1. Parties in a distribution franchisee agreement disputed the composition of the arbitral tribunal, the locus standi of a corporate debtor under insolvency, and the court's jurisdiction to extend time. (Para 5 )
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2026 Supreme(SC) 1297
SUPREME COURT OF INDIA
UJJAL BHUYAN, ATUL S. CHANDURKAR, JJ.
South Bihar Power Distribution Company Ltd. – Appellants
Versus
India Power Corporation Ltd. & Anr. – Respondents
Civil Appeal No. 9313 of 2026 (Arising out of Special Leave Petition (Civil) No. 27403 of 2023) With Civil Appeal No. 9325 of 2026 (Arising out of Special Leave Petition (Civil) No. 24988 of 2026)
Decided On : 28-10-2026
Important Points
Participation in arbitration and filing counter-claims without timely objection constitutes a waiver of the tribunal's composition. Furthermore, jurisdiction to extend an arbitrator's mandate under Section 29A of the 1996 Act lies with the principal civil court of original jurisdiction, not the High Court acting under Section 11.
Subject
Civil Law - Arbitration & Insolvency
Act Referred
Headnote
(A) Arbitration and Conciliation Act, 1996 - Sections 4, 16(2), 29A and 42 - Waiver of right to object - Jurisdiction of Court to extend mandate - A party who proceeds with arbitration without stating objection to non-compliance with the arbitration agreement without undue delay is deemed to have waived the right to object (Section 4) - A plea that the tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence (Section 16(2)) - Participation in proceedings, including filing of counter-claims, amounts to acquiescence and waiver regarding the composition of the arbitral tribunal (Paras 23, 25, 26)
(B) Arbitration and Conciliation Act, 1996 - Section 29A read with Section 2(1)(e) - The power to extend the mandate of the arbitrator under Section 29A(4) vests in the 'Court' as defined in Section 2(1)(e), which is the principal civil court of original jurisdiction in a district or a High Court only if it has ordinary original civil jurisdiction - The authority empowered under Section 11 to appoint an arbitrator is not the 'Court' as defined in Section 2(1)(e) and does not possess residual supervisory power to extend the mandate under Section 29A (Paras 34, 39, 40, 43)
(C) Insolvency and Bankruptcy Code, 2016 - Section 14 - Moratorium - The moratorium under Section 14 prohibits debt recovery actions against the corporate debtor but does not prohibit the corporate debtor from initiating or continuing proceedings for the recovery of its own dues, such as arbitral proceedings, as these enhance the value of the corporate debtor (Paras 29, 30)
Facts of the case:
An agreement provided for a three-member arbitral tribunal. However, the parties consented to the appointment of a sole arbitrator through the High Court. After the sole arbitrator's mandate expired, the respondents sought an extension under Section 29A. The appellant challenged the composition of the tribunal, the locus standi of the second respondent (a corporate debtor under insolvency resolution), and the jurisdiction of the High Court to grant the extension under Section 29A.
Findings of Court:
The appellant's conduct in participating in the proceedings and filing counter-claims constituted a waiver of the requirement for a three-member tribunal. The corporate debtor's pursuit of recovery dues is not barred by the IBC moratorium. Regarding jurisdiction, the High Court's order extending the mandate was legally unsustainable as the power under Section 29A vests in the principal civil court of original jurisdiction.
Issues: 1. Whether consent and participation in proceedings before a sole arbitrator constitute a waiver of the contractual requirement for a three-member tribunal. 2. Whether a corporate debtor undergoing corporate insolvency resolution has the locus standi to pursue arbitration for the recovery of its dues. 3. Whether the High Court, acting under Section 11, is the competent 'Court' to extend the mandate of an arbitrator under Section 29A.
Ratio Decidendi: Participation in arbitral proceedings and failure to object to the tribunal's composition within the statutory timeframe constitutes a deemed waiver under Section 4 and Section 16(2) of the 1996 Act. Section 14 of the IBC does not bar the corporate debtor from initiating recovery actions. The jurisdiction for extension under Section 29A is governed by the definition of 'Court' in Section 2(1)(e) and is distinct from the appointing authority's role under Section 11.
Result: Civil appeals dismissed.
