Insolvency and Arbitration proceedings are starkly divergent in many ways yet when it comes to real disputes, their interplay assumes a greater significance. The relationship between arbitration and insolvency is often characterized as “a conflict between near polar extremes.” While insolvency proceedings dealt with under the Insolvency and Bankruptcy Code, 2016 talks about the procedure for resolving the insolvency and clearing the debts, arbitration on the other hand regulated by the arbitration and conciliation act, 1996 is an alternative dispute resolution mechanism where an arbitrator is appointed for resolving the disputes. Arbitration proceedings are in personam and are decentralized protecting party confidentiality. On the other hand, insolvency proceedings are in rem. Convergence and collision of these two proceedings become inevitable and transpire in the cases in various scenarios.
The major objective of this article is to analyze the different scenarios in which Insolvency and arbitration proceedings collide in a case. This article places special emphasis on dealing with the effect of initiation of insolvency proceedings on existing arbitration proceedings, on new arbitration proceedings, on arbitral awards already declared by arbitral tribunals, the effect of foreign arbitrations on insolvency proceedings in India, and the prevalence of one law over the other in the light of international jurisprudence with the help of judicial precedents and case laws. The coexistence of arbitration and insolvency processes has a few problems that must be faced in real disputes due to their convergence, this article seeks to highlight the legal provisions that can be applied when a such collision takes place.