In Brief
Indus Biotech Private Limited sought arbitration of disputes with venture capital investors regarding the conversion of preference shares into equity shares, with disagreement on the percentage entitlement (10% vs 30%). When investors invoked insolvency proceedings, the company sought to refer the dispute to arbitration. The Supreme Court held that the trigger point for an insolvency proceeding to become a non-arbitrable "action in rem" is the Adjudicating Authority's admission after finding default—not the mere filing of a petition. Before admission, where the amount disputed is still being negotiated, no default has occurred. The Court allowed the arbitration petition and appointed arbitrators to resolve the conversion formula dispute.
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