High Court Cannot Nullify Prior Arbitral Proceedings While Appointing Substitute Arbitrator: Supreme Court

The judgment came in an appeal challenging a Bombay High Court order which, while appointing a substitute arbitrator, had declared arbitral proceedings conducted between 17-03-2022 and 25-08-2022 as void on the ground that they took place during the moratorium imposed under Section 14 of the IBC.

A bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan observed, “…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. 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”.

“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”, the bench further observed.

Advocate Ashim Sood appeared for the appellant and Tushar Mehta, Solicitor General appeared for the respondent.

In the matter, the dispute arose from a redevelopment project in Mumbai undertaken through a partnership arrangement between the parties. Following disputes, arbitration was invoked and an arbitrator was appointed by the High Court.

Subsequently, insolvency proceedings were initiated against one of the parties, and a moratorium under Section 14 of the IBC came into force.

Despite this, arbitral proceedings continued on several dates, during which interim reliefs under Section 17 of the Arbitration Act were granted. Later, upon termination of the arbitrator’s mandate, the High Court appointed a substitute arbitrator under Section 15(2) of the Arbitration Act, but also declared the earlier arbitral proceedings conducted during the moratorium period as a nullity.

Allowing the appeal in part, the Supreme Court held that Section 15 of the Arbitration Act is a self-contained provision dealing only with termination and substitution of an arbitrator, and does not confer power on the High Court to invalidate past arbitral orders.

The Court emphasised that:

-Section 15(2) must be read with Sections 15(3) and 15(4), which expressly preserve the validity of prior arbitral orders unless the parties agree otherwise.

-The High Court exceeded its jurisdiction by effectively setting aside orders passed under Sections 16 and 17 of the Arbitration Act, which can be interfered with only in the manner expressly provided under the Act, particularly under Section 37.

-Declaring proceedings a nullity while exercising jurisdiction under Section 15(2) amounts to assuming powers not conferred by statute, contrary to the principle of minimal judicial intervention in arbitration.

Relying on settled precedents, the Court reiterated that substitution of an arbitrator is meant to preserve continuity of proceedings, not to restart arbitration de novo.

While acknowledging that a moratorium under Section 14 of the IBC was in force during part of the arbitral proceedings, the Court held that this factor alone did not empower the High Court, acting under the Arbitration Act, to invalidate prior arbitral actions.

Setting aside the impugned portion of the High Court’s order, the Supreme Court restored the validity of arbitral proceedings conducted between 17-03-2022 and 25-08-2022.

The Court exercising its powers under Article 142 of the Constitution of India, further declared that transactions carried out pursuant to interim arbitral orders including those affecting third-party rights, shall remain lawful and valid.

Cause Title: Ankhim Holdings Pvt. Ltd. & Anr. v. Zaveri Construction Pvt. Ltd. [Neutral Citation: 2026 INSC 137]

Appearances:

Appellant: Ashim Sood, Saahil Memon, Senu Nizar, Ekansh Gupta, Kartikeya Jaiswal, Prateek Kundu, Karan Kumar, Pallavi Pratap, AOR, Advocates.

Respondent: Tushar Mehta, S.G., Sanjay Kapur, AOR, Surya Prakash, Shubhra Kapur, Santha Smruthi, Shakti Kanta Pattanaik, AOR, Santosh Kumar, Advocates.

Click here to read/download the Order