Over the years, the Indian Economy has seen a rapid increase in the number of high-profile insolvency cases. The Insolvency and Bankruptcy Code, 2016 ('the Code') was brought in to regulate and bring a set mechanism for the resolution of insolvencies with the intent to prioritise a delicate balance for all stakeholders in a time-bound manner.

While the Code has enhanced the due diligence which is followed in the process of insolvency, the intersection of Arbitration and Insolvency has always been at loggerheads in the judicial interpretations. When the Corporate debtor is the subject of the Corporate Insolvency Resolution Process ('CIRP'), there may arise issues regarding the arbitrability of disputes and enforcement of awards by the AwardHolder.

This article aims to analyse the jurisprudence which has been set over time when an award is passed in an arbitration proceeding and the award-debtor is declared insolvent before the award could be enforced.

Arbitration Award as a 'Debt' under Insolvency and Bankruptcy Code, 2016

Domestic Awards have been discussed at length under Part I of the Act. It is a settled position that an award can be enforced only when it has become final and binding on the parties, i.e., when it has overcome the challenges posed by S. 34 of the Act. The award, henceforth, becomes final under S. 35 of the Act and executed in the same manner as if it were a decree of the court.1

However, the Code provides for a Moratorium to be triggered upon the initiation of the Insolvency Resolution Process ('IRP') under section 14 of the Code. Section 14(1)(a) of the IBC specifically bars the institution of any suit or the continuation of pending suits or proceedings against the corporate debtor (including the execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority). The Report of Insolvency Law Committee of February 20202 specified the objective of the moratorium which is to "form a scheme which shields the corporate debtor from pecuniary attacks against it in the moratorium period so that the corporate debtor gets breathing space to continue as a going concern in order to ultimately rehabilitate itself."

The conundrum arises, however, when the award has been passed by the Hon'ble Arbitral Tribunal and the award holder goes insolvent, what remedy lies with the award holder in respect of their claims?

It is a settled position that an arbitral award is considered a valid claim under the Code.3 Even the unenforced foreign awards have also been considered as a claim under IBC.4 The definition of a claim under Section 326 of the Code makes it amply clear that it intends to include all the possible claims that may affect the financial condition of a Corporate Debtor.

However, the aforementioned award shall be filed as a 'claim' with the Resolution Professional within time, i.e., during CIRP. In this regard, Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016 ("CIRP Regulations") provides that a Resolution Plan should mandatorily contain the amount payable under it including the amount payable to the operational and financial creditors.

Whether a proceeding going on under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") needs to be stayed, when moratorium has been imposed under Section 14(1)(a) of the Code, was examined in Power Grid Corporation of India Ltd. v. Jyoti Structures Ltd. 5 wherein the Hon'ble Delhi High Court deliberated upon the term 'proceeding', observing that Section 14(1)(a) of the Code, is not preceded by the word 'all' to connote that the moratorium provisions would apply to all the proceedings against the corporate debtor. Since the aforementioned award was passed in the favour of the Respondent (who was the corporate debtor), the Hon'ble Court observed that in the light of the object of the code to keep the Corporate Debtor as a going concern, extending the unexecutability of the award would further prevent the Respondent (i.e. the corporate debtor) from recovering money due to it, adding further to the misery of the Respondent. Therefore, Section 14 of the Code would not apply to the proceedings which are for the benefit of the corporate debtor as these proceedings are not a 'debt recovery action'. The Hon'ble Court further observed that in the execution of the award, if the objections are settled against the Respondent (i.e., corporate debtor), then its enforceability under Section 36 of the Act shall be within the ambit of moratorium of Section 14(1)(a) of the Code.

However, in an interesting turn of events6 , the Hon'ble Calcutta High Court in the year 2021 dealt with an issue when the award had been passed by the Arbitral Tribunal and upon the filing of the application under Section 34 of the 1996 Act, the Respondent failed to lodge the claim with the IRP under the presumption that the award was automatically stayed. Therefore, the respondent could not approach the NCLT for lodging its claim. The Hon'ble Court, hence, adjudicated on the premise whether the claim of an Award-holder can be frustrated on the approval of a Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016. The Hon'ble Court observed that from the date of the admission of the application of initiation of the CIRP against the petitioner until approval of the resolution plan, the respondent, as an Award-holder had sufficient opportunity to approach the NCLT for appropriate relief. Unless the Award is stayed by an order of the Court in the manner provided under Section 36(3), filing of an application for setting aside of an Award under Section 34 shall not by itself make the Award unenforceable.

Hence, despite the claim being valid even in this case, it was the non-filing to the Resolution Professional at the apportioned time i.e., during CIRP that led to the extinguishment of the claim. However, the same is pending before the Hon'ble Supreme Court for final adjudication.

Under Foreign Awards, to enforce the award, the award-holder may resort to the New York Convention or Geneva Convention, as applicable. However, foreign awards in India have to pass a two-fold test of recognition and enforcement as provided for under Part II of the Arbitration Act. When enforcement proceedings against the Corporate Debtor with respect to a foreign award are pending before any commercial court of India, the conundrum arises whether a proceeding under recognition of the award will lie to enforce such an award against the Corporate Debtor.

In this regard, in Fuerst Day Lawson Ltd. v. Jindal Export7 , it was observed by the Hon'ble Supreme Court that separate proceedings for deciding the enforceability of the award and the execution thereafter are not required and that both the reliefs could be sought for in the same proceedings. Allegedly, the proceedings till the stage of deciding upon the question of enforceability of the award may not be covered under the moratorium and only if the Corporate Debtor fails on this account, the moratorium shall apply to the subsequent proceedings executing the award against the Corporate Debtor.


The economic turmoil caused by the ongoing pandemic has shown many corporations the door to insolvency while also showing a spark increase in the number of commercial disputes. Jurisprudence has shown that reconciliation is possible between the two statues, despite the different characteristics the arbitration act and insolvency code possess.

The key to enforcing an arbitral award under IBC lies in decoding the terms 'default' and 'debt' under the IBC. The jurisprudence has settled clearly that once an arbitral award is final and enforceable, it may be treated as an 'Operational debt', thereby preventing the corporate debtor to make frivolous attempts in dodging the liability. However, the Courts have, often, shown their reluctance in the institution or constitution of enforcement proceedings, domestic or foreign, against the Corporate Debtor. This in turn tends to jeopardise the interest of the award holder whose legitimate claims are kept in the parking lot during the moratorium period.

The final order in Sirpur mills8 case is awaited. If the order of the Calcutta High Court is upheld, it may offer some respite to the Award-Holder since the need of the hour calls for a proper balance to be drawn between the interest of the insolvent company (Corporate Debtor), which has to be revived and the award holder, who has suffered at the cost of the Corporate Debtor.


1 Section 36, Arbitration and Conciliation Act, 1996 (No. 3 of 2021).

2 Report of the Insolvency Law Committee, Ministry of Corporate Affairs (February 2020)

3 K. Kishan v. M/s Vijay Nirman Company P. Ltd, 2019 (193) AIC 88

4 Agrocorp International Private (PTE) Limited v. National Steel and Agro Industries Limited, MANU/NC/7624/2020

5 2018 IIAD(Delhi)569.

6 Sirpur Paper Mills Limited v. I.K. Merchants Pvt. Ltd., 2021(223)AIC 917.

7 2011 (4) UJ 2350.

8 Supra note 6.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.