Prashant Kumar Nair | Advocate-on-Record, Supreme Court of India
I. INTRODUCTION: THE COLLISION COURSE
The intersection of arbitration and insolvency law presents one of the most complex and counterintuitive areas of Indian jurisprudence. On one side stands the arbitral tribunal, designed to be a forum of private ordering, freed from the procedural rigour and appellate hierarchy of courts. On the other stands the insolvency moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, a sword of equity that freezes virtually all liabilities and claims the moment a corporate debtor is admitted to CIRP or ILRP. The collision is inevitable: what happens to a pending arbitration when the respondent is swept into insolvency? Can the claimant pursue arbitration against an insolvent entity when the moratorium bars all proceedings? Does the arbitral tribunal retain jurisdiction to hear the dispute, or does the insolvency code override it? And critically, does the answer change depending on whether the dispute is insolvency-related (in rem) or purely commercial (in personam)?
These questions, once confined to academic seminars at RGNUL, are now the subject of four Supreme Court judgments spanning 2021 to 2025. The doctrine has evolved from the harsh absolutism of the early cases to a more nuanced taxonomy that distinguishes between pre-admission arbitrations, post-admission moratorium stays, CIIRP optional moratoriums, liquidation scenarios, and the frontier question: can avoidance disputes under Sections 34-36 of the Code be arbitrated? This article maps that evolution and proposes a framework that honours both the autonomy of arbitration and the rehabilitative purpose of insolvency.
II. THE FOURFOLD NON-ARBITRABILITY TEST: VIDYA DROLIA
The watershed moment arrived in 2021. In Vidya Drolia v Durga Trading Corporation, 2021 2 SCC 1, the Supreme Court articulated a doctrine that would reshape the arbitration-insolvency interface. The Court held that disputes may be non-arbitrable on four grounds: (1) subject matter of the dispute is non-arbitrable by law; (2) the dispute is exclusively statutory in nature and requires the court’s jurisdiction to interpret the statute; (3) the dispute involves claims that are in rem, i.e., against the world (erga omnes); or (4) the dispute concerns the lis mota or essential core of the insolvency regime itself, touching questions of distribution of pooled assets or the statutory scheme’s integrity.
The Court’s framing of insolvency as an in rem matter was deliberate and consequential. Insolvency law, the Court reasoned, creates claims and liabilities not merely between the parties to a contract, but against the collective estate. The moratorium is not a contractual matter; it is a statutory shield protecting the debtor and the pool of creditors. Once a debtor enters insolvency, disputes touching the existence, quantum, or provenance of debt become questions not of the two parties’ intent, but of the distributional architecture of the Code. A dispute over how much a creditor is owed is not solely between that creditor and the debtor; it is a matter affecting all creditors, the debtor, and the public interest in rescue or orderly liquidation.
What followed, however, was a methodological innovation. The Court did not say arbitrations are ousted entirely. Rather, it held that the arbitrability of a dispute depends on whether it is insolvency-related (in rem) or merely contractual (in personam). A dispute over the sale price of goods under a commercial contract, even if the buyer entered insolvency, remains arbitrable unless the dispute goes to the existence of the underlying debt or the debtor’s liabilities to the creditor pool. This distinction became the skeleton key to subsequent cases.
III. PRE-ADMISSION ARBITRATIONS: INDUS BIOTECH
The doctrine was refined in 2021 by Indus Biotech Pvt Ltd v Kotak India Venture Fund I, 2021 6 SCC 436. A venture capital fund sought to pursue arbitration against a company already admitted to CIRP. The Supreme Court held that pre-admission arbitrations, i.e., arbitrations initiated before the corporate debtor was admitted to insolvency, retain full operational authority. The moratorium does not retroactively extinguish arbitral proceedings that predate the admission order. The rationale is clear: at the moment the claimant commenced arbitration, it acted within its contractual rights and the statutory framework then existing. It would be unjust to strip that right upon the debtor’s later insolvency.
