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Ankhim Holdings Pvt Ltd & Anrv.Zaveri Construction Pvt Ltd

Citation:
2026 INSC 137
Date:
13 February 2026

Synopsis

This judgment addresses the interplay between arbitration proceedings under the Arbitration and Conciliation Act, 1996, and the moratorium provisions under the Insolvency and Bankruptcy Code, 2016 (IBC). The core dispute arose when the Bombay High Court, while appointing a substitute arbitrator under Section 15(2) of the Arbitration Act, declared all proceedings conducted by the previous arbitrator during the period of IBC moratorium as a "nullity." The Supreme Court held that the High Court exceeded its jurisdiction under Section 15(2) by nullifying prior arbitral orders, as such power is not conferred by the Arbitration Act and undermines the statutory scheme which preserves the validity of prior proceedings upon substitution of an arbitrator.


1. Basic Information of the Judgment

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

Jurisdiction: Civil Appellate Jurisdiction of the Supreme Court of India.

Case Number: Civil Appeal No. 779/2026 (Arising out of SLP(C) No. 11667/2024).

INSC Citation: 2026 INSC 137.

Bench Composition: A division bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan.

Nature of Bench: Division Bench Judgment.


2. Legal Framework and Context

  • Primary Statutory Provisions:
    Arbitration and Conciliation Act, 1996:
    Section 9: Provides for interim measures by court.
    Section 11: Governs appointment of arbitrators.
    Section 15: Deals with termination of mandate and substitution of arbitrator. Sub-section (2) mandates that a substitute arbitrator be appointed according to the rules applicable to the original appointment. Sub-section (4) provides that orders or rulings made prior to replacement shall not be invalid solely because of change in composition.
    Section 16: Empowers the arbitral tribunal to rule on its own jurisdiction.
    Section 17: Provides for interim measures by arbitral tribunal.
    Section 37: Specifies appealable orders.
    Insolvency and Bankruptcy Code, 2016 (IBC):
    Section 14: Imposes moratorium upon admission of Corporate Insolvency Resolution Process (CIRP), prohibiting institution or continuation of proceedings against the corporate debtor.
    Section 33: Deals with initiation of liquidation.
    Section 33(5): Provides for fresh moratorium upon liquidation.

  • Key Judicial Precedents:
    Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd. , (2006) 6 SCC 204: Held that under Section 15(2), appointment of substitute arbitrator must be according to the rules applicable to the original appointment.
    Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899, In re, (2024) 6 SCC 1 (Constitution Bench): Held that the Arbitration Act is a self-contained code and what is permissible must be done only in the manner indicated.
    *Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd. *, 2025 SCC OnLine SC 2578: Held that when an arbitrator becomes unable to act, the proper course is to invoke Section 15(2) and appoint a substitute to continue from the existing stage.
    Official Trustee v. Sachindra Nath Chatterjee, 1968 SCC OnLine SC 103: Held that a court must have authority to pass the particular order sought; an order outside competence is void.
    Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 619: Affirmed that substitute arbitrator continues from the point where the earlier arbitrator left off.


3. Basic Relevant Facts of the Case

The factual matrix involves a complex timeline of arbitration and insolvency proceedings:

  1. Partnership and Disputes: The appellants and respondent (now under liquidation) entered into a partnership firm to develop an SRA project in Mumbai. Disputes arose, leading to Commercial Arbitration Petition No. 347/2019 under Section 9 of the Arbitration Act.

  2. Consent Terms and Arbitrator Appointment (09.07.2019): The Bombay High Court accepted consent terms between parties and appointed Hon'ble Mr. Justice J.N. Patel (Retd.) as sole arbitrator.

  3. IBC Moratorium (26.09.2019): NCLT Mumbai admitted the respondent to CIRP and imposed moratorium under Section 14 of the IBC.

  4. Section 9 Petitions and High Court Orders (2020-2022): The appellants filed multiple Section 9 petitions seeking permission to sell flats. On 15.03.2022, the High Court disposed of these petitions, granting liberty to move Section 17 applications before the Arbitrator.

  5. Arbitral Proceedings During Moratorium (March-August 2022): The appellants filed Section 17 applications on 17.03.2022. The respondent filed a Section 16 application challenging jurisdiction on grounds of moratorium, which was rejected by the Arbitral Tribunal on 29.03.2022. The Tribunal passed Section 17 orders permitting sale of certain flats.

  6. Liquidation Order (26.08.2022): NCLT passed an order initiating liquidation proceedings against the respondent, with fresh moratorium under Section 33(5).

  7. Termination of Arbitration (11.10.2023): The Arbitral Tribunal terminated the proceedings.

  8. Substitution Application (01.11.2023): The appellants filed Commercial Arbitration Petition No. 30650/2023 under Section 15(2) seeking appointment of substitute arbitrator and extension of time.

  9. High Court's Impugned Order (12.04.2024): The High Court appointed Hon'ble Mr. Justice R.M. Savant (Retd.) as substitute arbitrator. However, it declared all proceedings conducted by the Arbitral Tribunal between 17.03.2022 and 25.08.2022 (seven specific dates) as a "nullity" on the ground that they were undertaken during the moratorium period under Section 14 of the IBC.


