IBC cannot be used as a threat

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In a recent judgment, the Calcutta High Court dealt with the question of whether an application under section 34 of the Arbitration & Conciliation Act, 1996, can be kept in abeyance owing to the Insolvency and Bankruptcy Code, 2016 (IBC) being invoked by operational creditors against the petitioner.

In Sirpur Paper Mills Ltd v IK Merchants Pvt Ltd, the petitioner/debtor prayed for the setting aside of an award dated 7 July 2008, and contended that the present application under section 34 of the arbitration act could not proceed, since corporate insolvency proceedings under the IBC were initiated against the petitioner as the corporate debtor.

It was further submitted by the petitioner that since the management of the petitioner/corporate debtor was taken over by JK Paper, the resolution applicant before the National Company Law Tribunal (NCLT), and the respondents had also not made any efforts to place their claim before the resolution professional, the said application under section 34 of the arbitration act could not proceed.

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