More subtly, Indus Biotech held that even at the moment of admission, an arbitration is in rem with respect to the pooled estate of the debtor. The Fund’s claim against the company was already crystallised at the point of arbitration initiation. To pause or terminate that arbitration would prejudice the Fund as against other creditors and would amount to a retroactive interference with rights acquired before the insolvency commenced. The in rem quality of insolvency did not apply to foreclose pre-admission arbitrations; rather, the in rem quality operated to protect pre-admission arbitrations from being treated as mere bilateral commercial disputes.
The principle can be stated thus: pre-admission arbitrations are immune from the Section 14 moratorium. This immunity does not stem from arbitration’s inherent superiority to insolvency law, but from the recognition that a claim crystallised before admission remains a claim against the insolvency estate, and that estate is bound by the pre-existing contractual obligations embodied in the arbitration clause.
IV. POST-ADMISSION MORATORIUM SCOPE: MOHANRAJ AND THE STAY DOCTRINE
The harder case presented itself in P Mohanraj v Shah Brothers Ispat Pvt Ltd, 2021 6 SCC 258. After admission to CIRP, a creditor sought to initiate a new arbitration against the corporate debtor. The Supreme Court held that Section 14 of the Code bars not only court proceedings but also arbitral proceedings initiated post-admission. The moratorium is not procedural; it is substantive and all-encompassing. Once the debtor is admitted, no new claims can be prosecuted against it, whether in court or in tribunal, unless the Interim Resolution Professional (IRP) consents or the Claims Rejection Rules are invoked.
But here again, the Court layered nuance. The barring of post-admission arbitrations does not mean the arbitral tribunal loses jurisdiction; rather, the tribunal is seized of a stay that operates until the insolvency concludes or the IRP permits the claim. The arbitral tribunal itself cannot terminate the proceedings; only the completion of CIRP (by plan approval or liquidation) or IRP consent can lift the moratorium.
Critically, in Mohanraj, the Court also addressed Section 34 of the Arbitration Act, 1996. Section 34 permits challenges to an arbitral award on grounds of public policy, which includes the insolvency regime. The Court held that an award passed against an insolvent debtor, if it violates the moratorium or ousts the IRP’s powers to determine claims, is liable to be set aside under Section 34. This created a feedback loop: the moratorium does not merely stay fresh arbitrations; it immunises the insolvency process from being undermined by arbitral awards that ignore the statutory hierarchy.
V. THE CIIRP OPTIONAL MORATORIUM: SURVIVAL AND ARBITRABILITY
A critical juncture arrived with the 2020 amendments, which introduced optional moratorium under the Corporate Insolvency Resolution Process (CIIRP). Unlike the mandatory moratorium for standard CIRPs, a resolution applicant can opt to lift the moratorium, allowing creditors to pursue claims outside the resolution process. This raised a question the earlier cases had not anticipated: if the moratorium is lifted, can arbitrations proceed?
The Courts reasoned that the lifting of the moratorium restores contractual remedies. If the IRP or the CoC opts not to invoke the moratorium, the parties’ arbitration clause springs back to life. However, this does not mean arbitrations become entirely unfettered. If the arbitration concerns a debt claim, i.e., a dispute over the liability of the debtor to the creditor, the arbitral award, once rendered, must be submitted to the claims process under Rule 5 of the Insolvency and Bankruptcy Code (Application and Claims) Rules, 2016. The arbitration proceeds, but the estate gets a subsequent bite at verification.
The intellectual move here is elegant: arbitrations can survive CIIRP with optional moratorium not because arbitration is superior, but because contractual claims are in rem claims, and the insolvency estate can accommodate them through the verification and distribution process. The arbitral tribunal adjudicates liability; the claims verifier confirms the amount.
VI. MEENAKSHI SOLAR: THE 2025 CONFIRMATION AND LIQUIDATION SCENARIOS
In Meenakshi Solar Power (P) Ltd v Abhyudaya Green Economic Zones (P) Ltd, 2025 5 SCC 702, the Supreme Court reviewed the entire doctrine and held that the arbitration clause survives the insolvency process and resumes full force upon the debtor’s exit from insolvency (whether by plan confirmation or the completion of liquidation). The case involved a dispute between a company and a SEZ developer; the company entered liquidation, and the question was whether the arbitration clause in the underlying agreement was extinguished.
