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

Introduction

The judgment in Ankhim Holdings Pvt. Ltd. & Anr. v. Zaveri Construction Pvt. Ltd. was delivered by the Hon’ble Supreme Court of India in Civil Appeal No. 779/2026 (arising out of SLP (C) No. 11667/2024). The Bench, comprising Hon'ble Mr. Justice J.B. Pardiwala and Hon'ble Mr. Justice K.V. Viswanathan, addressed a jurisdictional question regarding the powers of a High Court under Section 15(2) of the Arbitration and Conciliation Act, 1996 (“Act”). The appeal was preferred against an order of the Hon’ble High Court of Bombay (“High Court”) which, while appointing a substitute arbitrator had concurrently declared certain arbitral proceedings and interim orders passed during a moratorium period under the Insolvency and Bankruptcy Code, 2016 (“IBC”) as a nullity. This case primarily examines the limits of judicial intervention in the substitution of arbitrators and the preservation of the continuity of arbitral proceedings.

Factual Background

Ankhim Holdings Pvt. Ltd.(“Appellant”) and Zaveri Construction Pvt. Ltd.(“Respondent”) [currently under liquidation] entered into a partnership firm named ‘M/s Anmol Alliance’ for the development and construction of an SRA project in Andheri (West), Mumbai. Following the emergence of disputes between the partners, the Appellant filed an application under Section 9 of the Act bearing Commercial Arbitration Petition No. 347/2019. On 09 July 2019 the Hon’ble High Court while ordering an interim arrangement that allowed the project to proceed, accepted the minutes of the order as consent terms and appointed Hon’ble Mr. Justice J.N. Patel as the sole arbitrator to adjudicate the dispute.

In a crucial development on 26 September 2019, the National Company Law Tribunal, Mumbai(“NCLT”) admitted the respondent to the Corporate Insolvency Resolution Process (“CIRP”) and imposed a moratorium under Section 14 of the IBC. While the moratorium was in effect, the Appellant filed two applications under Section 9 of the Act. The first being I.A. No. (L) 6167 of 2020 seeking to restrain the Resolution Professional from obstructing the sale of flats bearing 907 and 908 and the second being I.A. No. (L) 24302 of 2021 seeking permission to execute sale agreements for Flats 1001, 1302, and 704.

The Hon’ble High Court on 15 March 2022 passed a common order in applications bearing I.A. No. (L) 6167 of 2020 and I.A. No. (L) 24302 of 2021, recording that the Interim ResolutionProfessional (“IRP”) had become functus officio and granted the Appellant liberty to move these prayers as application under Section 17 of the Act, before the arbitrator. Acting on this liberty, the Appellant moved an application under Section 17 of the Act before the arbitrator seeking the same relief as in applications bearing I.A. No. (L) 6167 of 2020 and I.A. No. (L) 24302 of 2021 filed before the Hon’ble High Court.

On 25 March 2022, an application under Section 16 of the Act was filed by the Respondent’s IRP before the arbitral tribunal seeking to challenge its jurisdiction and stay the proceedings on the ground of the moratorium imposed under Section 14 of the IBC. In response, the arbitral tribunal vide an order dated 29 March 2022 rejected the Section 16 application filed by the Respondent’s IRP. By separate orders dated 17 March 2022 and 25 August 2022 the arbitral tribunal allowed the Appellant to execute agreements for sale in respect of Flat Nos. 1001, 1302, 704, 907, and 908.

In a related development, the NCLT vide its order dated 25 August 2022 in I.A. No. 2278 of 2020 initiated formal liquidation proceedings against the Respondent. The liquidator filed an application bearing I.A No.(L) 14336/2023 before the Hon’ble High Court vide which he had sought a declaration that the disputes are non-arbitrable. The Hon’ble High Court vide its orderdated 25 August 2023 dismissed I.A. No. (L) 14336 of 2023.

