Madras high court declines to proceed with section 11 arbitration petition pending NCLAT appeal

Madras High Court pauses Section 11 arbitration proceedings as NCLAT appeal is pending.

          Jagson Colorchem Ltd. v. Jayapushpam Investments and Trading Pvt. Ltd.

High Court of Madras | 1 September 2026 The Madras High Court recently considered whether a petition seeking appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 could proceed while an appeal relating to insolvency proceedings was pending before the National Company Law Appellate Tribunal. The Court declined to proceed with the arbitration matter and dismissed the application seeking clarification of its earlier order.

The dispute arose after the applicant had initiated proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the respondent. The applicant failed in its attempt before the NCLT and thereafter preferred an appeal before the NCLAT. At the same time, proceedings relating to arbitration were pending before the Madras High Court. The applicant had sought appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act.

Earlier, on 16 November 2023, the High Court had adjourned the arbitration proceedings while awaiting the outcome of the NCLAT appeal. The matter continued to be adjourned. On 4 September 2024, the applicant sought to contend that the pendency of the NCLAT appeal should not prevent the High Court from proceeding with the Section 11 petition.

The Court did not accept this position. It noted that the applicant had earlier taken a stand which resulted in the Court awaiting the decision of the NCLAT. The Court therefore held that the applicant could not subsequently take a contrary position and contend that the pending appeal was no longer a reason to defer the arbitration proceedings.

Before the Court, the applicant argued that there was no impediment to the appointment of an arbitrator during the pendency of the NCLAT proceedings. It was also submitted that merely filing an application under Section 7 of the IBC did not mean that the Adjudicating Authority had taken cognizance of the matter. Reliance was also placed on the Supreme Court judgment in Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund and Others.

The respondent opposed the request. It was argued that if the High Court proceeded with the appointment of an arbitrator and the applicant subsequently succeeded before the NCLAT, the appointment and subsequent arbitral proceedings could become unnecessary. The respondent therefore submitted that the applicant should await the outcome of the NCLAT proceedings.

Justice K. Kumaresh Babu considered the earlier orders passed in the matter and observed that the factual position which existed when the Court had directed the matter to await the NCLAT decision continued to exist. The NCLAT appeal was still pending and was stated to be ripe for disposal.

The Court further observed that if the applicant succeeded in the NCLAT appeal, the appointment of an arbitrator and the arbitral proceedings that followed could be rendered a useless formality. In these circumstances, the Court found no reason to clarify its earlier order so as to permit the Section 11 proceedings to continue immediately.

Accordingly, the Madras High Court dismissed the clarification application. The Court decided to await the outcome of the NCLAT proceedings before proceeding further in the matter. There was no order as to costs.

The decision is relevant in the context of the procedural overlap between arbitration proceedings and pending IBC proceedings. However, the judgment is closely connected to the particular procedural history of the case. The Court's decision was based substantially on the applicant's earlier stand before the Court and the possibility that proceeding with arbitration before the NCLAT appeal was decided could make the subsequent proceedings unnecessary. The judgment therefore should not be read as laying down a general rule that the pendency of every IBC proceeding automatically prevents a court from considering a Section 11 petition.