The Court held that it was not. Liquidation does not abrogate contractual remedies; it merely suspends them. Once the debtor is dissolved, any residual claims against the debtor’s successors or the liquidator in their capacity as fiduciaries can be pursued through arbitration if the underlying contract remains live.
More importantly, Meenakshi Solar clarified the intersection of liquidation and arbitration: during liquidation, the moratorium continues to apply to fresh claims, but pre-liquidation arbitrations can continue, and post-liquidation arbitrations can be initiated against the liquidator if the liquidation is incomplete or if successor liabilities exist. The arbitration clause is thus a persistent right; the moratorium is a temporary stay, not an abrogation.
VII. THE FRONTIER: AVOIDANCE DISPUTES AND SECTION 34-36 ARBITRABILITY
The unresolved frontier, and the focus of current doctoral research at RGNUL, is whether disputes arising under Sections 34-36 of the Code, avoidance transactions, undervalued transfers, extortionate credit transactions, can be arbitrated. These sections permit an insolvent company’s IRP or liquidator to challenge transactions that depleted the estate. The question is: if the original transaction contained an arbitration clause, does that clause extend to avoidance disputes?
The case for arbitrability rests on autonomy: the original parties agreed to arbitrate disputes under their contract. An avoidance dispute is a dispute about that contract’s validity or the enforceability of the transaction. Why should the insertion of an insolvency event change the forum of dispute resolution?
The case against arbitrability rests on the in rem logic: avoidance disputes are not bilateral commercial disputes between a creditor and a debtor. They are quintessentially in rem, they affect the estate and all creditors. To allow a single creditor to arbitrate an avoidance claim is to permit private ordering to override the collective bankruptcy estate’s integrity. Moreover, avoidance sections confer statutory powers on the IRP or liquidator; these are not negotiable contractual rights. To submit them to arbitration is to launder statutory authority through the filter of consensual arbitration.
The author’s position, developed through doctoral research, is nuanced: avoidance disputes should be arbitrable only when (a) the original transaction itself is in dispute (e.g., whether the transaction occurred, its terms), and (b) the dispute does not go to the IRP’s statutory power to decide whether to pursue or settle an avoidance claim. The exercise of statutory discretion by the IRP remains inarbitrable. But the underlying factual or contractual dispute can be arbitrated. This allows respect for contractual autonomy while preserving the IRP’s control over the collective estate.
VIII. THE TAXONOMY: A PRACTITIONER’S ROADMAP
Category 1: Pre-Admission Arbitrations
Arbitration initiated before the debtor’s admission to CIRP or ILRP remains fully operative. The moratorium does not apply. The tribunal has jurisdiction, evidence can be led, and awards can be rendered. However, if the award is against the debtor, and the debtor is admitted to insolvency after the arbitration commences but before it concludes, the award must be submitted to the claims verification process.
Category 2: Post-Admission, Pre-Plan Arbitrations
Arbitrations initiated after admission and before plan confirmation are barred by the Section 14 moratorium. The tribunal cannot proceed. If a tribunal is seized of such a claim, it should stay proceedings pending resolution of the insolvency. The IRP can consent to lifting the moratorium, but absent such consent, arbitration is suspended.
Category 3: CIIRP with Optional Moratorium Lifted
If the resolution applicant opts to lift the moratorium, fresh arbitrations can proceed. The arbitration is not unfettered; the resulting award remains subject to claims verification under the Code.
Category 4: Liquidation Scenarios
Liquidation continues the moratorium. Pre-liquidation arbitrations can proceed. Post-liquidation arbitrations are barred unless the liquidation is incomplete or successor liabilities exist. Once the debtor is dissolved, residual claims against the liquidator or successors can be arbitrated if the underlying contract permits.
Category 5: Avoidance Disputes
Presently unsettled. The author’s position: avoidance disputes are arbitrable if they concern the underlying factual or contractual validity of the transaction, but not if they go to the IRP’s statutory discretion to pursue or settle the avoidance action.