Following the termination of the arbitration mandate by the arbitral tribunal on 11 October 2023, the Appellant filed Commercial Arbitration Petition No. 30650/2023 under Section 15(2) of the Act seeking appointment of a substitute arbitrator and an extension of time. The Hon’ble High Court vide its order dated November 01November 2023 (“Impugned order”) appointed Hon’ble Mr. Justice R.M. Savant as the substitute arbitrator and concurrently declared all proceedings held between 17 March 2022 and 25 August 2022 as a nullity due to the moratorium. Aggrieved by this specific declaration of nullity, the Appellant filed an appeal.

Statutory Framework

The primary statutory provision governing the termination of an arbitrator's mandate and theirsubsequent replacement is Section 15 of the Act. Section 15(2) of the Act mandates that upon the termination of an arbitrator's mandate, a substitute arbitrator must be appointed according to the said rules and procedures that were applicable to the appointment of the arbitrator being replaced. This section ensures that the replacement process maintains consistency with the original arbitration agreement or the statutory procedures followed at the initial stage.

The legal consequences of such a substitution are addressed under Section 15(3) and Section 15(4) of the Act which prioritize procedural continuity. Under Section 15(3) of the Act, any hearings previously held are not automatically discarded, rather, they may be repeated only at the discretion of the newly constituted arbitral tribunal, unless the parties agree otherwise. Complementing this, Section 15(4) of the Act provides that an order or ruling made by the arbitral tribunal prior to the replacement of an arbitrator remains valid and is not rendered invalid solely because of the change in the arbitral tribunal's composition.

Section 14 of the IBC prohibits the institution or continuation of suits or proceedings against a corporate debtor once a moratorium is imposed. Under the proviso to Section 14(4) of IBC, this moratorium remains in effect until the completion of CIRP, or until the adjudicating authority either approves a resolution plan under Section 31(1) of IBC or passes a liquidation order under Section 33 of IBC. The core statutory conflict in this matter concerns whether the High Court while exercising its power to substitute an arbitrator under Section 15(2) of the Act can concurrently invoke these IBC provisions to nullify existing arbitral orders.

Submissions by the parties

Appellant :

The Appellant argued that the Hon’ble High Court while exercising jurisdiction under Section 15(2) of the Act lacked the authority to declare the proceedings conducted between 17 March2022 and 25 August 2022 as a nullity. They contended that the Hon’ble High Court’s role was limited to the substitution of the arbitrator and did not extend to reviewing or nullifying substantive orders. The Appellant emphasized that the jurisdiction of the Hon’ble High Court under Section 15(2) of the Act is significantly narrower than that under Section 11 of the Act, specifically pointing to the statutory language requiring the substitute arbitrator to be appointed according to the rules that were applicable in the appointment of the arbitrator that has been replaced.

To support its submission, the Appellant relied on the judgment of Hon’ble Supreme Court inYash with Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd.1, which held that substitution must follow the appointment mechanism as deployed during the appointment ofthe arbitrator that has been replaced.

The Appellant further argued that bare reading of Section 15(4) of the Act makes it clear that any rulings or order by the arbitral tribunal made prior to a replacement would not be rendered invalid simply due to a change in the arbitral tribunal's composition, unless otherwise agreed between the parties. The declaration of nullity by the Hon’ble High Court would have severe implications for third-party home buyers who had already acquired rights in the flats transferred pursuant to the arbitral tribunal's Section 17 orders.

Placing its reliance on the judgment of the Hon’ble Supreme Court in Official Trustee v. Sachindra Nath Chatterjee2 , the Appellant submitted that the Hon’ble High Court has exceeded its jurisdiction by nullifying orders passed by the arbitral tribunal, it otherwise had no jurisdiction to consider under the Act’s framework.

State Bank of India:

The State Bank of India (“SBI”) appeared to protect its interests and asserted that the flats in question were mortgaged with SBI and requested that its rights as a secured creditor be safeguarded. In response, the Appellant clarified that the specific flats under dispute were never mortgaged with SBI and were free from any bank charge.

