Vikky Construction Company Pvt. Ltd. (Corporate Debtor & Respondent) entered into a sub-Contract Agreement with one Nusheerabad Constructions Pvt. Ltd. (NCPL) on 01.02.2008, to undertake work of Construction and wide

The facts given in the question are similar to the case of K. Kishan v. Vijay Nirman Company Pvt. Ltd. in which the Supreme Court had an occasion to decide whether the provisions of the Insolvency and Bankruptcy Code, 2016 ('IBC') can be invoked in respect of an Operational Debt where an Arbitral Award has been passed in favour of the Operational Creditor in respect of such Operational Debt, but the objections against the said Arbitral Award are pending under Section 34 of the Arbitration & Conciliation Act, 1996 ('A&C Act'). The facts before the Supreme Court were that VNCP had entered into a sub-contract with KCPL on 01-02-2008, to undertake 50% of Section 2 work of 'Construction and widening of the existing two-lane highway to four lanes on NH 67 at KM 190000 to KM 218215 admeasuring a total of 28.215 KM for and on behalf of KCPL.' Apart from this Agreement, a separate agreement of the same date was entered into between the KPCL and one SDM Projects as a result of which, a tripartite Memorandum of Understanding was entered into on 09-05-2008 between KCPL, SDM Projects and VNCP. During the course of the project, certain disputes arose between the parties. The said disputes were referred to arbitration. The Arbitral Tribunal delivered an Award dated 21.01.2017. The Arbitral Tribunal allowed one of the claims of VNCP for a sum of ₹ 1,71,98,302/- and another claim for a sum of ₹ 13,56,98,624/-. Three cross claims that were made by KCPL were rejected. Thereafter, a notice under Section 8 of the IBC dated 06.02.2017 was sent by VNCP to KCPL to pay an amount of ₹ 1,79,00,166/-. KCPL responded on 16.02.2017 and disputed the invoice that was referred to in the said notice, stating that the said amount was, in fact, the subject-matter of an arbitration proceeding, and as per KCPL's accounts, VNCP was liable to pay larger amounts to them which were claimed in counter-claims before the Arbitral Tribunal. Subsequently, KCPL filed its objections under Section 34 of the A&C Act challenging the Arbitral Award. After the filing of the objections by KCPL, VNCP filed a petition under Section 9 of the IBC on 14.07.2017 before the NCLT. In the said petition, VNCP stated that as the amount claimed by it formed part of the Award, it has become an Operational Debt. On the other hand, KCPL submitted that the alleged Operational Debt was disputed all along and that it has also raised its counter-claims for much higher sums. It was also stated that KCPL has filed its objections against the Award under Section 34 of the A&C Act, which were pending and if its objections were allowed and its counter claims were awarded, KCPL would have to make recoveries from VNCP and not the other way around. The NCLT, by its order dated 29.08.2017, held that as the counsel for the KCPL was fair enough to admit that VNCP is entitled to the said sum of ₹ 1,71,98,302/-. According to the NCLT, the fact that a Section 34 petition was pending was irrelevant for the reason that the claim stood admitted, and there was no stay of the Award. For these reasons, therefore, the Section 9 petition was admitted. Being aggrieved, KCPL filed an appeal before the NCLAT. The NCLAT held that the non-obstante clause contained in Section 238 of the IBC would override the A&C Act. The NCLAT also held that since Form V of Part 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 requires the particulars of an order of an arbitral panel adjudicating on the default, this would have to be treated as "a record of an operational debt", as a result of which the petition would have to be admitted. Accordingly, the appeal by KCPL was dismissed. KCPL came in appeal before the Supreme Court. The parties made various submissions before the Supreme Court. Ultimately, the Supreme Court followed its decision in Mobilox Innovations Private Limited v. Kirusa Software Private Limited and held that the mere factum of challenge of an Arbitral Award under Section 34 of the A&C Act would be sufficient to state that the Corporate Debtor disputes the Award and that such a case would be treated as a case of a pre-existing ongoing dispute. As far as the non-obstante clause contained in Section 238 of the IBC is concerned, the Supreme Court observed that Section 238 of the IBC would apply in case there is an inconsistency between the IBC and the A&C Act. However, the Supreme Court held that there was no such inconsistency demonstrated in the present case. Therefore, the Supreme Court held that the pendency of objections under Section 34 or of an appeal under Section 37 of the A&C Act will render the subject matter of the award as a 'disputed debt' for the purposes of the IBC and an Operational Creditor cannot invoke the provisions of the IBC to initiate the Corporate Insolvency Resolution Process against a Corporate Debtor.