Supreme Court Curbs High Court Powers: No Nullification of Prior Arbitral Proceedings Under Section 15(2) During IBC Moratorium

Introduction

The Supreme Court of India , in a significant judgment delivered on February 4, 2026 , ruled that High Courts cannot declare prior arbitral proceedings as null and void while appointing a substitute arbitrator under Section 15(2) of the Arbitration and Conciliation Act, 1996 , even if those proceedings occurred during a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC). The bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan partially allowed an appeal filed by Ankhim Holdings Pvt. Ltd. and another against Zaveri Construction Pvt. Ltd., setting aside a Bombay High Court order that had invalidated certain arbitral actions. This decision underscores the principle of minimal judicial intervention in arbitration and protects the continuity of proceedings, particularly in insolvency scenarios involving real estate disputes.

Case Background

The dispute originated from a partnership between Ankhim Holdings Pvt. Ltd. (appellants) and Zaveri Construction Pvt. Ltd. (respondent) under the firm M/s Anmol Alliance for a Slum Rehabilitation Authority (SRA) project in Andheri West, Mumbai, covering 4514 square meters with 203 tenements. Disputes arose, leading to a Section 9 petition under the Arbitration Act filed by Ankhim Holdings before the Bombay High Court in 2019, seeking interim reliefs. On July 9, 2019 , the High Court recorded consent terms and appointed former Chief Justice J.N. Patel of the Calcutta High Court as the sole arbitrator. The Section 9 petition was treated as a Section 17 application for interim measures.

On September 26, 2019 , the National Company Law Tribunal (NCLT) Mumbai Bench admitted Zaveri Constructions to the Corporate Insolvency Resolution Process (CIRP), triggering a moratorium under Section 14 of the IBC. Despite this, arbitration proceeded intermittently. In March 2022, the Bombay High Court disposed of two interim applications by Ankhim Holdings, noting the Interim Resolution Professional (IRP) was functus officio and no liquidation order existed, granting liberty to seek Section 17 reliefs before the arbitrator.

Hearings resumed from March 17, 2022 , to August 25, 2022 , where the tribunal rejected a Section 16 jurisdictional challenge by the IRP (citing the moratorium) and granted interim reliefs under Section 17, permitting sales of specific flats (numbers 907, 908, 1001, 1302, and 704). On August 26, 2022 , NCLT ordered liquidation under Section 33 of the IBC, ending the Section 14 moratorium but imposing a new one under Section 33(5). In October 2023 , the arbitrator terminated proceedings due to unpaid fees, prompting Ankhim Holdings to seek substitution under Section 15(2) and time extension. The Bombay High Court appointed a substitute arbitrator (Retired Justice R.M. Savant) but declared proceedings from March 17 to August 25, 2022 , as nullity due to the moratorium, leading to the Supreme Court appeal.

The main legal questions were: Does a High Court under Section 15(2) have jurisdiction to nullify prior arbitral proceedings conducted during an IBC moratorium? And does such nullification affect the validity of Section 16 and 17 orders, including third-party transactions?

Arguments Presented

The appellants, represented by Advocate Ashim Sood , argued that the High Court's jurisdiction under Section 15(2) is limited to appointing a substitute arbitrator according to original rules (akin to Section 11), without power to declare prior proceedings null. They emphasized Section 15(4), which preserves prior orders unless parties agree otherwise, and cited Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd. to stress continuity. Nullifying proceedings would restart arbitration de novo , invalidating Section 17 orders and affecting flat sales to third parties, undermining arbitration's efficiency. They also invoked Official Trustee v. Sachindra Nath Chatterjee to argue the High Court assumed unvested powers, as challenges to Section 16/17 orders are limited to Section 37 appeals.

The respondent, through its Liquidator represented by Advocate Santosh Kumar , contended the High Court correctly declared proceedings from March 17 to August 25, 2022 , null due to the ongoing Section 14 moratorium, which continued until the August 26, 2022 , liquidation order per Section 14(4) proviso. They relied on IBC provisions to argue moratorium bars such actions, rendering them void. The State Bank of India (SBI) , appearing via Solicitor General Tushar Mehta , sought protection for mortgaged flats, but appellants clarified no such mortgage existed on the relevant flats.

Legal Analysis

The Supreme Court analyzed Section 15 holistically, noting it is self-contained for arbitrator substitution. Section 15(2) mandates appointment per original rules, while Section 15(3) allows (but does not require) repeating prior hearings at the tribunal's discretion unless parties agree otherwise. Crucially, Section 15(4) explicitly states prior orders/rulings remain valid post-substitution absent party agreement. The Court held the Bombay High Court exceeded jurisdiction by subsuming powers under Sections 16 and 17, which are appealable only under Section 37, not via Section 15(2).

Drawing on precedents, the Court referenced Yashwith Constructions (2006) 6 SCC 204 , affirming substitution follows original appointment rules to ensure continuity without de novo restarts. In Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd. (2025 SCC OnLine SC 2578) , it reiterated substitution preserves prior validity unless objected. Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899 , In re (2024) 6 SCC 1 , described the Arbitration Act as a self-contained code minimizing judicial intervention, excluding external procedures. Official Trustee (1968 SCC OnLine SC 103) clarified courts cannot grant reliefs beyond statutory conferral, rendering the High Court's nullity declaration void for want of competence.

The Court distinguished: Moratorium under IBC halts creditor actions but does not empower courts under the Arbitration Act to invalidate tribunal orders; such challenges must follow prescribed routes. Nullification would inequitably impact third-party rights from Section 17 orders, contravening arbitration's speedy resolution goal.

Key Observations

• "The proper and legal course for the High Court acting under Section 15(2) of the Act, 1996, should have been to appoint a substitute arbitrator to continue from the existing stage of the proceedings. The impugned part of the judgment rendered by the High Court could be said to have resulted in a situation where the arbitration proceedings would have to be restarted de novo and the same would have a direct impact on the sale of flats made pursuant to the Section 17 orders of the Tribunal. This could be both inequitable and inefficient."
• "There is no doubt that the High Court assumed and exercised power which has clearly not been conferred by the Act, 1996, more particularly, wherein the statute itself envisages minimal judicial intervention ."
• "Section 15(2) is not a standalone provision and should be read with Section 15(3) and Section 15(4) respectively... Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal."
• "This Court has time and again said that the object of speedy resolution of disputes by arbitration would best be subserved by a substitute arbitrator continuing at the point at which the earlier arbitrator has left off."

Court's Decision

The Supreme Court allowed the appeal in part, setting aside the Bombay High Court 's declaration that arbitral proceedings from March 17, 2022 , to August 25, 2022 , were null. It upheld the substitute arbitrator's appointment but restored the validity of prior proceedings, including Section 16 rejection and Section 17 reliefs. Invoking Article 142 , the Court declared transactions pursuant to these orders, including third-party flat sales, lawful and valid to protect homebuyer rights amid prolonged delays.

This ruling reinforces arbitration's autonomy, limiting High Court interference to statutory bounds and preventing moratoriums from retroactively voiding tribunal actions without due process. Future cases will benefit from enhanced procedural continuity in insolvency-arbitration overlaps, reducing inefficiencies and safeguarding stakeholder interests, though parties must still navigate IBC constraints carefully.