Can a court, while exercising its statutory power to substitute an arbitrator under Section 15(2) of the Arbitration and Conciliation Act, 1996, also exercise a supervisory jurisdiction to declare prior arbitral proceedings as a nullity? This was the primary legal issue addressed by the Supreme Court of India in Ankhim Holdings Pvt. Ltd. & Anr. v. Zaveri Construction Pvt. Ltd. (2026)1. The Court held that the scope of Section 15(2)2 is strictly limited to the appointment of a substitute arbitrator and does not extend to an adjudication upon the validity of orders passed by the previous tribunal. By setting aside the High Court’s declaration that proceedings conducted during an insolvency moratorium were void, the Supreme Court upheld the principle of minimal judicial interference and the finality of interim orders under the Act.
The background involves a partnership between the appellants and the respondent for a slum redevelopment project. Following the emergence of disputes, a sole arbitrator was appointed by the High Court. Subsequently, the National Company Law Tribunal (NCLT) initiated the Corporate Insolvency Resolution Process (CIRP) against the respondent, attracting the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC). During this moratorium period, the arbitral tribunal continued to function, passing several orders under Section 16 regarding its jurisdiction and Section 17 regarding interim measures, which facilitated the sale of residential units to third-party purchasers. Upon the original arbitrator’s recusal, the appellants moved the High Court under Section 15(2) for the appointment of a substitute. While the High Court granted the substitution, it simultaneously declared all proceedings and orders passed between March and August 2022 the period of the moratorium as a “nullity” for being in violation of Section 14 of the IBC.
The rationale provided by the Supreme Court centered on the jurisdictional limitations of Section 15(2). The Court observed that Section 15 of the Arbitration and Conciliation Act is a facilitative provision intended to ensure the continuity of the arbitral process “according to the rules that were applicable to the appointment of the arbitrator being replaced.” It held that a court, when seized of a substitution application, cannot act as an appellate or a writ court to review the merits of prior procedural orders. The High Court, by declaring the Section 16 and Section 17 orders as void, had effectively bypassed the statutory remedy of appeal available under Section 37 of the Arbitration and Conciliation Act. The Supreme Court reasoned that the Arbitration Act is a self-contained code, and any challenge to an arbitrator’s order must be strictly within the framework provided by the legislature, rather than through a collateral attack during a substitution proceeding.
In its legal analysis, the Court relied on the precedent set in Interplay Between Arbitration Agreements & Stamp Act (2024)3, which emphasizes that courts must refrain from expanding their interventionist powers beyond what is explicitly permitted by the statute. To further define the scope of substitution, the Court referred to Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd4, clarifying that the term “rules” under Section 15(2) refers to the same appointment mechanism including the judicial power under Section 11 used for the initial appointment, but does not grant a broader power of review. This principle of procedural continuity was reinforced by citing Bihar Rajya Pul Nirman Nigam Ltd. v. Shanti Devi5, which mandates that a substitute arbitrator must continue the proceedings from the stage already reached to ensure the efficiency and cost-effectiveness of the arbitral process. Consequently, the Court highlighted Section 15(4) of the Act, which provides that “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.” By integrating these authorities, the Court concluded that the High Court had exceeded its mandate by attempting to resolve the complex interplay between the IBC moratorium and the Arbitration Act within a summary application for substitution, thereby disturbing the legislative intent of a seamless transition between arbitrators.
Conclusion
Ultimately, the Supreme Court determined that the validity of the arbitral proceedings conducted during the moratorium remains a matter to be tested during a challenge to the final award under Section 34, rather than at the stage of substitution. By invoking its powers under Article 142 of the Constitution, the Court restored the interim orders to protect the interests of bona fide third-party homebuyers who had acted upon the tribunal’s directions. This judgment reinforces the rule of law in arbitration by ensuring that a change in the person of the arbitrator does not provide a backdoor for parties to re-litigate settled procedural stages, thereby preserving the efficiency and autonomy of the arbitral process.
Citations
Expositor(s): Adv. Jahnobi Paul