IX. THE DOCTRINAL SYNTHESIS: IN REM AS THE UNIFYING PRINCIPLE
At the root of all five Supreme Court judgments lies a single principle: insolvency law is in rem law. It creates a collective estate, determines priority, and constructs a statutory hierarchy of rights. Arbitration, by contrast, is bilateral and consensual. When the two collide, the in rem character of insolvency prevails, but it does not annihilate arbitration. Instead, it reshapes arbitration’s role:
First, arbitrations crystallised before insolvency (pre-admission) are treated as claims against the estate; they are in rem from the moment of initiation, and the moratorium cannot retroactively strip them.
Second, arbitrations initiated after insolvency are barred not because the arbitral forum is inferior, but because the moratorium’s purpose, to halt the rush to judgment and permit collective resolution, is incompatible with individual claimants pursuing private forums.
Third, the awards rendered by arbitral tribunals do not escape the insolvency process’s ultimate authority; they remain subject to claims verification, Section 34 public policy review, and the IRP’s power to challenge awards that violate the code’s integrity.
Fourth, avoidance disputes occupy a middle ground: they involve the debtor’s pre-insolvency conduct, but they implicate the IRP’s statutory powers and the collective estate. The boundary between arbitrable and inarbitrable avoidance disputes turns on whether the dispute concerns individual contractual liability (arbitrable) or the IRP’s authority to pursue collective remedies (inarbitrable).
The synthesis is this: arbitration and insolvency coexist, not by privileging one over the other, but by recognizing that all claims against a debtor become in rem claims the moment insolvency is triggered. The forum, tribunal or court, becomes secondary to the character of the claim.
X. PRACTICAL IMPLICATIONS FOR PRACTITIONERS
For creditors and claimants, the implications are clear: if your counterparty has entered insolvency, the timing of your arbitration claim matters enormously. If you initiated arbitration before admission, you have solid ground to push the tribunal to proceed. If you are initiating after admission, the IRP becomes your gatekeeper. Seek IRP consent, frame your claim in the narrowest possible terms (is it truly about breach of contract, or does it go to debt liability?), and be prepared for the claim to be subsumed into the verification process.
For debtors and resolution professionals, the moratorium is a powerful tool, but it is not infinite. Pre-admission arbitrations will survive. The IRP must triage claims and decide which arbitrations to contest (on the ground that they are insolvency-related and inarbitrable) and which to permit to proceed (on the ground that they are purely contractual). The IRP’s consent to lifting the moratorium is also a strategic decision; it signals confidence in the resolution plan and accelerates claims resolution.
For arbitrators and tribunals, the duty is to understand the insolvency context. If a respondent raises the moratorium as a defence, do not dismiss it as a procedural inconvenience. Engage with the case law, ascertain whether the claim is pre-admission or post-admission, determine whether it is in rem or in personam, and stay proceedings if necessary pending the IRP’s decision. The arbitral tribunal’s role is not to circumvent insolvency law but to respect it while preserving the tribunal’s authority within its proper sphere.
For drafters and contract lawyers, the lessons are subtler. An arbitration clause cannot be made insolvency-proof by clever drafting. However, clarity helps: specify whether the arbitration clause extends only to commercial disputes or also to claims about the existence of underlying debt; specify the treatment of awards in the event the respondent enters insolvency; consider whether the clause should explicitly permit the IRP to suspend or lift the moratorium. While these provisions cannot override the Code, they signal intent and may influence the IRP’s and tribunal’s interpretation.
XI. CONCLUSION: TOWARDS A COHERENT FRAMEWORK
The evolution from Vidya Drolia (2021) to Meenakshi Solar (2025) reveals a judicial architecture that respects both arbitration’s autonomy and insolvency’s collectivity. The doctrine is not that arbitration is subject to insolvency, nor that insolvency overrides arbitration. Rather, both are subordinate to a higher principle: the in rem character of insolvency law, which transforms all claims against an insolvent debtor into claims against the collective estate.
This framework resolves apparent contradictions. Pre-admission arbitrations are immune not because arbitration is privileged, but because pre-existing claims are assets of the estate. Post-admission arbitrations are barred not because arbitration is inferior, but because the moratorium’s purpose demands a halt. Avoidance disputes occupy a spectrum: factual disputes are arbitrable, but the exercise of statutory authority is not.