4. Issues Before the Court

The Supreme Court considered the following issues:

  1. Whether the High Court, in exercise of its jurisdiction under Section 15(2) of the Arbitration and Conciliation Act, 1996, could declare the proceedings conducted by the Arbitral Tribunal during the period of IBC moratorium as a "nullity"?

  2. What is the scope and extent of the power conferred on a court under Section 15(2) of the Arbitration Act when appointing a substitute arbitrator?

  3. Whether the High Court's declaration of nullity, which effectively set aside orders passed under Sections 16 and 17 of the Arbitration Act without following the procedure prescribed under Section 37 (appeals), was within its jurisdiction?

  4. What is the effect of Section 15(4) of the Arbitration Act, which provides that prior orders shall not be invalid solely because of change in composition of the arbitral tribunal?

  5. Whether third-party rights created pursuant to the Section 17 orders (sale of flats to home buyers) could be protected?


5. Ratio Decidendi of the Court

The Supreme Court's reasoning and conclusion were founded on the following principles:

  • Limited Scope of Section 15(2): The power under Section 15(2) is circumscribed and must be exercised according to the rules applicable to the original appointment. Following Yashwith Constructions, this means appointment of a substitute arbitrator in accordance with the original agreement or provision (here, Section 11). It does not confer a roving jurisdiction to review or nullify prior arbitral orders.

  • Section 15 Must Be Read as a Whole: Section 15(2) cannot be read in isolation. It must be read with Section 15(3) and 15(4). Section 15(4) explicitly provides that an order or ruling of the arbitral tribunal made prior to replacement "shall not be invalid solely because there has been a change in the composition of the arbitral tribunal." This preserves the validity of prior proceedings.

  • Arbitration Act is a Self-Contained Code: Following the Constitution Bench in Interplay (supra), the Arbitration Act provides its own mechanisms for challenging orders—Section 37 specifies appealable orders. A court acting under Section 15(2) cannot adopt a procedure that exercises jurisdiction barred by the Act, such as setting aside Section 16 or Section 17 orders without an appeal under Section 37.

  • Court Cannot Exercise Power Not Conferred: Following Official Trustee (supra), before a court can be held to have jurisdiction, it must have authority to pass the particular orders sought. The High Court's declaration of nullity was an order it had no competence to make under Section 15(2), and therefore was void.

  • Proper Course is Continuation, Not De Novo: The proper course when an arbitrator is substituted is for the substitute arbitrator to continue from the existing stage of proceedings, not to restart de novo. This preserves efficiency and upholds the object of speedy resolution under the Arbitration Act. Section 15(3) gives discretion to the arbitral tribunal to repeat hearings, but this discretion is not to be exercised by the court at the substitution stage.

  • Protection of Third-Party Rights: Where third-party rights (such as home buyers' rights) have been created pursuant to valid Section 17 orders, equity demands their protection. The Court invoked Article 142 to declare such transactions lawfully valid.


6. Analysis of the Legal Framework Established

This judgment reinforces and clarifies several critical principles in the intersection of arbitration law and insolvency law:

  • Jurisdictional Limits Under Section 15(2): The judgment establishes that the power to appoint a substitute arbitrator under Section 15(2) is strictly that—a power to appoint. It does not include the power to review, set aside, or declare as nullity the proceedings conducted by the previous arbitrator. Any such review must be through the mechanisms specifically provided in the Act (Section 34 for challenging awards, Section 37 for appeals against certain orders).

  • Preservation of Prior Proceedings Under Section 15(4): The Court gives full effect to Section 15(4), holding that change in composition of the tribunal does not, by itself, invalidate prior orders. This ensures continuity and prevents parties from using arbitrator substitution as a tactic to restart proceedings.

  • Interplay Between IBC Moratorium and Arbitration: While the Court did not decide the substantive question of whether arbitration proceedings can continue during IBC moratorium (leaving that for the appropriate forum), it held that the High Court, under Section 15(2), could not pre-judge that issue and nullify proceedings. The proper course was to allow the substitute arbitrator to rule on the effect of moratorium, subject to challenge under Section 37.

  • Principle of Minimal Judicial Intervention: The judgment reaffirms the fundamental principle underlying the Arbitration Act—minimal judicial intervention. Courts must resist the temptation to expand their jurisdiction beyond what the statute expressly confers.

  • Protection of Third-Party Rights Under Article 142: The invocation of Article 142 to protect home buyers' rights demonstrates the Court's willingness to use its plenary powers to prevent injustice where third parties have acted in good faith on the basis of judicial orders.


7. Court's Examination and Conceptual Application

The Supreme Court's analysis proceeded methodically:

  • Textual Analysis of Section 15: The Court first reproduced Section 15 in full and analyzed its structure. It noted that Section 15(2) is not standalone but must be read with Section 15(3) and 15(4). Sub-section (4) expressly preserves the validity of prior orders.

