Arbitration clause does not oust insolvency jurisdiction where debt and default must be examined under the Code.

An arbitration agreement does not automatically require referral of an insolvency dispute to arbitration where the adjudicating authority is satisfied that debt and default are in issue. The commentary treats the Insolvency and Bankruptcy Code as the governing special enactment in such circumstances and notes that its overriding effect under Section 238 prevails over inconsistent contractual remedies. On that basis, the existence of an arbitration clause, by itself, does not oust insolvency jurisdiction or prevent the Tribunal from examining the statutory requirements before granting insolvency relief.

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Issues: Whether the existence of an arbitration clause required the dispute to be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, and whether Section 238 of the Insolvency and Bankruptcy Code, 2016 prevented such reference in a proceeding under the Code.

Analysis: The application was examined on the footing that the parties had an arbitration agreement, but the decisive question was whether that agreement could displace the insolvency jurisdiction once debt and default were asserted. The Tribunal held that the availability of an alternative contractual remedy by itself does not bar consideration of insolvency relief where the adjudicating authority is satisfied about debt and default. It also relied on the overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016, and treated the Code as the governing special enactment for the dispute before it.

Conclusion: The request to refer the matter to arbitration was rejected, and the application was dismissed.

Final Conclusion: The insolvency proceeding was allowed to proceed on the basis that the arbitration clause did not oust the Tribunal's jurisdiction in the circumstances of the case.

Ratio Decidendi: An arbitration agreement does not, by itself, defeat insolvency proceedings where the Code applies and the statutory requirements of debt and default are to be determined, because the Insolvency and Bankruptcy Code, 2016 has overriding effect over inconsistent contractual or other legal remedies.

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