Supreme Court holds that NCLT can consider an application filed under Section 8 of Arbitration Act in a petition under Section 7 of IBC

Brief Facts

Indus Biotech (“Petitioner”) filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996 (“Act”) in the Supreme Court of India for appointment of the arbitral tribunal to adjudicate its disputes with Respondent Nos. 1 – 4 (“Respondents”). Respondent No. 1 is a Mauritius based company, whereas Respondent Nos. 2 – 4 are Indian companies and sister ventures of Respondent No. 1. The dispute sought to be referred to arbitration arose between the parties under different share subscription
and shareholders’ agreements. The Respondents sought to convert their preference shares they held in the Petitioner into equity shares. As the conversion formula to be applied in converting the shares was disputed, the Petitioner did not pay the Respondents the redemption amount. Terming this as ‘default’, Respondent No. 2 filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016 (“IBC”)
before the National Company Law Tribunal (“NCLT”). The Petitioner argued that as the subject matter of the arbitration is same, although under different agreements, the arbitration could be conducted by a single arbitral tribunal as an international arbitration. The Petitioner filed an application under Section 8 of the Act in the Section 7 petition, seeking a direction to refer the parties to arbitration.

The NCLT, vide its order, dismissed the petition under Section 7 of the IBC and allowed the application under Section 8 of the Act.

Download PDF