Challenge to an interim arbitral award u/s 31(6) of the ...

Rejection of IBC resolution plan's impact on arbitration counterclaims: Court upholds arbitral award.

Case Laws     Insolvency and Bankruptcy

August 27, 2024

Challenge to an interim arbitral award u/s 31(6) of the Arbitration and Conciliation Act, 1996. The key issues are: (1) whether the rejection of an application u/s 16 regarding the arbitrator's jurisdiction operates as res judicata for the interim award, and (2) whether alleged future losses covered by a counterclaim could be dismissed due to the approval of a Resolution Plan under the Insolvency and Bankruptcy Code (IBC). The court held that the earlier rejection u/s 16 did not operate as res judicata, as the subsequent approval of the Resolution Plan extinguishing creditors' rights altered the scenario, providing a fresh cause of action. Regarding the second issue, the court ruled that all claims, including future losses, stood extinguished upon approval of the Resolution Plan, as per Section 31 of the IBC and the Supreme Court's decision in Ghanashyam Mishra. Consequently, the arbitrator was justified in dismissing the counterclaims at the outset due to the Resolution Plan's approval. The court found no grounds to interfere with the interim award u/s 34, as the arbitrator's findings were legally correct. The petition was dismissed.

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