Two procedural regimes that, until April 2026, ran in parallel without practical overlap have begun to intersect. The Arbitration and Conciliation Act 1996 directs commercial disputes to arbitration, with the Supreme Court or High Court appointing an arbitrator under Section 11 where the parties cannot agree. The Insolvency and Bankruptcy Code 2016 routes default-driven distress to the National Company Law Tribunal under Sections 7, 9, and 10. The 2026 Amendment Act introduced the Creditor-Initiated Insolvency Resolution Process under new Chapter IV-A, a regime designed to operate without judicial admission. The intersection question follows immediately: if a creditor can initiate insolvency without going to the NCLT, can it also bypass the arbitration agreement?
The short answer, on a careful reading of the statute and the leading authority, is no. The longer answer is more useful, because it identifies the precise points at which the next round of litigation will concentrate.
The CIIRP Architecture in One Paragraph
Sections 58A to 58K of the IBC, inserted by the IBC (Amendment) Act 2026, create a framework where the financial creditors holding at least 51 percent of voting share by value may initiate the Creditor-Initiated Insolvency Resolution Process without filing a Section 7 application. The process operates through a Creditor Committee, runs for 150 days extendable by 45 days, and may either resolve the debt through a CIIRP plan, convert to CIRP under Section 58H, or terminate. The corporate debtor’s management remains in possession unless the Creditor Committee votes otherwise. The Adjudicating Authority is involved only to recognise plan approval or termination, not during the process itself.
The Section 11 Baseline
Section 11 of the Arbitration and Conciliation Act 1996 vests the power to appoint an arbitrator in the Supreme Court (for international commercial arbitration) and in the relevant High Court (for domestic). The Supreme Court has progressively narrowed the inquiry at this stage. The standard, after the Constitution Bench decision in SBI General Insurance Co. Ltd. v. Krish Spg., is that the appointing court examines only the existence of the arbitration agreement and its prima facie validity. Substantive defences, including allegations that the underlying contract is void, that the agreement was procured by fraud, or that the dispute has been settled by accord and satisfaction, are for the arbitral tribunal.
This is the negative competence-competence principle in its clearest Indian statement. Anything that requires deeper inquiry goes to the arbitrator. The court’s role at the appointment stage is narrow by design.
The Intersection Point
A creditor with an arbitration clause in its loan or supply contract now has, in theory, three procedural choices when default occurs:
- Invoke arbitration under Section 11.
- File a Section 7 application before the NCLT (financial creditor) or Section 9 (operational creditor).
- If holding the 51 percent threshold of value with other financial creditors, initiate CIIRP under Section 58A.
The question is whether option three is available where option one is contractually available. Two readings are possible.
Reading A, CIIRP overrides the arbitration agreement. The argument is that insolvency proceedings are in rem and non-arbitrable per Vidya Drolia v. Durga Trading Corpn., and the new Chapter IV-A is a self-contained code that operates regardless of the contractual dispute resolution choice. The creditor’s CIIRP initiation is not a “dispute” in the arbitration sense; it is an exercise of a statutory power triggered by default. The arbitration clause does not cover statutory remedies.
Reading B, the arbitration agreement survives. The counter-argument is that the very predicate of CIIRP is default, and the existence and quantum of default may be contested by the corporate debtor. Where contested, that is a “dispute arising out of or in connection with” the underlying contract, which is precisely what the arbitration clause covers. The Information Utility record is conclusive evidence under the 2026 Amendment for Section 7 purposes, but the CIIRP framework does not explicitly extend that conclusive-evidence rule to its own initiation threshold. If default is contestable and the contract carries an arbitration clause, the dispute belongs to the arbitrator.
Which Reading Holds
Reading B is more defensible, for three reasons that draw together a settled line of authority.
First, the in rem character of insolvency under Vidya Drolia attaches to the consequences of insolvency, the moratorium, the resolution plan, the binding effect on dissenting creditors, the cleansing of past liabilities. It does not attach to the determination of whether default has occurred. That determination is bilateral, between creditor and debtor, and is what arbitration agreements cover. The Supreme Court drew this distinction in Indus Biotech (P) Ltd. v. Kotak India Venture (Offshore) Fund, where the Court held that the in rem character of CIRP attaches at admission, not at the contractual default stage.
Second, the competence-competence principle now operates at a higher level of generality after SBI General Insurance v. Krish Spg. and the seven-judge Constitution Bench in In re: Interplay Between Arbitration Agreements & Stamp Act, 1899. A court asked to exercise statutory recognition powers, including under the IBC, must first ask whether the underlying question belongs to the arbitral tribunal. Where the contract carries an arbitration clause and the dispute is whether default has occurred, the answer is yes.
