The Delhi High Court presided by Justice Jasmeet Singh, has held that a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside an arbitral award is not maintainable during the insolvency process of a corporate debtor.
The ruling came in a case where Ansal Properties and Infrastructure Ltd. sought to challenge an arbitral award directing it to pay INR 644 crores under a corporate guarantee issued to debenture holders. The Court held that allowing such a petition would be contrary to the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC), as it could lead to affirmation of the award, which would amount to continuation of proceedings against the corporate debtor.
The Court relied on the Supreme Court’s judgment in P. Mohan Raj v. Shah Brothers Ispat (2021) 6 SCC 258, which affirmed that Section 14 IBC imposes a bar on all legal proceedings against the corporate debtor during the moratorium.
However, the Court granted liberty to Ansal Properties to initiate proceedings to set aside the award after completion of the insolvency resolution process. It also clarified that, in accordance with Section 60(6) of the IBC, the moratorium period will be excluded for the purpose of calculating limitation under Section 34 of the Arbitration Act.
Further details will be added once the full order is uploaded.
Petitioners: Vikas Goel Hermanbir Singh Sandhu Singhania and Partners
Respondent Sidhant Kumar Manyaa Chandhok- Unum Law