  • Application of Yashwith Constructions: The Court applied the principle from Yashwith Constructions that under Section 15(2), appointment of substitute arbitrator must be according to the rules applicable to the original appointment. Since the original appointment was made under Section 11, the High Court's power was limited to making a similar appointment—not to reviewing prior proceedings.

  • Application of Interplay (Constitution Bench): The Court applied the principle that the Arbitration Act is a self-contained code and what is permissible must be done only in the manner indicated. The High Court's declaration of nullity was not a procedure indicated anywhere in the Act for proceedings under Section 15(2).

  • Application of Official Trustee: The Court applied the principle that a court must have authority to pass the particular order sought. The High Court had jurisdiction to appoint a substitute arbitrator, but it had no jurisdiction to declare prior proceedings a nullity. Such an order was therefore void.

  • Application of Hindustan Construction: The Court followed the principle that when an arbitrator becomes unable to act, the proper course is to appoint a substitute to continue from the existing stage, not to restart de novo. The High Court's approach would have forced a de novo start, which is contrary to the object of speedy resolution.

  • Rejection of the Liquidator's Arguments: The Court rejected the Liquidator's reliance on Section 14(4) and Section 23(1) proviso of the IBC, holding that these were matters for the arbitral tribunal to consider in the first instance, not for the High Court under Section 15(2).

  • Invocation of Article 142: Recognizing that third-party home buyers had acquired rights pursuant to the Section 17 orders, the Court invoked Article 142 to declare those transactions lawfully valid, preventing injustice.


8. Critical Analysis and Final Outcome

Critical Analysis:

This judgment is a significant contribution to the jurisprudence on arbitrator substitution and the limits of judicial intervention under the Arbitration Act. Its primary strength lies in its strict adherence to the statutory text and the principle that courts must not exercise power not conferred by statute.

The Court's reading of Section 15 as a cohesive whole—particularly the interplay between sub-sections (2), (3), and (4)—is commendable. By emphasizing Section 15(4), the Court ensures that the substitution of an arbitrator does not become an opportunity to undo prior proceedings, which would defeat the very purpose of arbitration as an efficient dispute resolution mechanism.

The judgment also provides important guidance on the relationship between the Arbitration Act and the IBC. While it does not definitively resolve whether arbitration can continue during moratorium, it makes clear that such questions must be decided by the arbitral tribunal (subject to challenge under Section 37) and not by a court exercising a limited power like Section 15(2).

The invocation of Article 142 to protect third-party rights is a pragmatic and equitable solution. The home buyers who purchased flats pursuant to Section 17 orders acted in good faith and should not suffer because of the underlying dispute between the corporate entities. This aspect of the judgment reflects the Court's commitment to doing complete justice.

However, the judgment could have provided more detailed guidance on how the substitute arbitrator should approach the question of moratorium. By leaving it entirely to the tribunal, the Court may have invited further litigation on this issue. A clearer articulation of principles—such as whether arbitration proceedings are "instituted" or "continued" within the meaning of Section 14—would have been helpful.

The Court's observation that the flats "have not been sold" (in para 3(xv)) while later protecting "home buyers rights" (in para 47) creates a slight ambiguity. It appears that agreements for sale were entered into, but actual transfer may not have been completed. The protection under Article 142 would cover both stages.


Final Outcome and Directions:

  1. Appeal Partly Allowed: The appeal succeeded in part.

  2. Impugned Order Modified: The part of the High Court's order declaring the proceedings held by the Arbitral Tribunal on seven dates (17.03.2022 to 25.08.2022) as a nullity was set aside.

  3. Substitution Upheld: The appointment of Hon'ble Mr. Justice R.M. Savant (Retd.) as substitute arbitrator was upheld.

  4. Continuation of Proceedings: The substitute arbitrator was to continue from the existing stage of proceedings, not restart de novo.

  5. Protection of Third-Party Rights: In exercise of power under Article 142 of the Constitution, the Court declared the transactions involving sale of flats pursuant to the Section 17 orders to be lawfully valid, protecting home buyers' rights.

  6. Disposal of Appeal: The appeal was disposed of with modification of the impugned order as above.


(MCQs)


1. Under which section of the Arbitration and Conciliation Act, 1996, did the High Court appoint the substitute arbitrator in this case?
a) Section 11
b) Section 14
c) Section 15(2)
d) Section 29A


2. Which sub-section of Section 15 of the Arbitration and Conciliation Act, 1996, expressly provides that an order or ruling of the arbitral tribunal made prior to replacement of an arbitrator shall not be invalid solely because of the change in composition?
a) Section 15(1)
b) Section 15(2)
c) Section 15(3)
d) Section 15(4)


3. Which Constitution Bench judgment of the Supreme Court, cited in this case, held that the Arbitration and Conciliation Act, 1996, is a self-contained code and what is permissible must be done only in the manner indicated?
a) Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd.
b) Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899, In re
c) Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd.
d) Shailesh Dhairyawan v. Mohan Balkrishna Lulla


4. Under which provision of the Insolvency and Bankruptcy Code, 2016, was the moratorium imposed upon admission of the respondent to CIRP on 26.09.2019?
a) Section 13
b) Section 14
c) Section 33
d) Section 33(5)

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