Proceedings under Section 37 of the Arbitration Act would not constitute ‘Dispute’ for IBC

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Oct 01, 2017

Proceedings under Section 37 of the Arbitration Act would not constitute ‘Dispute’ for IBC

Under Section 9 of the IBC, the existence of a dispute could bar an application by a financial or operational creditor. Section 8(2) of the IBC provides that, while pendency of “arbitration proceedings” has been included as “existence of dispute”, pendency of an application under Section 37 of the Arbitration Act has not been included as “existence of dispute”.

By an order dated August 29, 2017,[1] the NCLAT considered the relationship between the IBC and the Arbitration Act. It held that an arbitral award reaches finality upon: (i) expiry of the time within which an application under Section 34 of the Arbitration Act to set aside the arbitral award can be made, or (ii) an application made under Section 34 being rejected. Accordingly, the pendency of an appeal under Section 37 of the Arbitration Act would not constitute an “existence of a dispute” within the meaning of the IBC.

[1] M/s Annapurna Infrastructure P. Ltd. v. Soril Infra Resources Ltd., Company Appeal (AT) (Insolvency) No. 32 of 2017.

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