(1) Where it is provided by a term in a contract to which a person who is adjudged an insolvent is a party that any dispute arising thereout or in connection therewith shall be submitted to arbitration, the said term shall, if the receiver in insolvency adopts the contract, be enforceable by or against him so far as it relates to any such dispute.
(2) Where a person who is adjudged an insolvent had, before the commencement of the insolvency proceedings, become a party to an arbitration agreement, and any matter to which the agreement applies is required to be determined in connection with, or for the purposes of, the insolvency proceedings, then, if the case is one to which sub-section (1) does not apply, any other party or the receiver may apply to the judicial authority having jurisdiction in the insolvency proceedings for an order directing that the matter in question shall be submitted to arbitration in accordance with the arbitration agreement, and the judicial authority may, if it is of opinion that, having regard to all the circumstances of the case, the matter ought to be determined by arbitration, make an order accordingly.
(3) In this section the expression "receiver" includes an Official Assignee.
Legal Commentary & Landmark Judgments: Section 41
Section 41 of the Arbitration and Conciliation Act, 1996 regulates the enforceability of arbitration agreements in the event of the insolvency of a party, empowering the Official Assignee or Receiver to adopt the contract or apply to the court for a reference.
If an individual contracting party becomes insolvent, serve notice on the Official Assignee/Receiver under Section 41 to adopt the arbitration clause; in corporate insolvencies under IBC, arbitration is stayed during the Section 14 moratorium.