Official Liquidator

The Official Liquidator asserted that no error of law had occurred by the Hon’ble High Court in passing the Impugned order. It was argued that the Hon’ble High Court was correct in identifying that all proceedings and transactions held during the moratorium period, specifically from 17 March 2022 and 25 August 2022 were a nullity by operation of law. The Liquidator relied upon the mandatory nature of the moratorium under Section 14(4) of IBC and the proviso to Section 23(1) of the IBC to justify the suspension of arbitral authority during that timeframe.

Issue:

Whether the Hon’ble High Court was justified in ordering that the proceedings held by the arbitral tribunal on the seven relevant dates, i.e., from 17 March 2022 and 25 August 2022 were liable to be declared as nullity on the premise that those proceedings were undertaken during the period of moratorium under Section 14 of the IBC ?

Analysis

The Hon’ble Supreme Court’s analysis centered on the jurisdictional boundaries of a High Court when exercising powers under Section 15(2) of the Act. It identified the core issue as whether the Hon’ble High Court was justified in declaring the proceedings conducted by the arbitral tribunal on seven dates from 17 March 2022 and 25 August 2022 a nullity on the ground that they were held during the moratorium period under Section 14 of the IBC.

The Hon’ble Supreme Court clarified that Section 15(2) of the Act is not a standalone provision but must be read as part of a cohesive scheme alongside Sections 15(3) and 15(4)of the Act. Section 15(2) of the Act stipulates that upon termination of the mandate of an arbitrator under Section 14 of the Act, a substitute arbitrator was required to be appointed according to the rules applicable to the appointment of the arbitrator replaced. Section 15(3) prescribed the course of action once such substitution took place, providing that any previous hearings “may” berepeated at the discretion of the arbitral tribunal always subject to the agreement of the parties.

The Hon’ble Supreme Court explained that if the parties agree to reconduct the hearings, the expression “may” in Section 15(3) of the Act effectively operates as “shall”, whereas if they agreed that the hearings were not to be repeated, “may” operates as “shall not”, and if the parties failed to reach any agreement, the decision whether or not to repeat earlier hearings lay with the arbitral tribunal. It further clarified that the parties could arrive at such an agreementon re‑hearing either before the stage of substitution was reached or after substitution of the arbitrator.

In support of its interpretation of Section 15(2) of the Act, the Hon’ble Supreme Court relied upon its earlier decision in Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd. 3 where it had been held that the appointment of a substitute arbitrator under Section 15(2) of the Act must be made in accordance with the original agreement or appointment mechanism applicable at the appointment of the substituted arbitrator. It reiterated the principle that any omission in the arbitration agreement to expressly authorise appointment of a substitutearbitrator was cured by Section 15(2) of the Act, and the rules in that provision referred to the procedure stipulated in the arbitration agreement or applicable institutional rules, not merely to statutory or framed rules. Applying this dictum, the Court held that in the present case, since the original appointment had been made under the Act, the governing provision for appointment of the arbitrator will be as per Section 11 of the Act.

The Hon’ble Supreme Court affirmed that the scope of judicial scrutiny under Section 11 of the Act is well settled to be narrowly circumscribed, confining the Court essentially to a prima facie examination of the existence of an arbitration agreement and not permitting it to traverse into merits or wider supervisory review. On this basis, the Hon’ble Supreme Court concluded that the Hon’ble High Court had travelled beyond its vested jurisdiction by effectively assuming powers including those referable to Section 37 of the Act.

Further, the Hon’ble Supreme Court asserted that having regard to the plain language of Section15(2) and 15(4) of the act, the Hon’ble High Court could not have declared the arbitral proceedings from 17 March 2022 and 25 August 2022 as a nullity on the ground of amoratorium. While referring to its own judgment in Interplay Between Arbitration Agreementsunder Arbitration and Conciliation Act, 1996 & Stamp Act, 1899, In re (2024) 6 SCC 14 4, hon’ble Supreme Court emphasised that the Act is a self‑contained and exhaustive code in respect of matters such as appointment of arbitrators, commencement of arbitration, making of awards, challenge thereto and execution of awards. When such a self‑contained code prescribes a specific procedure, the application of general legal procedures stands impliedly excluded and matters governed by the Act must be dealt with only in the manner there indicated.