(B) Arbitration and Conciliation Act, 1996 - Section 29A read with Section 2(1)(e) - The power to extend the mandate of the arbitrator under Section 29A(4) vests in the 'Court' as defined in Section 2(1)(e), which is the principal civil court of original jurisdiction in a district or a High Court only if it has ordinary original civil jurisdiction - The authority empowered under Section 11 to appoint an arbitrator is not the 'Court' as defined in Section 2(1)(e) and does not possess residual supervisory power to extend the mandate under Section 29A (Paras 34, 39, 40, 43)
(C) Insolvency and Bankruptcy Code, 2016 - Section 14 - Moratorium - The moratorium under Section 14 prohibits debt recovery actions against the corporate debtor but does not prohibit the corporate debtor from initiating or continuing proceedings for the recovery of its own dues, such as arbitral proceedings, as these enhance the value of the corporate debtor (Paras 29, 30)
Facts of the case:
An agreement provided for a three-member arbitral tribunal. However, the parties consented to the appointment of a sole arbitrator through the High Court. After the sole arbitrator's mandate expired, the respondents sought an extension under Section 29A. The appellant challenged the composition of the tribunal, the locus standi of the second respondent (a corporate debtor under insolvency resolution), and the jurisdiction of the High Court to grant the extension under Section 29A.
Findings of Court:
The appellant's conduct in participating in the proceedings and filing counter-claims constituted a waiver of the requirement for a three-member tribunal. The corporate debtor's pursuit of recovery dues is not barred by the IBC moratorium. Regarding jurisdiction, the High Court's order extending the mandate was legally unsustainable as the power under Section 29A vests in the principal civil court of original jurisdiction.
Issues: 1. Whether consent and participation in proceedings before a sole arbitrator constitute a waiver of the contractual requirement for a three-member tribunal. 2. Whether a corporate debtor undergoing corporate insolvency resolution has the locus standi to pursue arbitration for the recovery of its dues. 3. Whether the High Court, acting under Section 11, is the competent 'Court' to extend the mandate of an arbitrator under Section 29A.
Ratio Decidendi: Participation in arbitral proceedings and failure to object to the tribunal's composition within the statutory timeframe constitutes a deemed waiver under Section 4 and Section 16(2) of the 1996 Act. Section 14 of the IBC does not bar the corporate debtor from initiating recovery actions. The jurisdiction for extension under Section 29A is governed by the definition of 'Court' in Section 2(1)(e) and is distinct from the appointing authority's role under Section 11.
Result: Civil appeals dismissed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. Manish Kumar Choudhary, Adv. Mr. Ashutosh Kumar, Adv. Ms. Srishti Choudhary, Adv. Ms. Shefali Choudhary, Adv. Ms. Namita Choudhary, AOR
For the Respondent(s): Mr. Harminder Chawla, Adv. Mr. Gajanand Kirodiwal, Adv. Ms. Astha Nigam, Adv. Mr. Shivam Rajpal, Adv. Mr. Ayush Chatterjee, Adv. Mr. Faisal Sherwani, AOR
For the Appellant(s) : Mr. Manish Kumar Choudhary, Adv. Mr. Ashutosh Kumar, Adv. Ms. Srishti Choudhary, Adv. Ms. Shefali Choudhary, Adv. Ms. Namita Choudhary, AOR
For the Respondent(s): Mr. Harminder Chawla, Adv. Mr. Gajanand Kirodiwal, Adv. Ms. Astha Nigam, Adv. Mr. Shivam Rajpal, Adv. Mr. Ayush Chatterjee, Adv. Mr. Faisal Sherwani, AOR
Table of Contents
2. Appellants challenged the sole arbitrator's appointment against contractual requirements, the corporate debtor's standing during insolvency, and the High Court's jurisdiction to exercise powers under Section 29A, Arbitration Act. (Para 10 , 11 , 12 )
3. The Court affirmed that repeated consent and participation in proceedings constitute waiver of the tribunal's composition under Section 4 and that moratoriums do not bar recovery-oriented arbitral proceedings. (Para 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 )
4. Section 29A powers to extend time vest solely in the court defined under Section 2(1)(e), and once constituted, the High Court lacks residual supervisory jurisdiction over arbitral proceedings. (Para 32 , 34 , 38 , 39 , 40 , 43 )
5. The High Court's order on jurisdiction is set aside, but the arbitral mandate is affirmed through proceedings before the jurisdictional commercial court; civil appeals are dismissed. (Para 44 , 45 , 46 , 47 )
6. Does participating in arbitration under a sole arbitrator waive the right to object to a multi-member tribunal requirement in the agreement?
