𝐒𝐮𝐩𝐫𝐞𝐦𝐞 𝐜𝐨𝐮𝐫𝐭 𝐨𝐧 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐨𝐟 𝐈𝐧𝐬𝐨𝐥𝐯𝐞𝐧𝐜𝐲 𝐃𝐢𝐬𝐩𝐮𝐭𝐞

Posted on 26-04-2022

𝐒𝐮𝐩𝐫𝐞𝐦𝐞 𝐜𝐨𝐮𝐫𝐭 𝐨𝐧 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐨𝐟 𝐈𝐧𝐬𝐨𝐥𝐯𝐞𝐧𝐜𝐲 𝐃𝐢𝐬𝐩𝐮𝐭𝐞 Indus Biotech Pvt. Ltd. Vs. Kotak India Venture (Offshore) Fund (SCC OnLine SC 268) 1. The respondent Kotak subscribed certain equity shares & optionally convertible redeemable preference shares of Indus. Later, Kotak exercised its right of redemption and asked Indus to make payment of Rs 367 crores as the redemption value. According to the respondent’s calculations, Indus has to pay 30% of the total share capital ; while as per Indus, it should only be 10%. 3. Kotak filed a petition before National company Law Tribunal (#NCLT) Mumbai, under Section 7 of IBC, as a financial creditor claiming a default in payment of debt by Indus, a financial debtor, to initiate corporate insolvency resolution process (CIRP) against Indus. 4. On the other hand, Indus sent an arbitration notice to Kotak to invoke arbitration as per the agreement. Indus also filed an application, in the pending Section 7 IBC proceedings, under Section 8 of the A&C Act, to refer the dispute to arbitration. 5. NCLT has dismissed the Insolvency petition citing that the petitioner has never defaulted in making the payment citing that for a mere payment dispute, a company cannot be forced into insolvency proceedings. Since the dispute in this case revolves around the redemption percentage calculation, NCLT referred the parties to resolve their dispute under arbitral proceeding as per the agreement between the parties. 6. Further, Indus filed an application before the apex court for the appointment of arbitrator. The Honorable supreme court clarified that in a dispute where an insolvency proceedings has already been admitted by the #NCLT as per the section 7 of IBC, 2006; in such circumstances the application under Section 8 of the Arbitration Act (i.e referring the parties to arbitration as per the terms of arbitration agreement) made thereafter will not be maintainable. 7. The apex court in this case concluded that since the insolvency petition wasn’t admitted, the decision of NCLT is justified and ordered for the appointment of arbitrator. #supremecourt #arbitration #insolvencyandbankruptcy