Factual Background
The parties formed a partnership, “M/s Anmol Alliance,” to develop and construct an SRA project at Andheri (West), Mumbai. Disputes arose, leading to a Section 9 petition in which the High Court recorded consent terms on 09.07.2019 and appointed Hon’ble Mr. Justice J.N. Patel (former Chief Justice, Calcutta High Court) as sole arbitrator.
On 26.09.2019, the NCLT, Mumbai admitted CIRP against the respondent and imposed a moratorium under Section 14 IBC.
The appellants filed two Section 9 applications (I.A. (L) 6167/2020 and I.A. (L) 24302/2021) before the High Court seeking permission to sell specified flats. On 15.03.2022, the High Court disposed of these Section 9 applications, recording that the Interim Resolution Professional had become functus officio and granting liberty to move Section 17 applications before the arbitrator.
On 17.03.2022, the appellants filed Section 17 applications before the arbitrator. The respondent (through IRP) filed a Section 16 application on 25.03.2022 challenging jurisdiction in view of the moratorium. On 29.03.2022, the tribunal rejected the Section 16 plea and, by a separate order the same day, allowed the appellants to execute agreements for sale for flats 1001, 1302 and 704. On 20.04.2022, the tribunal permitted the sale of flats 907 and 908.
Pursuant to the orders dated 29.03.2022 and 20.04.2022, the appellants entered into agreements for sale with third parties between July 2022 and February 2023 for flats 907, 908, 1001, 1302 and 704. The appellants stated before the Supreme Court that these flats had not been sold.
On 26.08.2022, the NCLT ordered liquidation, appointed a liquidator under Section 34 IBC and declared a fresh moratorium under Section 33(5) IBC. The arbitral tribunal later terminated the arbitration on 11.10.2023.
The appeal arose from the Bombay High Court’s order dated 12.04.2024 in Commercial Arbitration Petition (L) No. 30650/2023. The High Court substituted the earlier arbitrator under Section 15(2) of the Arbitration and Conciliation Act, 1996, but also declared that all arbitral proceedings conducted on seven dates between 17.03.2022 and 25.08.2022 were a nullity due to the Section 14 IBC moratorium. The Supreme Court set aside the “nullity” finding while leaving the substitution intact.
Issues
- Whether the High Court, while exercising jurisdiction under Section 15(2) A&C Act to substitute an arbitrator, could declare arbitral proceedings and orders during the period 17.03.2022–25.08.2022 to be a nullity on account of the Section 14 IBC moratorium.
- How Sections 15(3) and 15(4) A&C Act govern the continuity and validity of prior arbitral steps upon substitution of the arbitrator.
- What is the status of third-party transactions executed pursuant to the tribunal’s Section 17 orders during the relevant period.
Parties’ Key Submissions
The Appellants argued that Section 15(2) confers a limited, appointment-focused power, and the High Court could not, in that proceeding, nullify prior arbitral proceedings or orders. They contended that Section 15(4) preserves the validity of prior orders despite a change in the tribunal’s composition and relied on Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd. (2006) 6 SCC 204 and Official Trustee v. Sachindra Nath Chatterjee, 1968 SCC OnLine SC 103. They also pointed to adverse consequences for third parties if prior steps were treated as void.
The State Bank of India sought protection of it’s interests, asserting that the flats were mortgaged to them. The appellants denied any mortgage or charge.
The Liquidator supported the High Court’s order, contending that all proceedings and transactions during the moratorium period were a nullity. He relied on Section 14(4) IBC and the proviso to Section 23(1) IBC.
Decision of the Supreme Court
The Supreme Court allowed the appeal in part. It held that under Section 15(2) A&C Act, the High Court’s role is confined to appointing a substitute arbitrator according to the original appointment mechanism, and it cannot, in that jurisdiction, declare prior proceedings a nullity or set aside tribunal orders. The High Court exceeded its jurisdiction by nullifying proceedings conducted between 17.03.2022 and 25.08.2022, and that portion of the order was set aside.
Considering the passage of time and the involvement of homebuyers, the Supreme Court, in exercise of its powers under Article 142 of the Constitution, declared the transactions pursuant to the tribunal’s Section 17 orders to be lawfully valid.
Ratio
Sections 15(2)-(4) A&C Act operate together. Section 15(2) mandates substitution of the arbitrator under the same rules applicable to the original appointment. Section 15(3) permits the tribunal, subject to party agreement, to repeat prior hearings at its discretion. Section 15(4) confirms that prior orders or rulings are not rendered invalid solely due to a change in the tribunal’s composition.
The substitution jurisdiction under Section 15(2) is narrow and analogous in its limited remit to the court’s role under Section 11, which is confined to a prima facie examination of the existence of an arbitration agreement. It does not permit the court to nullify or review prior tribunal orders.
The Arbitration and Conciliation Act, 1996 is a self-contained code. Courts cannot adopt an alternative route to achieve what the Act prohibits. Section 37 provides for appeals against Section 17 orders and orders allowing Section 16 pleas, but does not permit interference with orders rejecting Section 16 pleas. The High Court could not, under Section 15(2), set aside (i) an order rejecting a Section 16 application; (ii) Section 17 orders outside a Section 37 proceeding; or (iii) other procedural orders. The Court relied on Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1.
The Court referred to Yashwith Constructions to reaffirm that the substitute arbitrator must be appointed in accordance with the original agreement or applicable provisions for appointment at the initial stage.
The Court also relied on Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd., 2025 SCC OnLine SC 2578, which clarified that when an arbitrator is unable to act, the proper course is substitution under Section 15(2), preserving continuity, with prior proceedings remaining valid unless a party objects.
The Court further relied on Official Trustee v. Sachindra Nath Chatterjee to hold that a court with limited statutory jurisdiction cannot pass orders it has no competence to make.
In equity, restarting the arbitration de novo would be inefficient and inequitable, and would jeopardize rights created pursuant to Section 17 orders. The Court therefore exercised Article 142 to validate the transactions.
The appeal was allowed in part. The High Court’s declaration that the arbitral proceedings conducted between 17.03.2022 and 25.08.2022 were a nullity was set aside. The remaining directions, including substitution of the arbitrator, were left undisturbed. The transactions arising from the tribunal’s Section 17 orders were declared lawfully valid under Article 142.
AMLEGALS Remarks
The power under Section 15(2) A&C Act is confined to substitution of the arbitrator and does not extend to nullifying prior arbitral steps or reviewing orders passed under Sections 16 or 17. Any challenge to Section 17 orders must be brought under Section 37, and orders rejecting Section 16 pleas are not appealable under the Act.
Sections 15(3)-(4) preserve arbitral continuity. Prior orders and rulings do not fail merely due to a change in the tribunal’s composition, and repetition of hearings is discretionary, subject to party agreement.
Courts must respect the self-contained structure of the Arbitration and Conciliation Act and cannot use substitution proceedings as a backdoor for supervisory review of tribunal orders.
In exceptional cases, to protect third-party rights and avoid inequity, the Supreme Court may exercise Article 142 to validate transactions carried out under tribunal orders.
Case Brief: Ankhim Holdings Pvt. Ltd. & Anr. v. Zaveri Construction Pvt. Ltd.
Court: Supreme Court of India
Citation: 2026 INSC 137; Civil Appeal No. 779/2026 (arising out of SLP (C) No. 11667/2024)
Date: 04 February 2026
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