Overlap of Insolvency and Arbitration Laws in India: How 'Virulent' are Insolvency Proceedings for Arbitrations
Published 20 May 2020
Executive Summary
(Minor revisions 02/11/2020) COVID-19 has caused a lockdown in India since March 25, 2020. Most businesses and offices are closed with people working from home; industries, factories and manufacturing units have not been operational and there has been an economic slowdown overall. As a consequence, the coming months will witness a rise in insolvency applications and claims in arbitration for breach of contract. To ensure that businesses are not pushed into insolvency because of the economic slump, the Indian Government has proposed to suspend the operation of the Insolvency and Bankruptcy Code, 2016 but no official notification has been released yet. On the other hand, contractual claims in arbitration are on the rise and an explosive increase in the number of arbitrations is expected once the lockdown is lifted.
This article analyses three scenarios in which arbitration proceedings and insolvency proceedings may overlap, and the treatment to pending proceedings in each of the three scenarios. The article also discusses a case study to highlight the problems faced by a corporate debtor in executing an award in its favour if insolvency proceedings are commenced against the corporate debtor. The author suggests possible measures to allow a corporate debtor a chance to execute the award in its favour before it is put under insolvency. These measures would require certain policy and legislative changes to the Insolvency and Bankruptcy Code, 2016, an overall change in judicial outlook to ensure that insolvency remains the last alternative.
This paper is part of a series of papers on the "Overlap between Bankruptcy / Insolvency Proceedings and Arbitrations ...". More information here www.transnational-dispute-management.com/news.asp?key=1812