New Delhi: In a significant ruling clarifying the limited scope of judicial intervention in arbitration matters, the Supreme Court has held that High Courts exercising jurisdiction under Section 15(2) of the Arbitration and Conciliation Act, 1996, cannot declare prior arbitral proceedings as a nullity while appointing a substitute arbitrator.
A two-judge Bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan delivered this judgment on February 4, 2026, emphasizing that such an approach exceeds the court’s jurisdiction and defeats the purpose of speedy dispute resolution through arbitration.
The case arose from a partnership dispute between Ankhim Holdings Pvt. Ltd. and Zaveri Construction Pvt. Ltd. concerning the development of an SRA project in Mumbai. The parties had entered into a partnership firm, M/s Anmol Alliance, to develop and construct an SRA project at Andheri, Mumbai. When disputes arose between them, the appellants filed an application under Section 9 of the Arbitration Act before the Bombay High Court. On July 9, 2019, the High Court accepted the consent terms between the parties and appointed former Chief Justice J.N. Patel of the Calcutta High Court as the arbitrator to adjudicate the disputes.
However, complications arose when the National Company Law Tribunal (NCLT), Mumbai, on September 26, 2019, admitted the respondent company to the Corporate Insolvency Resolution Process and imposed a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. Despite this moratorium, the arbitration proceedings continued, and the appellants filed applications under Section 17 of the Arbitration Act on March 17, 2022, before the arbitrator seeking interim relief. The arbitrator proceeded to pass orders permitting the appellants to execute agreements for sale in respect of certain flats in the project.
The respondent, through the Interim Resolution Professional, challenged the jurisdiction of the arbitral tribunal on the ground of the moratorium under Section 14 of the IBC. However, on March 29, 2022, the arbitral tribunal rejected this challenge and proceeded to pass orders permitting the sale of various flats. Subsequently, on August 26, 2022, the NCLT passed an order initiating liquidation proceedings against the respondent company. On October 11, 2023, the arbitral tribunal terminated the arbitration proceedings, following which the appellants filed an application before the High Court seeking the appointment of a substitute arbitrator.
The Bombay High Court, while appointing Justice R.M. Savant as the substitute arbitrator, observed that all proceedings undertaken by the arbitral tribunal between September 26, 2019, and August 26, 2022, were hit by the moratorium and could be said to be a nullity. The High Court specifically declared that the proceedings held on seven dates between March 17, 2022, and August 25, 2022, were liable to be treated as a nullity. It was this part of the High Court’s order that was challenged before the Supreme Court.
The appellants contended that the High Court, in exercise of its jurisdiction under Section 15(2) of the Arbitration Act, could not have declared the proceedings undertaken by the arbitral tribunal as a nullity. They argued that the jurisdiction of the High Court under Section 15(2) is circumscribed when compared to the jurisdiction exercisable under Section 11 of the Act. It was further emphasized that Section 15(2) merely requires the appointment of a substitute arbitrator in accordance with the rules applicable to the appointment of the arbitrator being replaced.
Accepting the appellants’ contentions, the Supreme Court observed that the High Court exceeded its jurisdiction in holding that the proceedings conducted by the arbitral tribunal were a nullity due to the operation of the moratorium. The Court examined the provisions of Section 15 of the Arbitration Act in detail and noted that Section 15(2) is not a standalone provision and must be read in conjunction with Sections 15(3) and 15(4).
The Court noted that Section 15(3) provides that, unless otherwise agreed by the parties, any hearings previously held may be repeated at the discretion of the arbitral tribunal. Section 15(4) specifically states that, unless otherwise agreed by the parties, any order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator shall not be invalid solely because there has been a change in the composition of the arbitral tribunal. The Court observed that these provisions indicate that prior proceedings remain valid unless either party objects.
Referring to its earlier decision in Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd., the Court reiterated that under Section 15(2), the appointment of a substitute arbitrator must be in accordance with the original agreement or the provision applicable at the initial stage. Since the appointment in the present case was made in terms of the Arbitration Act, the applicable provision was Section 11, which affords the court only a limited scope, requiring merely a prima facie finding that an arbitration agreement exists.
The Supreme Court held that the High Court had travelled beyond its vested jurisdiction, including by exercising powers expressly made unavailable to it under the Arbitration Act, including those under Section 37. The Court noted that the High Court had effectively set aside an order rejecting an application under Section 16, which the Arbitration Act does not permit. Additionally, the High Court had set aside orders under Section 17 without invoking Section 37, and had also interfered with procedural orders—none of which are powers vested in a court acting under Section 15(2).
The Court referred to its five-judge Bench decision in Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 & the Stamp Act, 1899, reiterating that the Arbitration Act is a self-contained code and that provisions of other statutes cannot interfere with its functioning unless expressly provided. The Court emphasized that when a self-contained code prescribes a specific procedure, the applicability of general legal procedures stands impliedly excluded.
The Supreme Court also relied on its decision in Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd., holding that when an arbitrator is unable to act owing to recusal, the proper course is to invoke Section 15(2) and appoint a substitute arbitrator to continue from the existing stage of proceedings, thereby preserving continuity unless either party objects.
The Court further observed that it is not empowered to nullify orders which it has no jurisdiction to consider. In this context, reliance was placed on Official Trustee v. Sachindra Nath Chatterjee, which held that for a court to pass an order, it must not only have jurisdiction over the subject matter but also the authority to grant the specific relief sought.
The Supreme Court held that the proper and lawful course for the High Court acting under Section 15(2) was to appoint a substitute arbitrator to continue from the existing stage of the proceedings. It observed that the impugned part of the High Court’s judgment would have resulted in the arbitration being restarted de novo, which would have adversely impacted third-party rights created pursuant to Section 17 orders permitting the sale of flats.
Considering the long lapse of time and the fact that third-party rights had crystallised, including the rights of homebuyers, the Supreme Court, in exercise of its powers under Article 142 of the Constitution, declared these transactions to be lawfully valid. The Court accordingly set aside that part of the impugned order by which the High Court had declared the proceedings undertaken between March 17, 2022, and August 25, 2022, as a nullity.
In the result, the appeal succeeded in part, and the Supreme Court modified the High Court’s judgment to the extent it had declared the arbitral proceedings to be a nullity.
Appearances:
For the Appellants: Mr. Ashim Sood, Advocate
For State Bank of India: Mr. Tushar Mehta, Solicitor General, assisted by Mr. Sanjay Kapur, Advocate
For the Official Liquidator: Mr. Santosh Kumar, Advocate
Case Title: Ankhim Holdings Pvt. Ltd. & Anr. v. Zaveri Construction Pvt. Ltd., Civil Appeal No. 779/2026