The Supreme Court referred to the decision in Hindustan Construction Co. Ltd. v. Bihar RajyaPul Nirman Nigam Ltd.,5 which addressed a situation where a High Court had directed an arbitrator not to continue proceedings after their mandate had been extended twice. The Court had held that if an arbitrator becomes unable to act due to recusal or disqualification, the legal and proper course is to invoke Section 15(2) of the Act, which is to appoint a substitute arbitrator to continue the proceedings from the existing stage. The Hon’ble Supreme Court reaffirmed that substitution is intended to preserve continuity and prior proceedings remain valid unless a party objects. Consequently, the Hon’ble High Court’s decision to suspend the arbitration altogether instead of ordering a substitution was found to be contrary to the settled law.

The Hon’ble Supreme Court further clarified that where the Act provides specific procedures for assailing orders or prohibits certain orders from being challenged, no alternate procedure can be adopted by a court whose jurisdiction derives from the Act itself. Section 37 of the Act provide provision for appeals against orders passed under Section 17 of Act and orders accepting pleas under Section 16 of Act, whereas orders dismissing applications Section 16 of Act are not subject to judicial interference.

The Hon’ble Supreme Court while referring to its own judgment in Official Trustee v. Sachindra Nath Chatterjee, 6 emphasized that for a court to have jurisdiction it must not only have the authority to try the suit but also the authority to pass the orders sought. The statute (Section 34 of the Act) prescribes what a court can do under its limited jurisdiction, and it is prohibited from granting any relief outside of those prescribed powers..

Ultimately, the Hon’ble Supreme Court held that the proper and legal course for the Hon’ble High Court under Section 15(2) of the Act should have been to appoint a substitute arbitrator to continue from the existing stage of the proceedings. A de novo (from the beginning) restart of the arbitration would be inequitable and inefficient, particularly as it would directly impact the sale of flats conducted pursuant to the arbitral tribunal’s orders dated 29 March 2022, and 20 April 2022. The Hon’ble Supreme Court reiterated that the object of speedy dispute resolution is best subserved by a substitute arbitrator continuing from the point where the previous arbitrator left off.

Verdict

The Hon’ble Supreme Court allowed the appeal in part and set aside the Hon’ble High Court'sorder to the extent that it declared the arbitral proceedings held between 17 March 2022 and 25August 2022 as a nullity. Recognizing the long lapse of time and the creation of third-party rights, the Hon’ble Supreme Court exercised its jurisdiction under Article 142 of the Constitution of India to declare the sale transactions as lawfully valid. The Impugned judgment was modified to reflect that the substitute arbitrator shall continue the proceedings from the stage at which the earlier mandate terminated, rather than restarting the process de novo (from the beginning).

Conclusion

The Hon’ble Supreme Court's ruling in Ankhim Holdings Pvt. Ltd. & Anr. v. Zaveri Construction Pvt. Ltd reinforces the principle that the Act is a self-contained and exhaustive code designed to ensure the speedy resolution of disputes with minimal judicial interference. By setting aside the Hon’ble High Court's declaration of nullity, the Hon’ble Supreme Court established that a court’s power under Section 15(2) of the Act is strictly limited to the substitution of an arbitrator and does not empower it to conduct a substantive review or nullification of prior arbitral orders based on external statutes like the IBC.

The decision underscores that procedural continuity is paramount, once an arbitrator is substituted the proceedings should ideally continue from the existing stage rather than restarting de novo (from the beginning), which would be both inequitable and inefficient. Furthermore, the Court’s use of Article 142 to validate third-party transactions highlights a pragmatic approach to protecting bona fide home buyers from the fallout of jurisdictional overreach. Ultimately, this judgment clarifies that jurisdictional challenges or grievances against interim orders must be addressed through the specific appellate mechanisms provided within the Act rather than through a disguised supervisory review during a substitutionapplication.