High Courts Cannot Invalidate Prior Arbitral Proceedings While Exercising Powers Under Section 15(2): Supreme Court 

Introduction

The Supreme Court has clarified the limited scope of judicial intervention under the Arbitration and Conciliation Act, 1996, holding that courts exercising jurisdiction under Section 15(2) of the Arbitration and Conciliation Act, 1996 cannot invalidate prior arbitral proceedings. 

The Court further examined the interplay between arbitral proceedings and the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016, reiterating that such issues must be addressed within the statutory framework of the arbitration law rather than through collateral judicial intervention. 

Factual Background

Disputes arose between the parties in relation to a construction project, following which proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 were initiated before the Bombay High Court. Pursuant to consent between the parties, a sole arbitrator was appointed. 

During the pendency of arbitral proceedings, the respondent company was admitted into Corporate Insolvency Resolution Process (CIRP), thereby attracting the moratorium under Section 14 of the IBC. 

Subsequently, an application was filed before the High Court under Section 15(2) seeking substitution of the arbitrator. While appointing a substitute arbitrator, the High Court additionally held that proceedings conducted during the subsistence of the moratorium were void. 

Issues Before the Supreme Court

The Court considered: 

• Whether a court acting under Section 15(2) has jurisdiction to declare prior arbitral proceedings void;  
• Whether the existence of a moratorium under Section 14 of the IBC permits such invalidation;  
• The permissible scope of judicial intervention in arbitral proceedings. 

Submissions of the Parties

The appellants contended that Section 15(2) is confined to the mechanical act of substitution, and does not permit adjudication on the validity of prior proceedings. It was argued that any challenge to arbitral orders must be pursued strictly in accordance with the remedies provided under the Act, including Section 16 and Section 37. 

The respondent, acting through the resolution professional/liquidator, argued that continuation of arbitral proceedings during the moratorium was impermissible and contrary to insolvency law, thereby justifying the High Court’s declaration. 

Judgment

The Supreme Court upheld the appointment of the substitute arbitrator but set aside the High Court’s finding that prior arbitral proceedings were void. It held that: 

• Section 15(2) is procedural in nature, limited to ensuring continuity in the arbitral process;  
• It does not confer any adjudicatory power upon courts to examine or invalidate prior proceedings;  
• Judicial intervention in arbitration is strictly circumscribed by Section 5 of the Arbitration and Conciliation Act, 1996.  

The Court emphasised that issues relating to: 

• validity of proceedings during a moratorium, and  
• jurisdictional objections  

must be raised before the arbitral tribunal under Section 16 of the Arbitration and Conciliation Act, 1996, and thereafter challenged only through statutorily prescribed mechanisms such as Section 37. 

Analysis

1. Scope of Section 15

Section 15 governs termination of mandate and substitution of arbitrators. Sub-section (2) mandates that substitution must follow the same procedure as the original appointment, while sub-section (4) preserves the validity of prior proceedings unless otherwise agreed. 

The legislative intent is to ensure continuity, not re-litigation. By declaring earlier proceedings void, the High Court effectively undertook a de facto merits review, which falls outside the scope of Section 15. 

The ruling is consistent with the Supreme Court’s decision in Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd¹, which affirms that substitution does not reset the arbitral process. 

2. Minimal Judicial Intervention

The decision reinforces the principle that arbitration is a self-contained code, with court intervention permitted only where expressly provided. 

This aligns with precedents such as: 

• SBP & Co. v. Patel Engineering Ltd.²  
• Deep Industries Ltd. v. ONGC Ltd.³  

which emphasise judicial restraint in arbitral matters. 

3. Kompetenz-Kompetenz

Under Section 16, the arbitral tribunal is the first authority to rule on its jurisdiction, including objections arising from the IBC moratorium. 

The High Court’s intervention effectively bypassed this statutory hierarchy, undermining the tribunal’s competence to decide such issues in the first instance. 

4. Interplay with IBC Moratorium

While Section 14 of the IBC imposes a moratorium on proceedings against the corporate debtor, its impact on arbitration is nuanced and fact-specific. 

Crucially: 

• Proceedings are not automatically “void”;  
• The appropriate course is stay or suspension, subject to adjudication within the statutory framework.  

The Supreme Court’s approach avoids conflating illegality with procedural irregularity, preserving the integrity of both arbitration and insolvency regimes. 

Conclusion

The ruling reaffirms that courts exercising jurisdiction under Section 15(2) cannot expand their mandate beyond substitution of arbitrators. Any attempt to invalidate prior arbitral proceedings constitutes impermissible judicial intervention. 

The decision strengthens the autonomy of arbitral tribunals, reinforces the doctrine of minimal court interference, and clarifies the procedural boundaries between arbitration law and insolvency law.