Arbitration of CIRP Initiation Applications Under Section 9 of the Insolvency and Bankruptcy Code, 2016: Impact of ‘Indus Biotech

Abstract

The decision of the Hon’ble Supreme Court in Indus Biotech (P) Ltd. v. Kotak India Venture (Offshore) Fund & Ors. has potentially allowed arbitration of disputes that arise in applications to initiate the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 by dismantling the hurdle of non-arbitrability of insolvency disputes. This article explores the nature of disputes that arise in applications by operational creditors to initiate the corporate insolvency resolution process of a corporate debtor, and analyses the applicability of the decision in Indus Biotech to such disputes. It argues how and why arbitration can help adjudication of such applications and highlights the need for mandating arbitration of disputes that arise during such adjudications. Due to the complex and mixed questions of law and facts involved, these applications take a substantial time to be decided by the National Company Law Tribunals, thus delaying the process and defeating a core objective of the Insolvency and Bankruptcy Code, 2016, i.e., time bound resolution of commercial insolvencies. It proposes a broad alternative framework whereby arbitration can be used/mandated to adjudicate an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, along with the necessary safeguards.