Tag Archives: On going Dispute

Insolvency Code – Cannot be Used Prematurely

Operational Creditors cannot use the Insolvency Code either prematurely or for extraneous considerations or as a substitute for debt enforcement procedures. The alarming result of an operational debt contained in an arbitral award for a small amount of say, two lakhs of rupees, cannot possibly jeopardize an otherwise solvent company worth several crores of rupees. Such a company would be well within its rights to state that it is challenging the arbitral award passed against it, and the mere factum of challenge would be sufficient to state that it disputes the award. Such a case would clearly come within para 38 of Mobilox Innovations (P) Ltd. V. Kirusa Software (P) Ltd., (2018) 1 SCC 353 being a case of a pre-existing ongoing dispute between the parties. The Code cannot be used in terrorem to extract this sum of money of Rupees Two Lakhs even though it may not be finally payable as adjudication proceedings in respect thereto are still pending. K. Kishan v. Vijay Nirman Company Private Ltd., (2018) 17 SCC 662.

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Filed under Insolvency and Bankruptcy Code, Premature Use