel representing the promoters who are arrayed as respondent Nos.5 to 11 in the arbitration petition has pointed out that the affidavit has been filed supporting the petition seeking arbitration and, therefore, the Tribunal be constituted. Though Mr. Neeraj Kishan Kaul, learned senior counsel and Mr. Nitin Mishra, learned counsel had in their argument opposed the reference to arbitration by pointing out lacunae in the manner the clause was invoked and the name of the arbitrator was suggested, in the circumstance the only remedy for the parties being resolution of their dispute through arbitration as indicated above, we consider it appropriate to take note of the substance of the arbitration clause and constitute an appropriate Tribunal. 35. In that regard it would be necessary to consider as to whether the matter is to be referred to a Single Tribunal or the Tribunal be appointed in respect of each of the agreements. Mr. Nitin Mishra in his written submission has contended that there cannot be composite arbitration. In that regard the decision in the case of M/S Duro Felguera S.A vs M/S. Gangavaram Port Limited, (2017) 9 SCC 729 is relied upon with specific reference to paragraphs 38 and 55 therein, while Mr. Ritin Rai has pressed para 44 of the same decision into service seeking common Tribunal. In the said case there were five separate contracts each having independent existence with separate arbitration clauses and in that light, it was held that there cannot be a single Arbitral Tribunal for International Commercial Arbitration and domestic arbitration and bifurcated accordingly. In the instant case also four separate agreements have been entered into between the parties. The provision for arbitration contained in clause 20.04 is similar in all the agreements and the supplemental agreements have also adopted the same. Clause 20.4.1 reads as hereunder: 20.4.1 Except as provided in Section 20.4.2, the parties hereto irrevocably agree that any dispute, controversy or claim arising out of, relating to or in connection with this Agreement (including any provision of any exhibit, annex or schedule hereto) or the existence, breach, termination or validity hereof (a Dispute) shall be finally settled by arbitration. The arbitration shall be conducted in accordance with the international arbitration rules of the Arbitration and Conciliation Act, 1996. The arbitration shall be held at Mumbai and shall be conducted by three (3) arbitrators. For purpose of appointing such arbitrators, KIVF I, KEIT and KIVL shall jointly, on the one hand, and the Promoters, as a group, on the other hand, shall each appoint one arbitrator, and the third arbitrator, who shall be the chairperson, shall be selected by the two party- appointed arbitrators. In the event that any party fails to appoint an arbitrator within fifteen (15) days after receipt of written notice of the other partys intention to refer a Dispute to arbitration, or in the event of the two party- appointed arbitrators failing to identify the third arbitrator within fifteen (15) days after the two party-appointed arbitrators are selected such arbitrator shall be appointed by a Court of competent jurisdiction on an application initiated by any party. An arbitral tribunal thus constituted is herein referred to as a Tribunal. In the event an appointed arbitrator may not continue to act as an arbitrator of a Tribunal, then the party (or the two appointed arbitrators, in the case of the third arbitrator) that appointed such arbitrator shall have the right to appoint a replacement arbitrator in accordance with the provisions of this Section 20.4.1.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]11. As a matter of fact, the transaction entered into between the parties arising out of the SS and SA dated 20.07.2007, 12.07.2007, 09.01.2008 and the supplemental agreements dated 22.03.2013 and 19.07.2017 is not in dispute. The further fact that the SS and SA dated 20.07.2007, 12.07.2007 and 09.01.2008 vide Clause 20.4 provides for arbitration in the event of any dispute, controversy or claim arising out of, relating to or in connection with the said agreement is also not in dispute. Further the supplemental agreements vide Clause 13 and 19 respectively provides that the provision for arbitration in Clause 20.4 of the SS and SA agreement dated 20.07.2007 shall apply to the supplemental agreement is also evident. If in that context the matter is looked at, there would be no need for this Court to advert to any other aspect in the petition filed under Section 11 of the Act, 1996 since in the normal circumstance, on constitution of the Arbitral Tribunal all other issues are to be gone into by the Arbitral Tribunal relating to the above noted dispute between the parties. However, the nature of Arbitral Tribunal will have to be considered since one is international arbitration and the other are domestic.12. Despite the said position, before concluding on the Arbitration Petition filed by Indus Biotech Private Limited, keeping in perspective the objection raised by the Kotak India Venture relating to the petition having already been instituted before the NCLT under Section 7 of the IBC and also keeping in perspective the order dated 09.06.2020 passed by NCLT disposing of the application filed under Section 8 of the Act, 1996; the matter requires