The Clause Not Taken: Arbitration Or Insolvency?
- IJLLR Journal
- Apr 19
- 1 min read
Akshat Garg, Lloyd Law College, Greater Noida, India.
ABSTRACT
In commercial transactions, disputes are often inevitable, and parties frequently face a critical fork in the road: arbitration or insolvency. While each framework serves distinct legal purposes—arbitration upholding party autonomy in resolving disputes, and insolvency addressing collective creditor interests through statutory intervention—their overlap presents intricate legal questions. This article explores the nuanced interplay between arbitration and insolvency under the Indian legal framework, especially in light of evolving jurisprudence under the Insolvency and Bankruptcy Code, 2016 (IBC).
Focusing on the temporal phases of insolvency—before, during, and after the commencement of the Corporate Insolvency Resolution Process (CIRP)— the discussion dissects the legal consequences of initiating or continuing arbitration proceedings vis-à-vis the moratorium imposed under Section 14 of the IBC. Through an analysis of landmark judgments and recent judicial shifts, including the Supreme Court's revisitation of the Indian Oil case in 2024, the article underscores a gradual but clear move towards harmonizing the twin goals of contractual freedom and insolvency finality. It ultimately argues for a context-driven approach—one that avoids rigid binaries and instead promotes a pragmatic reconciliation of arbitration with the broader objectives of financial rehabilitation and asset maximization under insolvency law.
