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The Insolvency and Bankruptcy Code, (IBC) 2016 was adopted with an object to initiate insolvency proceedings against Corporate Debtors. The Supreme Court on August 20,2018 held that insolvency process cannot be initiated if the proceedings challenging the arbitral award is pending. The Supreme Court in K Kishan vs. Vijay Nirman Company Ptvt. Ltd. observed that when a petition is filed under Section 34(Arbitration) against the arbitral award, it means that a dispute is already in existence between the parties.
Background of the Case
Therefore, in view of above observations the SC held that if a petition is filed under Section 34 against an arbitral award, that means there is a pre-existing dispute between the parties. It further held that if the petition under Section 34 is barred by limitation, it must be proved to the court that it is filed after the expiry period and that there is no pending petition and if the petition is filed in the wrong Court, and as a result limitation period expires, the petitioner may claim the application of Limitation Act. The bench also said that Section 238 of IBC will only apply in a case if there is inconsistency between the Code and the Arbitration Act. The SC, while allowing the appeal said that if the debt is disputed, the insolvency petition cannot be proceeded with.
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