deeper consideration on that aspect13. Before adverting to the contentions in this regard, it is to be taken note that against the order dated 09.06.2020 assailed in the special leave petition, Kotak India Venture in the normal course if aggrieved, ought to have availed the remedy of appeal by filing an appeal in the NCLAT as provided under Section 61 of IB Code. Having not done so, in a normal circumstance we would have chosen to relegate Kotak India Venture to avail the alternate remedy of appeal. The contention on behalf of Kotak India Venture that they do not have the remedy of appeal as it is an order disposing an application filed under Act, 1996 and not an order under the part as provided in Section 61 of IB Code is noted only to be rejected. The order dated 09.06.2020 is certainly an order passed by the Adjudicating Authority under IB Code and petition under Section 7 of that Code is also disposed.However, as noted from the narration made above, the order dated 09.06.2020 passed by the NCLT is while taking note of petition under Section 7 of IB Code, in the backdrop of Indus Biotech seeking for the resolution of dispute through arbitration and the Arbitration Petition to that effect was already pending before this Court as on the date the order was passed by the NCLT. It is only in this special circumstance we have proceeded to entertain the petition and examine the matter on merits.15. This Court had the occasion to consider exhaustively the scheme and working of the IB Code in the case of Innoventive Industries Limited vs. ICICI Bank and Another (2018) 1 SCC 407. The proceeding under Section 7 of the IB Code and the scope thereof is articulated in paras 27 to 30 which read hereunder,27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of debt, we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a claim and for the meaning of claim, we have to go back to Section 3(6) which defines claim to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4).The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5(21) means a claim in respect of provision of goods or services.28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor — it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub- section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the debt, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing—i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code.30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is due i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.17. The procedure contemplated will indicate that before the Adjudicating Authority is satisfied as to whether the default has occurred or not, in addition to the material placed by the financial creditor, the corporate debtor is entitled to point out that the default has not occurred and that the debt is not due, consequently to satisfy the Adjudicating Authority that there is no default. In such exercise undertaken by the Adjudicating Authority if it is found that there is default, the process as contemplated under sub-Section (5) of Section 7 of IB Code is to be followed as provided under sub-Section 5(a); or if there is no default the Adjudicating Authority shall reject the application as provided under sub-Section 5(b) to Section 7 of IB Code. In that circumstance if the finding of default is recorded and the Adjudicating Authority proceeds to admit the application, the Corporate Insolvency Resolution Process commences as provided under sub-section (6) and is required to be processed further. In such event, it becomes a proceeding in rem on the date of admission and from that point onwards the matter would not be arbitrable. The only course to be followed thereafter is the resolution process under IB Code. Therefore, the trigger point is not the filing of the application under Section 7 of IB Code but admission of the same on determining default.18. In that circumstance, though Dr. Singhvi has referred to the evolution of IB Code after all earlier legal process had failed to give the rightful place to the creditor; which is sought to be achieved by the IB Code, it cannot be said that by the procedure prescribed under the IB Code it means that the claim of the creditor if made before the NCLT, more particularly under Section 7 of IB Code is sacrosanct and the corporate debtor is denuded of putting forth its version or the contention to show to the Adjudicating Authority that the default has not occurred and explain the circumstance for contending so. In fact, in the very decision relied on by both the parties in the case of Innoventive Industries Limited (supra), this court while considering the scope of the various provisions under the Act and while referring to the procedure contemplated in a petition under Section 7 of the IB Code, which is also extracted supra reads thus: -It is at the stage of Section 7(5), where the Adjudicating Authority is to be satisfied that default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the debt, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact.It is no doubt true that the original period of the OCRPS was up to 31.12.2018, on which date it could be redeemed.20. Therefore, in a fact situation of the present nature when the process of conversion had commenced and certain steps were taken in that direction, even if the redemption date is kept