Arbitration Act Vs IBC: SC to hear the matter on November 5

Hindustan Construction Company (HCC) and Gammon Engineers & Contractors have approached the Supreme Court seeking to prevent their lenders from pushing them into insolvency. The above companies are seeking to recover thousands of crores of rupees from Public Sector Undertakings (PSUs), Central Government and statutory bodies.

HCC is seeking to recover Rs. 6,070 crore from the Central government and PSUs including the National Highways Authority of India (NHAI) and NTPC. Gammon wants to recover its dues of over Rs. 837 crore that is stuck with the Government and other PSUs like NHPC, Gail and DMRC in terms of various arbitration awards.

The companies have told the SC that Section 87 of the Arbitration and Conciliation Act 1996 (Arbitration Act), as inserted by the 2019 Amendment Act, is in conflict with the Insolvency and Bankruptcy Code 2016 (IBC) as the new provision destroys the level playing field.

According to the companies, Section 87 provides that for all arbitral proceedings, which commenced prior to October 23, 2015, there shall be an automatic stay of the arbitral awards when challenged under Section 34 of the Arbitration Act. According to them, this amendment creates an imbalance between the consequences of the Arbitration Act and the IBC.

The companies have challenged the various provisions such as Sections 3(10), 3(11), 3(12), 6, 7, 9, 31 and 238 of IBC as well as Section 87 of the Arbitration Act as being “arbitrary and discriminatory”.

A Supreme Court Bench led by Justice R F Nariman is set to hear the case on November 5.