Insolvency Of Parties In The Arbitration Process: An Analysis
- IJLLR Journal
- 10 hours ago
- 2 min read
Sanskar Pandey, LL.M. (Corporate Laws) – MNLU-CS (2024–25), B.A., LL.B. (Hons.), NLUJAA (2019–24)
Shikha Madheshiya, LL.M. (Business Law)- NLUJAA (2024-25), B.A., LL.B.(Hons.), RMNLU (2019-24)
ABSTRACT
In India, there are certain matters that do not fall under the ambit of resolution via arbitration. Since insolvency proceedings are in rem and include third party rights, they are not subject to arbitration. The Supreme Court of India in A. Ayyasamy v. A. Paramasivam & Ors., had observed that the insolvency matters are not arbitrable. But there are exceptions to cases where either of the processes can override the other. In order to avoid arbitration processes, to stop the parties from resolving the issue, and to serve as a pressure tactic, the insolvency proceedings are started. In India, the arbitrability of insolvency petitions is still a murky topic devoid of definitive answers because of conflicting and dearth of Supreme Court decisions. The commencement of insolvency proceedings has caused many arbitral proceedings to stop, and the impact of insolvency on ongoing arbitration proceedings causes a stir. What happens when one application is made to institute insolvency proceedings and another to refer the same matter to arbitration? That is the fundamental question that must be answered. This paper analyses this prime question which is the main crux for understanding the intersection of insolvency and arbitration in India. The insolvency and arbitration intersection in India has been dealt with only on case-by-case basis, with the main test being that if the arbitration proceeding is done with the intention of debt recovery, only then can it override the insolvency proceedings. The paper delves into various cases to understand how this overriding effect is decided, what are the basis, and different aspects in the collision.
Keywords: Arbitration, Insolvency, NCLT on Arbitration and Insolvency, Overlap in Arbitration and Insolvency; Simultaneous Arbitration and Insolvency Proceedings.