Third, the CIIRP framework provides for conversion to CIRP under Section 58H. If CIIRP initiation is being used to bypass an arbitration clause, the corporate debtor can challenge that bypass at the conversion stage, when the matter does reach the NCLT. At that point the arbitration question is fully justiciable.
Practical Implications for Counsel
For lenders, the CIIRP regime is most useful where default is uncontested and the Information Utility record is unambiguous. Where default itself is disputed, especially where the dispute turns on accord and satisfaction, force majeure, or contractual interpretation, the cleaner route remains arbitration first, with insolvency as the enforcement endgame.
For corporate debtors facing CIIRP initiation despite an arbitration clause, the strategic posture is to seek a Section 9 reference of disputes to arbitration before the dispute escalates, or to file a Section 8 application at the moment CIIRP is initiated, on the grounds that the default question is arbitrable. The Supreme Court’s Indus Biotech framework supports this posture.
For arbitrators appointed under Section 11 in matters where the respondent corporate debtor is simultaneously the subject of CIIRP initiation, the question of stay arises. Section 14 of the IBC creates a moratorium on the commencement or continuation of proceedings against the corporate debtor. CIIRP does not automatically trigger Section 14, but the Creditor Committee may vote to impose a moratorium under Section 58D. Where it does, the arbitral tribunal must decide whether to stay its own proceedings or to proceed pending NCLT determination. Power Finance Corpn. v. Shree Maheshwar Hydel Power Corpn. and the line of authority on inter-jurisdictional coordination remains relevant here.
Where the Next Litigation Concentrates
Three flashpoints are predictable.
One. The 51 percent threshold itself. CIIRP requires the consent of financial creditors holding at least 51 percent of voting share by value. Where the threshold is contested, particularly where related-party debt or recently-restructured debt is being voted, the litigation will turn on whether the threshold is correctly calculated. Information Utility records, while conclusive for default determination, may not be conclusive for voting calculations.
Two. The relationship between Section 58D (CIIRP moratorium) and Section 14 (CIRP moratorium). Where CIIRP converts to CIRP under Section 58H, does the Section 58D moratorium continue, or is it superseded by Section 14? The statute is silent. Practitioners should expect early NCLAT clarification.
Three. The treatment of arbitration awards rendered before CIIRP initiation but unenforced as at the date of initiation. The clean slate principle under Section 31(5), now codified, applies to CIRP resolution plans. The CIIRP plan, by contrast, is not subject to the same statutory clean slate language. The status of pending arbitration awards is the most significant unresolved question for commercial creditors with arbitration-anchored contracts.
Conclusion
CIIRP does not displace the arbitration agreement. Where a contract carries an arbitration clause and the existence or quantum of default is contested, the dispute belongs to the arbitral tribunal under the negative competence-competence principle in SBI General Insurance v. Krish Spg. and In re Interplay. CIIRP becomes the right route only where default is uncontested or where the Information Utility record is unchallenged.
The statutory architecture rewards careful sequencing. The Supreme Court’s pro-arbitration trajectory through BALCO, the 2015 Amendment, Perkins Eastman, BGS SGS SOMA JV, HCC v Union of India, Amazon v Future Retail, and now Gayatri Balasamy and SBI General Insurance, remains the dominant framework. The 2026 Amendment to the IBC operates inside that framework, not outside it.
Endnotes
1. Insolvency and Bankruptcy Code 2016, Sections 58A to 58K, as inserted by the Insolvency and Bankruptcy Code (Amendment) Act 2026.
2. Arbitration and Conciliation Act 1996, Section 11.
3. SBI General Insurance Co. Ltd. v. Krish Spg., (2024) 12 SCC 1 : 2024 SCC OnLine SC 1754.
4. Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : 2020 SCC OnLine SC 1018.
5. Indus Biotech (P) Ltd. v. Kotak India Venture (Offshore) Fund, (2021) 6 SCC 436 : 2021 SCC OnLine SC 268.
6. In re: Interplay Between Arbitration Agreements & Stamp Act 1899, (2024) 6 SCC 1 : 2023 SCC OnLine SC 1666 (7-judge Constitution Bench).
7. Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1 : 2025 SCC OnLine SC 986 (5-judge Constitution Bench).
8. Amazon.Com NV Investment Holdings LLC v. Future Retail Ltd., (2022) 1 SCC 209 : 2021 SCC OnLine SC 557.
9. Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760 : 2019 SCC OnLine SC 1517.