Kiran Raj

The Supreme Court Division Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan partly allowed an appeal and modified a Bombay High Court order on an application for substitution of an arbitrator, observing that while considering such a request it is not open to the High Court to interfere with, or declare invalid, steps taken in the arbitral proceedings. The dispute arose from differences between joint venture partners over a Mumbai redevelopment/SRA project, with the respondent company being under an insolvency moratorium during part of the arbitration. Setting aside the High Court’s “nullity” finding for hearings held between 17 March 2022 and 25 August 2022, the Court preserved continuity of the arbitration and declared the related third-party transactions lawful.

The appeal arose from a judgment of the Bombay High Court in proceedings under Section 15(2) of the Arbitration and Conciliation Act, 1996, where a substitute arbitrator was appointed but arbitral proceedings conducted between 17.03.2022 and 25.08.2022 were declared a nullity on the ground that the respondent company was under a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016.

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The appellants and the respondent, subsequently placed under liquidation, had entered into a partnership to develop an SRA project in Mumbai. Disputes arose and Section 9 petitions were filed before the High Court. An arbitrator was appointed to adjudicate disputes. Meanwhile, the respondent was admitted to corporate insolvency resolution proceedings and a moratorium was imposed.

After disposal of Section 9 petitions with liberty to approach the arbitrator under Section 17, the appellants filed Section 17 applications. The respondent challenged jurisdiction under Section 16 of the Act citing the moratorium. The arbitral tribunal rejected the objection and passed orders permitting execution of certain agreements for sale. Later, liquidation proceedings were initiated. The High Court, while appointing a substitute arbitrator, declared the earlier proceedings during the moratorium period as a nullity, leading to the present appeal.

The Court observed that “Section 15(2) is not a standalone provision and should be read with Section 15(3) and Section 15(4) respectively.” It further recorded that “Section 15(2) states that when mandate of an arbitrator is terminated under Section 14, a substitute arbitrator has to be appointed. It further states that such an appointment must be made according to the rules that were made applicable to the appointment of the arbitrator being replaced.”

On the effect of substitution, the Court noted that “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.”

Referring to precedent, Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd. & Anr., (2006) 6 SCC 204 the Court quoted that “what Section 15(2) contemplates is an appointment of the substituted arbitrator or the replacing of the arbitrator by another according to the rules that were applicable to the appointment of the original arbitrator who was being replaced.”

The Court stated that “The High Court could be said to have travelled beyond its vested jurisdiction including by subsuming jurisdictions expressly made unavailable to it including Section 37 of the Act, 1996.” It recorded that “the High Court exceeded in its jurisdiction while taking the view that the proceedings held by the Arbitral Tribunal between 17.03.2022 and 25.08.2022 are a nullity because of the operation of moratorium.”

On the scheme of the Act, the Court quoted that “Being a self-contained and exhaustive code on arbitration law, the Arbitration Act carries the imperative that what is permissible under the law ought to be performed only in the manner indicated, and not otherwise.”

The Court further observed that “the High Court has set aside an order rejecting an application under Section 16 – which the Act, 1996, does not countenance in any provision; (ii) the High Court has set aside Section 17 orders but not in a proceeding under Section 37; and (iii) the High Court has set aside further procedural orders, which again is not a power vested in any court exercising jurisdiction under the Act, 1996.”

Relying Official Trustee v. Sachindra Nath Chatterjee (1969) 3 SCC 92, the Court recorded that “before a Court can be held to have jurisdiction to decide a particular matter it must not only have jurisdiction to try the suit brought but must also have the authority to pass the orders sought for.”

It concluded that “Following the dictum as laid in Interplay (supra), it would be impermissible for a court acting under Section 15(2) to adopt a procedure whereby it exercises jurisdiction barred to it by the Act, 1996 as has occurred in the present case…where the High Court has set aside Section 17 orders but not in a proceeding under Section 37;

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The Court directed that “the part of the impugned order by which the High Court declared the proceedings undertaken between 17.03.2022 and 25.08.2022 as a nullity deserves to be interfered with. The impugned order to the extent it says that the proceedings held by the Arbitral Tribunal on the seven dates, i.e., from 17.03.2022 to 25.08.2022, are a nullity is hereby set aside.”

“We, in exercise of our jurisdiction under Article 142 of the Constitution of India declare these transactions to be lawfully valid. The impugned judgment and order of the High Court stands modified to the aforesaid extent.” The appeal was disposed of accordingly and pending applications were disposed of.

Advocates Representing the Parties

For the Petitioners: Mr. Ashim Sood, Adv. Mr. Saahil Memon, Adv. Mr. Sidharth Srivastava, Adv. Ms. Pallavi Pratap, AOR

For the Respondents: Mr. Shakti Kanta Pattanaik, AOR Mr. Santosh Kumar, Adv. Mr. Rajeev Nayan, Adv. Mr. Rupesh Sashi, Adv.

Case Title: Ankhim Holdings Pvt. Ltd. & Anr. v. Zaveri Construction Pvt. Ltd.

Neutral Citation: 2026 INSC 137

Case Number: Civil Appeal No. 779/2026

Bench: Justice J.B. Pardiwala and Justice K.V. Viswanathan