The NCLT, Kolkata Bench has opined that arbitral proceedings cannot continue after Section 7 of the Insolvency and Bankruptcy Code,2016 (hereinafter referred to as “IBC”) application was admitted. The Section 14 moratorium comes into effect when the application under Section 7 is admitted and therefore, the continuation of arbitral proceedings would be in violation of Section 14 of IBC.

Brief Facts:

The present application has been preferred by the Operational Creditor (Applicant) of the Corporate Debtor to seek permission for the continuation of the arbitration proceedings against the Corporate Debtor.

Brief Background:

As per the Applicant, the application preferred by the Financial Creditor under Section 7 of the IBC was admitted against the Corporate Debtor on 29.04.2022.

Further, the dispute between the Corporate Debtor and the Applicant arose out of an arbitration agreement dated 22.09.2012. The Applicant terminated the contract as the Corporate Debtor failed to adhere to the timelines. The Applicant hence has filed the present petition to seek permission for the continuation of arbitration proceedings and ensured not to execute the award while the moratorium is in force.

Observations of the Tribunal:

The issue for determination was whether arbitration proceedings can continue in lieu of the Section 14 IBC moratorium.

The Bench analysed Section 14(1)(a) of the IBC and expounded that arbitral proceedings cannot continue after the Section 7 application was admitted. The Section 14 moratorium came into effect when the application was admitted and therefore, the continuation of arbitral proceedings would be in violation of Section 14 of IBC.

The decision of the Tribunal:

Based on the aforementioned reasons, the application was accordingly dismissed.

Case Title: Steel Authority of India Limited v. Mr. Ravi Sethia

Coram: Mr. Rohit Kapoor (Judicial Member), Mr. Balraj Joshi (Technical Member)

Case No.: IA.(IBC) No. 1657/(KB)/2022 in CP (IB) No. 891/(KB)/2020

Advocates for Applicant: Advs. Mr. Sarathi Dasgupta, Mr. Arijit Basu

Advocates for Respondents: Advs. Ms. Shweta Dubey, Ms. Ishita Srivastava, Mr. Atul Sureka

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