Yes. Under Section 4 and Section 16 of the Arbitration and Conciliation Act, 1996, if a party knows an agreement requirement is not complied with but continues to participate without timely objection, they are deemed to have waived their right to object. (Para 23 , 24 , 25 , 26 )
7. Does a moratorium under Section 14 of the IBC prohibit an ongoing arbitration where the corporate debtor is a claimant?
No. Section 14 moratorium prohibits debt recovery actions against the corporate debtor. It does not bar the corporate debtor from continuing arbitral claims for recovery, which serve to bolster its financial health. (Para 28 , 29 , 30 )
8. Which court is empowered to extend the time limit for making an arbitral award under Section 29A of the Arbitration Act?
The power vests in the 'court' as defined in Section 2(1)(e), being the principal civil court of original jurisdiction. The High Court or Supreme Court designated under Section 11 lacks residual supervisory power to extend time under Section 29A once the tribunal is constituted. (Para 34 , 38 , 39 , 40 , 43 )
JUDGMENT :
UJJAL BHUYAN, J.
Facts of both the appeals being inter-related and parties being the same, those were heard together and are being disposed of by this common judgment and order.
2. The two appeals take exception to the judgment and order dated 15.09.2023 passed by the High Court of Judicature at Patna (briefly ‘the High Court’ hereinafter) in Request Case No. 78 of 2022 and Request Case No. 36 of 2021.
3. By the aforesaid judgment and order dated 15.09. 2023 (‘impugned judgment and order’ hereinafter), High Court held that the jurisdiction to extend the period of time has to be exercised by the High Court under Section 29A of the Arbitration and Conciliation Act, 1996 (briefly ‘the 1996 Act’ hereinafter). Accordingly, the High Court directed that there shall be an extension of the mandate of the arbitral tribunal by four months starting from the date of appearance of the parties before the arbitral tribunal as per the extension granted by the High Court. Consequently Request Case No. 36 of 2021 was allowed and Request Case No. 78 of 2022 was rejected.
4. Relevant facts may be briefly noted.
5. Appellant i.e. South Bihar Power Distribution Company Ltd. is a company incorporated under the Companies Act, 1956. Electricity Act, 2003 provides for a distribution licensee and contemplates appointment of a distribution franchisee by a distribution licensee. Appellant is a distribution licensee under the provisions of the Electricity Act, 2003. It has the license to supply electricity in four electric supply areas i.e. (i) Patna Electric Supply Unit, (ii) Central Electric Supply Area, (iii) Magadh Electric Supply Area, and (iv) Bhagalpur Electric Supply Area within the State of Bihar. For facilitating such supply of electricity, appellant is also entitled to act through a franchisee.
5.1. A competitive bidding process was initiated by the appellant for selecting a franchisee pursuant to which India Power Corporation Ltd., a company also incorporated under the Companies Act, 1956, came out as the successful bidder. As per the terms of the letter of intent, the successful bidder through a special purpose vehicle was required to enter into a distribution franchisee agreement with the appellant. India Power Corporation (Bodhgaya) Ltd. was accordingly incorporated as a 100% subsidiary of India Power Corporation Ltd. to act as a special purpose vehicle whereafter a tripartite agreement was entered into between the three companies i.e. the successful bidder, the special purpose vehicle and the distribution licensee, called the Distribution Franchisee Agreement, dated 31.12.2013.
5.2. India Power Corporation (Bodhgaya) Ltd. i.e. the special purpose vehicle was to undertake and perform the obligations under the distribution franchisee agreement entered into by the parties with the first respondent i.e. India Power Corporation Ltd. to act as the confirming party.
5.3. In the implementation of the franchisee agreement, disputes arose which led the first respondent i.e. India Power Corporation Ltd. to issue arbitration notice to the appellant dated 09.11.2016 in accordance with Article 17 of the distribution franchisee agreement. Since no arbitrator was appointed, the special purpose vehicle i.e. the second respondent approached the High Court under Section 11 of the 1996 Act vide Request Case No. 77 of 2018. The said request case was disposed of with the consent of the parties vide the order dated 04.04.2018 whereby the High Court appointed a retired Judge of the said High Court Mr. Justice Shashank Kumar Singh as the sole arbitrator.
5.4. The arbitration proceedings commenced on 12.04.2018 and proceeded upto the stage of recording of evidence whereafter the learned arbitrator could not continue further. In the meanwhile, the sole arbitrator had rejected the application filed by the appellant under Section 13 read with Section 16(1) of the 1996 Act vide the order dated 12.05.2018 as not pressed. Appellant thereafter filed counter claim on 02.02.
