The Weekly Obiter

NO ARBITRATION PROCEEDINGS AFTER IMPOSITION OF MORATORIUM UNDER SECTION 14 OF INSOLVENCY AND BANKRUPTCY CODE, 2016: HON’BLE SC: OCTOBER 23, 2017

November 14, 2017

The Hon’ble Supreme Court in the matter bearing Civil Appeal No. 16929 of 2017 titled as Alchemist Asset Reconstruction Company Limited v. M/s Hotel Gaudavan Private Limited, opined that in an event where the moratorium with reference to Section 14 of the Insolvency and Bankruptcy Code, 2016 has been imposed, the said dispute cannot be referred to Arbitration. Section 14 of the Code, inter alia prohibits institution of any suit or continuation of any pending suit once the moratorium has been imposed. In such an event, initiation of arbitration proceeding would fall squarely in the ambit of prohibition as imposed by Section 14 of the Code. Keeping in mind the position of law, the Hon’ble Supreme Court held that:
“The effect of Section 14(1)(a) is that the arbitration that has been instituted after the aforesaid moratorium is non est in law.”
Therefore, the Hon’ble Supreme Court while allowing the appeal, had set aside an Order pertaining to an Appeal under Section 37 of Arbitration and Conciliation, 1996, The Hon’ble Supreme Court had set aside this Order and held that such a proceeding after the imposition of moratorium ceases to exist. 

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