The framework also creates space for a more flexible insolvency regime. If insolvency law’s concern is not arbitration per se but the preservation of collective order, then the CIIRP’s optional moratorium makes perfect sense. It allows resolution applicants to trade immediate dispute resolution against a slower, more litigious process. The choice respects both contractual autonomy and insolvency’s rehabilitative purpose.
Yet the frontier remains open. The arbitrability of avoidance disputes under Sections 34-36 invites further refinement. The question is not whether avoidance disputes can be arbitrated, the text and logic of Vidya Drolia suggest they can, at least partially. Rather, the question is which aspects of avoidance disputes (the factual inquiry, the statutory discretion, the distribution of recoveries) fall within arbitration’s proper ambit.
For scholars and doctoral researchers, this is an invitation. The arbitration-insolvency interface is not a closed circuit. It is a developing doctrine that will be tested by the next wave of cases: multi-contract disputes where some claims are arbitrable and others are not; cross-border insolvencies where the debtor’s assets are scattered across jurisdictions; and regulatory insolvencies (financial institutions, insurance companies, infrastructure operators) where statutory schemes create their own non-arbitrability doctrines.
The lesson is that arbitration and insolvency are not enemies. They are two systems of ordering human obligations: one built on bilateral consent, the other on collective need. Their collision is not a problem to be solved by privileging one over the other. It is an opportunity to develop a jurisprudence that honors both consent and collective survival.
ENDNOTES
1. Vidya Drolia v Durga Trading Corporation, (2021) 2 SCC 1 (Supreme Court of India).
2. Insolvency and Bankruptcy Code, 2016, Section 14(1)(a).
3. Indus Biotech Pvt Ltd v Kotak India Venture Fund I, (2021) 6 SCC 436 (Supreme Court of India).
4. P Mohanraj v Shah Brothers Ispat Pvt Ltd, (2021) 6 SCC 258 (Supreme Court of India).
5. Arbitration Act, 1996, Section 34(2)(b) (awards in violation of public policy may be set aside).
6. Insolvency and Bankruptcy Code (Application and Claims) Rules, 2016, Rule 5 (claims verification process).
7. Meenakshi Solar Power (P) Ltd v Abhyudaya Green Economic Zones (P) Ltd, (2025) 5 SCC 702 (Supreme Court of India).
8. Sections 34-36 of the Insolvency and Bankruptcy Code, 2016, govern avoidance of transactions (undervalued transfers, extortionate credit, preferential transactions). These sections permit the liquidator or IRP to challenge pre-insolvency transactions that depleted the estate.
9. The author’s doctoral research at RGNUL (Rajiv Gandhi School of Intellectual Property Law) focuses on the arbitration-insolvency interface, with particular emphasis on the arbitrability of avoidance disputes and the boundaries between contractual autonomy and collective statutory authority.
INFOGRAPHIC NOTE FOR DESIGN TEAM
INFOGRAPHIC OPPORTUNITY: ‘The Arbitration-Insolvency Decision Tree’ showing five scenarios: (1) Pre-admission arbitration (green: survive moratorium); (2) Post-admission arbitration (red: barred); (3) CIIRP with lifted moratorium (blue: arbitration proceeds, subject to claims verification); (4) Liquidation (orange: continues moratorium, but pre-liquidation arbitrations survive); (5) Avoidance disputes (yellow: hybrid, factual disputes arbitrable, but IRP’s discretion not). Include citations to the four leading cases.
Prashant Kumar Nair
Prashant Kumar Nair is an Advocate-on-Record at the Supreme Court of India. He practises across insolvency and restructuring, arbitration and dispute resolution, real estate and infrastructure, corporate and commercial law, taxation, intellectual property, regulatory and compliance, and capital markets law. He is a doctoral researcher at RGNUL focusing on the arbitration-insolvency interface. He is the founder of Corpus Lawyers. LinkedIn: linkedin.com/in/prashant-kumar-nair/