in view and the clause in Schedule J indicating that redemption value shall constitute a debt outstanding is taken note; when certain transactions were discussed between the parties and had not concluded since the point as to whether it was 30 per cent of the equity shares in the company or 10 per cent by applying proper formula had not reached a conclusion and thereafter agreed or disagreed, it would not have been appropriate to hold that there is default and admit the petition merely because a claim was made by Kotak Venture as per the originally agreed date and a petition was filed. In the process of consideration to be made by the Adjudicating Authority the facts in the particular case is to be taken into consideration before arriving at a conclusion as to whether a default has occurred even if there is a debt in strict sense of the term, which exercise in the present case has been done by the Adjudicating Authority.21. In such circumstance if the Adjudicating Authority finds from the material available on record that the situation is not yet ripe to call it a default, that too if it is satisfied that it is profit making company and certain other factors which need consideration, appropriate orders in that regard would be made; the consequence of which could be the dismissal of the petition under Section 7 of IB Code on taking note of the stance of the corporate debtor. As otherwise if in every case where there is debt, if default is also assumed and the process becomes automatic, a company which is ably running its administration and discharging its debts in planned manner may also be pushed to the Corporate Insolvency Resolution Process and get entangled in a proceeding with no point of return. Therefore, the Adjudicating Authority certainly would make an objective assessment of the whole situation before coming to a conclusion as to whether the petition under Section 7 of IB Code is to be admitted in the factual background.We note, it cannot be in dispute that so would be the case even if the Adjudicating Authority takes a view that the petition is not ripe to be entertained or does not constitute all the ingredients, more particularly default, to admit the petition, since even such order would remain appealable to the NCLAT and the Supreme Court where the correctness in that regard also will be examined.In our view, the stage of the proceedings at which the said observation was made will be relevant. If the case has reached the stage to the status of a proceeding in rem, then such observation would not be justified and sustainable but not otherwise. In the instant case, the petition was yet to be admitted and, therefore had not assumed the status of a proceedings in rem.23. The tests to be applied to determine as to when the subject matter is not arbitrable and on applying such test, actions in rem is not arbitrable is laid down by this Court in the case of Vidya Drolia and Others Vs. Durga Trading Corporation (2021 2 SCC 1 ) which reads as hereunder:76. In view of the above discussion, we would like to propound a fourfold test for determining when the subject matter of a dispute in an arbitration agreement is not arbitrable:76.1 (1) when cause of action and subject matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.76.2 (2) when cause of action and subject matter of the dispute affects third party rights; have erga omnes effect; require centralized adjudication, and mutual adjudication would not be appropriate and enforceable;76.3 (3) when cause of action and subject matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable; and76.4 (4) when the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).76.5 (5) These tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject matter is non-arbitrable. Only when the answer is affirmative that the subject matter of the dispute would be non-arbitrable.76.6. However, the aforesaid principles have to be applied with care and caution as observed in Olympus Superstructures (P) Ltd. [Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan, (1999) 5 SCC 651 ] : (SCC p. 669, para 35)35. … Reference is made there to certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, which cannot be referred to arbitration. It has, however, been held that if in respect of facts relating to a criminal matter, say, physical injury, if there is a right to damages for personal injury, then such a dispute can be referred to arbitration (Keir v. Leeman [Keir v. Leeman, (1846) 9 QB 371 : 115 ER 1315] ). Similarly, it has been held that a husband and a wife may refer to arbitration the terms on which they shall separate, because they can make a valid agreement between themselves on that matter.77. Applying the above principles to determine non- arbitrability, it is apparent that insolvency or intracompany disputes have to be addressed by a centralised forum, be the court or a special forum, which would be more efficient and has complete jurisdiction to efficaciously and fully dispose of the entire matter. They are also actions in rem. Similarly, grant and issue of patents and registration of trade marks are exclusive matters falling within the sovereign or government functions and have erga omnes effect. Such grants confer monopoly rights. They are non-arbitrable. Criminal cases again are not arbitrable as they relate to sovereign functions