In Ankhim Holdings Pvt. Ltd. & Anr. v. Zaveri Construction Pvt. Ltd¹, the Supreme Court examined the scope of judicial interference under Section 15(2) of the Arbitration and Conciliation Act, 1996 (“A&C Act, 1996”) and clarified that courts cannot declare prior arbitral proceedings a ‘nullity’ while appointing a substitute arbitrator. Allowing the appeal in part, the Court held that Section 15 of the A&C Act, 1996 is a mechanism designed to preserve the continuity of proceedings, and prior orders remain valid unless parties agree otherwise or the substitute tribunal decides to repeat hearings.

The dispute originated from a partnership formed to develop a Slum Rehabilitation Authority (“SRA”)project in Mumbai. Following the disputes, the Bombay High Court appointed a sole arbitrator in 2019 to adjudicate the parties' differences. Subsequently, the Respondent company was admitted to the Corporate Insolvency Resolution Process (“CIRP”), and a moratorium was imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) on 26th September 2019.

In March 2022, after the Bombay High Court observed that the Interim Resolution Professional (“IRP”) had become “functus officio”, the Appellants moved applications under Section 17 of the A&C Act, 1996. The Arbitral Tribunal rejected a challenge to its jurisdiction under Section 16 of the A&C Act. 1996 based on the IBC moratorium and proceeded to pass interim orders, permitting the sale of certain flats to third-party homebuyers. However, following the initiation of liquidation proceedings against the Respondent in August 2022, the original arbitrator eventually terminated the proceedings in October 2023.

The Appellants then approached the Bombay High Court under Section 15(2) of the A&C Act, 1996 seeking the appointment of a substitute arbitrator. While the High Court granted the prayer for substitution, it added a rider declaring that all arbitral proceedings held between 17th March 2022 and 25th August 2022 were a ‘nullity’ because they were conducted during the moratorium period.

Before the Supreme Court, the central question was whether a court exercising jurisdiction under Section 15(2) of the A&C Act, 1996 could nullify prior proceedings on the grounds of an IBC moratorium. The Court commenced its analysis by emphasizing that Section 15(2) of the A&C Act, 1996 is not a standalone provision and must be read alongside Sections 15(3) and 15(4) of the A&C Act, 1996. Under Section 15(4), an order or ruling made prior to replacement remains valid unless otherwise agreed by the parties, and Section 15(3) leaves the repetition of hearings to the discretion of the substitute tribunal.

Relying on Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd (2006) 6 SCC 204, and Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd, 2025 SCC OnLine SC 2578, the Court reiterated that substitution is intended to preserve continuity. The Court observed that the High Court had exceeded its limited jurisdiction, effectively exercising supervisory review or appeal powers that are not authorized by the Arbitration and Conciliation Act, 1996.

The Hon’ble Supreme Court held that it is impermissible for a court acting under Section 15(2) of the A&C Act, 1996 to adopt a procedure that exercises jurisdiction barred by the Act, such as setting aside a Section 16 rejection order (which is not appealable) or interfering with Section 17 orders outside of a Section 37 of the A&C Act, 1996 proceeding. The Court noted that the High Court assumed power not conferred by the statute, violating the principle of minimal judicial intervention.

Significantly, the Hon’ble Supreme Court observed that nullifying such proceedings would inefficiently force a de novo restart and jeopardize the rights of third-party homebuyers who had purchased flats pursuant to the tribunal's interim orders. Consequently, the Supreme Court used its extraordinary powers under Article 142 of the Constitution of India to declare the sale of the flats lawfully valid to protect these third-party interests.

Accordingly, the Supreme Court allowed the appeal in part and set aside the High Court’s declaration of nullity. The decision reinforces that Section 15(2) is confined to the appointment of a substitute arbitrator and affirms that the A&C Act, 1996, as a self-contained code, precludes courts from using substitution proceedings to bypass the statutory framework for challenging interim arbitral orders.

By - Akarsh Pandey and Debayan Dutta