Abstract

Arbitration is a process of alternate dispute redressal wherein the parties choose to have their disputes resolved by an arbitrator instead of approaching courts. It results in a private, binding and legally enforceable arbitral award. In India, the Arbitration and Conciliation Act, 1996, a composite piece of legislation, based on the 1985 UNICITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976, governs arbitration. It includes provisions for domestic arbitration, international commercial arbitration, enforcement of foreign award and conciliation. In the insolvency space, India introduced a paradigm shifting change in 2016 through the enactment of the Insolvency and Bankruptcy Code 2016. The Code was introduced to 'consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons in a time bound manner for maximisation of value of assets of such persons to promote entrepreneurship, available of credit and balance the interest of all the stakeholders.' The relationship between Insolvency and Arbitration is one of clear and fundamental contrasts. By its very nature insolvency law seeks to give its proceedings in rem effect by centralising all the proceedings against a debtor to one jurisdiction thereby resolving the insolvency collectively and comprehensively. On the other hand, arbitration heavily promotes party autonomy. It gives rise to in personam proceedings and decentralised proceedings. While arbitration proceedings are barred by operation of S.14 of the Code which deals with moratorium imposed when the insolvency resolution process is underway, there have been cases wherein arbitration proceedings involving the financially stressed debtor have been allowed to continue. This intersection between arbitration and insolvency proceedings continues to evolve on a case-by-case basis. In light of this interplay, the aim of this article is to study the effect arbitral proceedings have on insolvency proceedings and vice versa. The author will identify issues arising due to the conflicting nature of insolvency and arbitration laws and discuss the existing legal framework and jurisprudence of the Indian courts with relation to it. Finally, the author will offer comments and suggestions to ensure consistency and predictability in the legal position.

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