Supreme Court Overturns Bombay High Court's Nullification of Arbitration Proceedings, Apex Court Affirms Validity of Transactions Amidst Moratorium, Upholds Minimal Judicial Intervention
In a landmark judgment, the Supreme Court of India has overturned the Bombay High Court's decision to nullify arbitration proceedings held during a moratorium period under the Insolvency and Bankruptcy Code, 2016 (IBC). The case, Ankhim Holdings Pvt. Ltd. v. Zaveri Construction Pvt. Ltd., revolved around arbitration proceedings conducted during the moratorium imposed by the National Company Law Tribunal (NCLT) on the respondent company undergoing insolvency resolution.
The Supreme Court bench, comprising Justices J.B. Pardiwala and K.V. Viswanathan, ruled that the High Court exceeded its jurisdiction by declaring the proceedings undertaken by the Arbitral Tribunal as nullity, emphasizing that the principle of minimal judicial intervention under the Arbitration and Conciliation Act, 1996 must be upheld. The apex court clarified that the High Court's jurisdiction under Section 15(2) of the Arbitration and Conciliation Act, 1996 is limited to appointing a substitute arbitrator and does not extend to nullifying proceedings held during a moratorium unless explicitly provided by statute.
Justice Pardiwala, delivering the judgment, noted, "Section 15 of the Act, 1996 contemplates the appointment of a substitute arbitrator according to the rules applicable to the appointment of the original arbitrator. The jurisdiction under Section 15(2) is circumscribed and does not empower the court to nullify proceedings undertaken during the moratorium period under the IBC."
The Supreme Court further invoked Article 142 of the Constitution to protect third-party rights, declaring transactions involving the sale of flats during the arbitration proceedings as lawfully valid. This decision ensures equitable resolution and continuity in arbitration proceedings, safeguarding the interests of home buyers who had entered into agreements for sale with Ankhim Holdings Pvt. Ltd. amidst legal uncertainties.
The judgment has significant implications for arbitration proceedings conducted during moratorium periods under the IBC, reinforcing the autonomy of arbitral tribunals and limiting judicial intervention. It underscores the importance of adhering to statutory provisions and maintaining the efficiency and continuity of arbitration processes.
Bottom Line:
Arbitration proceedings held during the moratorium period under Section 14 of the IBC cannot be declared as nullity by the High Court acting under Section 15(2) of the Arbitration and Conciliation Act, 1996, unless the statute explicitly grants such jurisdiction.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 15(2), 15(3), 15(4); Insolvency and Bankruptcy Code, 2016 Sections 14, 33(5); Article 142 of the Constitution of India
Ankhim Holdings Pvt. Ltd. v. Zaveri Construction Pvt. Ltd., (SC) : Law Finder Doc id # 2850822