of the State. Further, violations of criminal law are offences against the State and not just against the victim. Matrimonial disputes relating to the dissolution of marriage, restitution of conjugal rights, etc. are not arbitrable as they fall within the ambit of sovereign functions and do not have any commercial and economic value. The decisions have erga omnes effect. Matters relating to probate, testamentary matter, etc. are actions in rem and are a declaration to the world at large and hence are non-arbitrable.In view of the exhaustive consideration made in Vidya Drolia and our clear understanding that a dispute will be non- arbitrable when a proceeding is in rem and a IB Code proceeding is to be considered in rem only after it is admitted it is seen that in the instant case the position is otherwise. The decisions relied on behalf of Kotak India Venture in the case of Booz Allen and Hamilton Vs. SBI Home Finance Ltd. & Others (2011) 5 SCC 532  and A. Ayyasamy Vs. A. Paramasivam & Others (2016) 10 SCC 386 need not be referred in detail and overburden this judgment since they have been referred in Vidya Drolia which also explain the same situation.24. In the case of Swiss Ribbons Private Limited vs. Union of India (2019) 4 SCC 17  and Pioneer Urban Land and Infrastructure Limited vs. Union of India & Ors. (W.P.(C) No.43/2019) relied on behalf of Kotak Venture, the entire scope and ambit of the IB Code was considered and the validity of the provisions were upheld. The said decisions have also been relied on to contend that when the petition under Section 7 of IB Code is triggered it becomes a proceedings in rem and even the creditor who has triggered the process would also lose control of the proceedings as Corporate Insolvency Resolution Process is required to be considered through the mechanism provided under the IB Code. The principles as laid down in Swiss Ribbons (supra) was also referred to in detail in the case of Pioneer Urban Land and Infrastructure (supra) wherein the observations contained in para 39 though in the case of Real Estate Development was laid down. The relevant portion which has been referred to, reads as follows:-Thus, any allottee/home buyer who prefers an application under Section 7 of the Code takes the risks of his flat/apartment not being completed in the near future, in the event of there being a breach on the part of the developers. Under the Code, he may never get refund of the entire principal, let alone interest. This is because, the moment a petition is admitted under Section 7, the resolution professional must first advertise for and find a resolution plan by somebody, usually another developer which has then to pass muster under the Code, i.e. that it must be approved by at least 66 per cent of the Committee of Creditors and must further go through challenges before NCLT and NCLAT before the new management can take over and either complete construction or pay out for refund amounts.The underlying principle, therefore, from all the above noted decisions is that the reference to the triggering of a petition under Section 7 of the IB Code to consider the same as a proceedings in rem, it is necessary that the Adjudicating Authority ought to have applied its mind, recorded a finding of default and admitted the petition. On admission, third party right is created in all the creditors of the corporate debtors and will have erga omnes effect. The mere filing of the petition and its pendency before admission, therefore, cannot be construed as the triggering of a proceeding in rem. Hence, the admission of the petition for consideration of the Corporate Insolvency Resolution Process is the relevant stage which would decide the status and the nature of the pendency of the proceedings and the mere filing cannot be taken as the triggering of the insolvency process.27. Therefore, to sum up the procedure, it is clarified that in any proceeding which is pending before the Adjudicating Authority under Section 7 of IB Code, if such petition is admitted upon the Adjudicating Authority recording the satisfaction with regard to the default and the debt being due from the corporate debtor, any application under Section 8 of the Act, 1996 made thereafter will not be maintainable. In a situation where the petition under Section 7 of IB Code is yet to be admitted and, in such proceedings, if an application under Section 8 of the Act, 1996 is filed, the Adjudicating Authority is duty bound to first decide the application under Section 7 of the IB Code by recording a satisfaction with regard to there being default or not, even if the application under Section 8 of Act, 1996 is kept along for consideration. In such event, the natural consequence of the consideration made therein on Section 7 of IB Code application would befall on the application under Section 8 of the Act, 1996.28. In the above background, on reverting to the fact situation in this case, a perusal of the order dated 09.06.2020 would indicate that the Adjudicating Authority, NCLT though has taken up the application filed under Section 8 of the Act, 1996 as the lead consideration, the petition filed under Section 7 of the IB Code is also taken alongside and made a part of the consideration in the said order. A further perusal of the order would disclose that the Adjudicating Authority was