Lawstreet Journal

Arbitral award-holder's claim be extinguished on approval of award-debtor's resolution plan under Insolvency and Bankruptcy Code 2016 : Calcutta HC

Lawstreet Journal 12 May 2021 7:19pm

Image courtesy: Lawstreet Journal Judiciary Arbitral award-holder's claim be extinguished on approval of award-debtor's resolution plan under Insolvency and Bankruptcy Code 2016 : Calcutta HC

On Friday, May 07, 2021 the Calcutta High Court settled an important question of arbitration law, viz., whether an arbitral award-holder's claim would stand extinguished upon the approval of a Resolution Plan for the award-debtor's revival, when it was not pressed during the Corporate Insolvency Resolution Process (CIRP). 

Taking precedence of the Supreme Court rulings from 2020, Justice Moushumi Bhattacharya ruled that the claim would get extinguished once the Resolution Plan was accepted by the National Company Law Tribunal.

 

Ruling to this effect, the Court said,

"This can be seen as a necessary and an inevitable fallout of the IBC in order to prevent, in the words of the Supreme Court, a "hydra head popping up" and rendering uncertain the running of the business of a corporate debtor by a successful resolution applicant. In essence, an operational creditor who fails to lodge a claim in the CIRP literally missed boarding the claims-bus for chasing the fruits of an Award even where a challenge to the Award is pending in a Civil Court."

An Award-debtor moved High Court seeking to withdraw its earlier application to the High Court under Section 34 of the Arbitration and Conciliation Act (Arbitration Act). In 2008, the Award-debtor had moved Court to set aside an arbitral award pronounced on July 7, 2008.

Stating that the Section 34 proceeding was unnecessary , the Award-debtor averred that the award-holder's claim is extinguished upon the approval of Resolution Plan that vested control of the Award-debtor with another entity. The CIRP leading up to the Resolution Plan lasted from September 18,… Continue Reading...


Tagged: calcutta high court   Insolvency and Bankruptcy Board of India  
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