Case Note & Summary
The applicant, Jasani Realty Pvt. Ltd., filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator to resolve disputes arising from two loan agreements with the respondent, Vijay Corporation. The applicant had borrowed Rs. 4,50,00,000 under a loan agreement dated 23 April 2015 (Agreement No. 1), which was later modified by a second agreement dated 5 July 2016 (Agreement No. 2) extending the repayment date to 31 March 2017. The applicant defaulted on repayment and issued a cheque dated 7 September 2021, which was dishonored. The applicant invoked the arbitration clause in the agreements and filed the Section 11 application. The respondent opposed the application, arguing that the applicant had filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, which should bar the appointment of an arbitrator. The court examined the legal issue of whether the mere filing of an insolvency petition creates an embargo on the court's power to appoint an arbitrator under Section 11 of the Arbitration Act. The court held that the moratorium under Section 14 of the IBC only comes into effect after the admission of the insolvency petition, not upon its mere filing. Therefore, the pendency of a Section 7 petition does not prevent the court from appointing an arbitrator. The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 of the Arbitration and Conciliation Act, 1996 - Effect of Pending Insolvency Petition - The court considered whether the mere filing of a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, bars the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. The court held that the mere filing of an insolvency petition does not create a moratorium or bar the court from appointing an arbitrator, as the moratorium under Section 14 of the IBC only arises after admission of the petition. The court allowed the application and appointed a sole arbitrator. (Paras 1, 10-12) B) Insolvency and Bankruptcy Code - Moratorium - Section 14 of the Insolvency and Bankruptcy Code, 2016 - Timing of Moratorium - The court clarified that the moratorium under Section 14 of the IBC operates only after the admission of the insolvency petition, not upon its mere filing. Therefore, the pendency of a Section 7 petition does not prevent the court from exercising its power under Section 11 of the Arbitration Act to appoint an arbitrator. (Paras 10-12)
Issue of Consideration
Whether mere filing of a proceeding under Section 7 of the Insolvency and Bankruptcy Code, 2016, would amount to any embargo on the Court considering an application under Section 11 of the Arbitration and Conciliation Act, 1996, to appoint an arbitral tribunal?
Final Decision
The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties.
Law Points
- Section 11 of the Arbitration and Conciliation Act
- 1996
- Section 7 of the Insolvency and Bankruptcy Code
- 2016
- appointment of arbitrator
- moratorium
- insolvency petition not a bar