conscious of the fact that consideration of the matter before it any further would arise only if there is default and the debt is payable. This is evident from the observation contained in para 5.13 of the order. The further narration made in para 5.14 would indicate that the Adjudicating Authority, from the material available on record had arrived at the conclusion that the issue involved has not led to a stage of the default having occurred and has rightly, in that context held that the claim of the company by invoking the arbitration clause is justified but the Adjudicating Authority has rightly done nothing with regard to arbitration and has left it to this Court. Accordingly, the Adjudicating Authority in para 5.15 has categorically recorded that they are not satisfied that a default has occurred.30. The conclusion reached by the Adjudicating Authority, NCLT in the instant case cannot be faulted if reference is made to the documents produced by Indus Biotech Private Limited along with an application and referred to by Mr. Shyam Divan, learned senior counsel are noted. It indicates that the allotment of equity shares against the OCRPS in view of the QIPO was still a matter of discussion between the parties and no conclusion had been arrived at so as to term it as default. The said issue was initiated in the 121st meeting of the Board of Directors wherein the Nominee Director representing Kotak India Venture Fund was also present. The IPO related matters were discussed as item No.6 and at 6(c). The discussion and decision that the conversion of the outstanding preference shares would take place after issuance of bonus shares as per the provisions of the Shareholders Agreement was recorded. In the 122nd meeting of the Board of Directors wherein the Non-Executive Director and Nominee Director representing Kotak India Venture were also present, the issue was considered at item No.7. It was resolved that the Board has accorded approval to the allocation of such percentage of the offer as may be determined by the Board to any category. Further, though in the Extraordinary General Body meeting dated 10.04.2018, the Representative Directors of the Kotak India Venture had obtained leave of absence, the resolution adopted in the said meeting had indicated that the equity shares of the company proposed to be issued and allotted as bonus equity shares shall be subject to the provisions of the memorandum of association and articles of association of the company. The Company Secretary was authorised to do all such acts in that regard.31. In the letter dated 21.11.2018 addressed by Indus Biotech Private Limited to Kotak India Venture, it was mentioned with regard to the fundamental issue that needs to be addressed regarding conversion and convertible securities into equity shares since the exist process initiated cannot move forward without such conversion. The letter dated 17.12.2018 addressed to Indus Biotech Private Limited by Kotak India Venture in fact refers to the stake in conversion and the dispute being as to whether it should be 10 per cent of the share capital of the company as offered by Indus Biotech Private Limited or 30 per cent as claimed by Kotak India Venture Fund. It is that aspect of the matter, which is still contended to be in dispute between the parties regarding which the arbitration is sought by Indus Biotech Private Limited, which was also noted by Adjudicating Authority. We express no opinion on the merits of the rival contention relating to the dispute.32. In such situation, in our opinion, it would be premature at this point to arrive at a conclusion that there was default in payment of any debt until the said issue is resolved and the amount repayable by Indus Biotech Private Limited to Kotak India Venture with reference to equity shares being issued is determined. In the process, if such determined amount is not paid it will amount to default at that stage. Therefore, if the matter is viewed from any angle, not only the conclusion reached by the Adjudicating Authority, NCLT insofar as the order on the petition under Section 7 of the IB Code at this juncture based on the factual background is justified but also the prayer made by Indus Biotech Private Limited for constitution of the Arbitral Tribunal as made in the petition filed by them under Section 11 of the Act, 1996 before this Court is justified.33. In that circumstance though in the operative portion of the order dated 09.06.2020 the application filed under Section 8 of the Act, 1996 is allowed and as a corollary the petition under Section 7 of the IB Code is dismissed; in the facts and circumstances of the present case it can be construed in the reverse. Hence, since the conclusion by the Adjudicating Authority is that there is no default, the dismissal of the petition under Section 7 of IB Code at this stage is justified. Though the application under Section 8 of the Act, 1996 is allowed, the same in any event will be subject to the consideration of the petition filed under Section 11 of the Act, 1996 before this Court. The contention as to whether payment of investment in preferential shares can be construed as financial debt was raised in the written submissions. However, we have not adverted to that aspect since the same was not the basis of the impugned order passed by the Adjudicating Authority.