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IPNet Case Study #1 – Admission of Claims in Pending Arbitration during CIRP

Facts

A Ltd. enters CIRP, and the RP invites claims from creditors. B Ltd. submits a claim for ₹50 crore, citing an ongoing arbitration. The RP admits only ₹10 crore (the undisputed amount), rejecting the ₹40 crore under arbitration as the outcome is uncertain. B Ltd. challenges this decision, arguing the entire ₹50 crore should be admitted.

Discussion Points

  • ⁠ ⁠Should the RP admit claims pending arbitration or only undisputed amounts?
  • ⁠ ⁠How should claims under arbitration be handled in CIRP?
  • ⁠ ⁠Any relevant case law on this issue?

IP Net Recommended Solution:

  1. ⁠RP should admit 10 Cr in full and the balance 40 Cr. Should be shown as contingent claim under arbitration/litigation
  2. ⁠RP should include in IM about contingent claim under arbitration for Rs. 40 Cr to make aware all parties willing to submit EOI and become PRA’s
  3. All RA’s submitting the Resolution Plan should include the treatment of such contingent amount besides other admitted claims. It is a mandatory content as per Regulations. In other words, unless it contains the treatment, RP should point out that deficiency to CoC and if CoC still approves such a plan, it is likely to be rejected by NCLT due to non-compliance of legal provisions.
  4. The question whether arbitration proceedings can continue or not after approval of the resolution plan, there are two opinions – one, it gets abated because of clean slate principle and two, it does not get abated but should reach its logical conclusion. Delhi High Court decided on the lines of first argument, however, Hon’ble Supreme court has set aside that judgment in view of parties agreeing for arbitration but the question of arbitrability has been kept open to be decided in some other case.

Disclaimer: The recommended solution provided for the case study is for informational purposes only and should not be considered as legal advice or a formal legal opinion. The information shared reflects the current understanding of insolvency processes and regulations, which may evolve over time due to changes in laws, judicial interpretations, or regulatory updates.

It is recommended that members consult for specific legal advice or opinions before making decisions. IP Net and its contributors are not liable for any actions taken based on the information provided.

More Case Studies

IPNet Case Study #3 – Sabari Realtors Pvt. Limited : An Analysis of the NCLT’s Landmark Ruling in Real Estate Insolvency
IPNet Case Study #2 – Treatment of Claims by Statutory Authorities in CIRP

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