In Favor of Corporate Debtor -

1. In Power Grid Corporation of India Ltd. v. Jyoti Structures Ltd. 246 (2018) DLT 485
("Power Grid"), while construing the scope of s. 14(1)(a) of the IBC, has held,
The court observed that the Arbitration Act draws a distinction between proceedings under section
34 (i.e. objections to the award) and under section 36 (i.e. the enforceability and execution of the
award). The proceedings under section 34 are a step prior to the execution of an award. Only after
determination of objections under section 34, the party may move a step forward to execute such
award and in case the objections are settled against the corporate debtor, its enforceability against
the corporate debtor then certainly shall be covered by moratorium of s. 14(1)(a)

2. The NCLAT reversed the aforesaid decision of the NCLT vide its order dated 03.08.2018
passed in Jharkhand Bijli Vitran Nigam Limited v IVRCL Ltd. (Corporate Debtor)
& Anr. [Company Appeal (AT)(Insolvency) No. 285 of 2018]. The NCLAT allowed the
arbitration proceedings to continue and held, as the claim of the Corporate Debtor can be
determined only after determination of counter claim made by the Appellant in the same
very arbitral proceedings and if counter claim or part of it is set off with the claim made by
the Corporate Debtor, were of the view that both the claim and the counter claim of parties
should be heard together by the Arbitral Tribunal in absence of any bar under Insolvency
and Bankruptcy Code, 2016.
However, on determination, if it is found that the Corporate Debtor is liable to pay certain amount,
in such case, no recovery can be made during the period of moratorium.
Thus, arbitrations involving claims (and counter claims) made by and against the corporate
debtor’s may not be hit by section 14(1)(a) during the pre- award stage, and will be proceeded
with. Thus, the moratorium may come into effect depending on the award in the arbitration
proceedings. If the award is against the corporate debtor, the moratorium will apply for the period
stated in the IBC to bar a recovery action.
3. The Supreme Court in Innoventive Industries Ltd v. ICICI Bank Ltd observed that,
during the moratorium period, no claim for recovery of debt (existing or new) can be
pursued. Clearly, the “calm period” is essentially provided so that the debtor scan negotiate
with the creditors to forego a part of the debtor to restructure the payment schedule of the
debt. During this “calm period”, no judicial proceedings for recovery, enforcement of
security interest, sale or transfer or assets, or termination of essential contracts can take
place against the corporate debtor.
Against the Corporate Debtor –

1. In the matter of, the Power Grid Corporation of India Limited Vs. Jyoti Structures
Limited, a petition was filed in Section 34 of the Arbitration and Conciliation Act, 1996
(Arbitration Act) for setting aside the arbitral award, in the nature of a pure money decree,
The question which therefore arose before the Hon'ble Delhi High Court was whether the
proceedings in Section 34 of the Arbitration Act must bestayed in Section 14 of IBC or
not.

It was then held that the term ‘proceedings referred to in Section 14 of IBC does not mean
all proceedings and it is restricted to debt recovery actions against the assets of the
corporate debtor. Further, continuation of proceedings in Section 34 of the Arbitration Act
does not harm the corporate debtors’ assets, thereby, is not prohibited in the moratorium
provision of Section 14. It was also held that the use of the term ‘against the corporate
debtor in Section 14(1) (a) of IBC in comparison with ‘by or against the corporate debtor
used in Section 33(5) of IBC clarifies that the former has restrictive meaning and
applicability,asOpposedToTheLatter.

In Simple words, Section 14 of the Code would not apply to the proceedings which are in
the benefit of the corporate debtor, like the one before this court in as much these
proceedings are not a 'debt recovery action' and its conclusion would not endanger,
diminish, dissipate or impact the assets of the corporate debtor in any manner

2. The judgment of the Hon'ble High Court of Bombay in Ashapura Minechem Ltd. v
Armada (Singapore) Pte. Ltd. & Ors. 2016 which was decided in the context of s. 22
of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA") which is a
similar provision to s. 14 of the IBC. The court held that since the provisions of SICA
including s. 22 thereof extend to only the territory of India, the same do not have any
application to proceedings outside India. Thus, there was no requirement of prior consent
of the Board of Industrial and Financial Reconstruction ("BIFR") for taking steps in
execution of foreign awards including filing garnishee proceedings in respect of
properties of the judgment debtor situated outside India. On the same logic, in view of s.
1 of the IBC which extends the said Act to India, it could be inferred that the moratorium
under s. 14 of the IBC would not apply to execution of a foreign award against a CD
which has assets outside India.