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The present article delves into the legal conundrum created by the judgment of the Supreme Court in Indus Biotech (P) Ltd v Kotak India Venture (Offshore) Fund,1 (“Indus Biotech”). In Indus Biotech, the Supreme Court held that the consequence of an insolvency petition filed under the Insolvency and Bankruptcy Code, 2016 (“Code”) (whether it is admitted or rejected on its own facts by the Adjudicating Authority) would fall upon the application under Section 8 of the Arbitration and Conciliation Act, 1996 (“Act”) filed by the corporate debtor seeking reference of the dispute with creditor raised in insolvency petition to an arbitral tribunal. In the event, the insolvency petition is admitted, the application under Section 8 of the Act would stand dismissed. However, if the said petition is rejected, the Adjudicating Authority shall consider the application under Section 8 of the Act. Such being the case, it does not align with another extant legal position that an arbitration proceeding can be invoked and initiated by the corporate debtor for its benefit even during the corporate insolvency resolution process (“CIRP”). It is proposed in the present article that applying the test of “dressed up petition”, the Adjudicating Authority may be able to resolve such conundrum at the origin by examining the real objective of the insolvency petition in light of the application seeking reference to arbitration under Section 8 of the Act. Subsequently, this article will also shed light on the adjudication of counterclaims by an appropriate forum in case of a dispute regarding the amount of default. Additionally, it will be contended that even if an application seeking reference to arbitration under Section 8 of the Act is dismissed, the same should not act as a precedent to the adjudication of an application under Section 11 of the Act, seeking appointment of arbitrator in terms of the agreement.

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