Insolvency filing alone does not bar arbitration; Section 238 applies only after admission, and limitation issues may go to the arbitrator.

Mere filing of an insolvency application under the Insolvency and Bankruptcy Code, 2016 does not by itself bar appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996; the statutory bar under Section 238 arises only after admission of the insolvency petition and commencement of insolvency proceedings. The Court also held that the existence of a dispute must be assessed on the full correspondence and surrounding facts, while questions on the effect of an alleged admission or the substantive limitation defence are generally for the arbitrator to decide. On that basis, the objections based on pending insolvency, absence of dispute, and limitation did not prevent reference to arbitration.

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Issues: (i) Whether the mere filing of an insolvency application under the Insolvency and Bankruptcy Code, 2016 bars appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. (ii) Whether the alleged absence of dispute and the plea of limitation precluded reference to arbitration.

Issue (i): Whether the mere filing of an insolvency application under the Insolvency and Bankruptcy Code, 2016 bars appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.

Analysis: The operative trigger for the bar under Section 238 of the Insolvency and Bankruptcy Code, 2016 is not the mere filing of an insolvency petition but its admission under Section 7(5), after the Adjudicating Authority applies its mind and records a finding of default. Until that stage is reached, proceedings under Section 11(6) of the Arbitration and Conciliation Act, 1996 are not interdicted. The Court treated the earlier view followed in Jasani Realty as correctly stating the law and held that there was no inconsistency requiring refusal of arbitration merely because an insolvency application was pending.

Conclusion: The objection based on the pending insolvency proceedings failed, and appointment of an arbitrator was permissible.

Issue (ii): Whether the alleged absence of dispute and the plea of limitation precluded reference to arbitration.

Analysis: The Court held that the existence of dispute had to be assessed on the totality of communications and factual material, not on one isolated email. The effect of the correspondence, including the alleged admission, was held to be a matter for the arbitrator. On limitation, the Court noted that the arbitration clause was invoked in the reply dated 15/09/2020 and the application followed thereafter, so the application itself was not time-barred; any plea that the substantive claim was time-barred was left to the arbitrator.

Conclusion: These objections did not defeat the application for appointment of an arbitrator.

Final Conclusion: The application was allowed and an arbitrator was appointed to adjudicate the disputes between the parties, with the insolvency proceedings held not to bar reference at the pre-admission stage.

Ratio Decidendi: The mere filing of an insolvency petition does not create a statutory bar to arbitration; the bar under Section 238 of the Insolvency and Bankruptcy Code, 2016 arises only after admission of the insolvency application and commencement of the insolvency process.

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