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A.   INSOLVENCY AND BANKRUPTCY CODE, 2016  V/s. Arbitration and Conciliation act, 1996

 

In the matter of Indus Biotech Pvt. Ltd. vs. Kodak India Venture Fund-I, NCLT, Mumbai Bench, referred the parties to Arbitration by allowing an application filed by the corporate debtor u/s 8 of the Arbitration & Conciliation Act, 1996 seeking reference to arbitration for settlement of the disputes between the parties, and dismissed the Company Petition filed by the financial creditor u/s 7 of IBC.

 

In this case, the Corporate Debtor had submitted that – (i) Sec. 8 of the Arbitration Act, which provides for the power of a judicial authority to refer parties to arbitration, is mandatory in nature, and (ii) the arbitration clause in the agreement is wide enough to cover all disputes between the parties which are in the nature of commercial disputes. Outlining the rules of interpretation of general laws versus special laws as summarized by NCLT, the author points out that when two provisions of law - one being a general law and the other being special law govern a matter, the court should endeavour to apply a harmonious construction to the said provisions.

 

In the instant case. although NCLT directed the parties to resolve their disputes through arbitration, it is noteworthy that the NCLT did not hold that the Arbitration and Conciliation Act, 1996 would prevail over the IBC and observed that law on this subject is res integra. In view of this, it can be said that once the NCLT is satisfied as to the existence of ‘default’ according to section 7 of the IBC, the existence of an arbitration agreement between the parties would not restrict the NCLT from initiating CIRP against the corporate debtor.

 

In can be concluded that section 8 of the Arbitration and Conciliation Act, 1996 would not prevail over section 7 of the IBC.”

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