An arbitral award is a finding that money is owed. It is not the money, and against a company in the corporate insolvency resolution process it is not even a priority. This note explains what an award-holder can do before admission, what it cannot do after, how the award is treated as a claim, and what survives the resolution plan.
The award does not change what kind of creditor you are
The Insolvency Code sorts creditors by the nature of the debt, not by the piece of paper that proves it. An award for repayment of a loan is a financial debt. An award for unpaid contract price, damages for breach, or liquidated damages is an operational debt.[1] A decree or award does not turn an operational creditor into a financial one.[2] That classification decides everything that follows: whether you can start the process, on what showing, whether you vote, and where you rank.
Before admission: can you use the Code to collect?
If your award is for a financial debt, you apply under Section 7 and need only show debt and default. A pending challenge to the award does not stop admission.[3]
If your award is for an operational debt, you apply under Section 9, and the application fails if there is a dispute. The Supreme Court has held that a pending challenge to the award under Section 34 of the Arbitration Act is a dispute, and that an operational creditor cannot use the Code to collect an award while the challenge, or an appeal from it, is undecided.[4] It makes no difference whether the debtor has obtained a stay of the award.[5] If the time for challenge has expired with no challenge filed, the award is an undisputed debt and the application lies.[6] A claim the arbitrator rejected, or one that is time-barred, cannot be used to start the process.[7]
[1] Insolvency and Bankruptcy Code, 2016 (“the Code”), ss. 5(8) and 5(21).
[2] Sushil Ansal v. Ashok Tripathi, NCLAT, Company Appeal (AT) (Insolvency) No. 452 of 2020 (14 August 2020).
[3] Code, s. 7; Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407.
[4] K. Kishan v. Vijay Nirman Company Pvt. Ltd., (2018) 17 SCC 662; Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353.
[5] Bharat Industrial Projects Pvt. Ltd. v. Anupam Industries Ltd., NCLT Ahmedabad, 2025.
[6] Viom Infra Ventures Ltd. v. Bahula Infotech Pvt. Ltd., NCLT Kolkata, 2022.
[7] Transmission Corporation of Andhra Pradesh Ltd. v. Equipment Conductors and Cables Ltd., (2019) 12 SCC 697.
After admission: everything against the company stops
From the day the process is admitted, no suit or proceeding against the company can be started or continued, including execution of any award or decree, and no action can be taken against its assets.[8] The Code overrides any other law.[9] An arbitration started against the company during the moratorium is a nullity.[10] Repossession of the company’s assets under an award is prohibited.[11]
For the award-holder this means: the company’s challenge to your award is suspended; your execution application is suspended; if it is a foreign award, your petition to have it recognised is suspended; and you cannot get interim protection against the company’s assets. The freeze lasts until a resolution plan is approved or liquidation is ordered.
The freeze runs one way. Proceedings that benefit the company continue. The resolution professional can pursue the company’s own claims, including in arbitration against you.[12] Contract disputes that exist independently of the insolvency stay with the arbitral tribunal, not the NCLT.[13] You may find the company’s claims against you moving forward while your award against it is frozen.
Your award becomes a claim
Your remedy during the process is to file a claim with the resolution professional, within the time set by the public announcement.[14] The award is your proof. The resolution professional collects and verifies claims; he does not decide them.[15] If a challenge to the award is pending, file anyway and disclose it; the claim can be admitted as contingent and given an estimated value.[16] Claims are counted as at the date the process began. Interest accruing after that date will not ordinarily be admitted. Do not expect the plan to pay it.
If your award is foreign and has not yet been recognised by an Indian court, the better view is that it can still be relied on as proof of the debt, because the Act makes it binding between the parties from the day it is made.[17] This has not been settled at the appellate level. File on that basis and record the position.
[8] Code, s. 14(1)(a) to (c).
[9] Code, s. 238.
[10] Alchemist Asset Reconstruction Co. Ltd. v. Hotel Gaudavan Pvt. Ltd., (2018) 16 SCC 94.
[11] Tata Motors Finance Solutions Ltd. v. Jadoun International Pvt. Ltd., NCLAT.
[12] Power Grid Corporation of India Ltd. v. Jyoti Structures Ltd., 2017 SCC OnLine Del 12189.
[13] Code, s. 60(5); Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, (2021) 7 SCC 209.
[14] Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, regs. 7 and 8.
[15] Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17.
[16] CIRP Regulations, reg. 14.
[17] Arbitration and Conciliation Act, 1996, s. 46.
What survives the plan
Once a resolution plan is approved, it binds the company, all creditors and guarantors.[18] Every claim that was not part of the plan is extinguished, and no proceeding on it can be started or continued.[19] The new owner takes the company on a clean slate.[20] If you did not file your claim, or if your claim was filed and dealt with in the plan, you have no award left to enforce against the company. The suspended challenge, execution and recognition proceedings do not revive when the moratorium lifts. They are overtaken.
What you receive is what the plan gives you. Operational creditors must get at least what they would receive in liquidation.[21] Above that floor, the committee of creditors decides, subject to fairness.[22] In liquidation, operational creditors rank below the costs of the process, secured creditors, workmen, unsecured financial creditors and government dues.[23] An unsecured award for contract damages sits in that bottom class. In most resolutions the recovery for that class is small. In most liquidations it is nothing.
Guarantors
The moratorium protects the company and its assets. It does not protect the company’s guarantors.[24] If you have a guarantee, or an award against co-obligors, proceed against them now. Do not wait for the process to end.
What to do
Work out whether your debt is financial or operational, because that decides whether the Code is open to you while the award is under challenge. If operational and unchallenged, the Code is the fastest route to payment; send the demand notice. If operational and challenged, the Code is closed; pursue execution and interim protection under the Arbitration Act before anyone else starts the insolvency. If financial, the Code is available on default; whether to use it is a commercial call. In every case, if anyone starts the company’s insolvency, file your claim on time with the award and the status of any challenge, and go after guarantors immediately. Do not treat the award as security. It is a claim, and claims are paid from what is left.
The open questions
Whether an unrecognised foreign award can be admitted as proof of debt without more. How a contingent claim should be valued while a challenge is pending: at the full award, at a discount, or at nil; there is no consistent practice. And whether extinguishment of a claim in the plan also extinguishes an award against a guarantor that was not in the process, where the plan is silent; decisions have gone both ways. The award-holder who filed on time, classified correctly and went after guarantors is on the right side of each.
[18] Code, s. 31(1).
[19] Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657.
[20] Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531.
[21] Code, s. 30(2)(b).
[22] Essar Steel, above.
[23] Code, s. 53(1).
[24] State Bank of India v. V. Ramakrishnan, (2018) 17 SCC 394.
This note is published for general information. It states the position as understood on the date shown and is not legal advice. It does not create a lawyer–client relationship and is not an invitation to engage the firm.
