South Bihar Power Distribution Company Ltd vs India Power Corporation Ltd.
- Court
- Supreme Court
REPORTABLE
2026 INSC 1165
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9313 OF 2026
(Arising out of Special Leave Petition (Civil) No. 27403 of 2023)
SOUTH BIHAR POWER
DISTRIBUTION COMPANY LTD.
APPELLANT(S)
VERSUS
INDIA POWER CORPORATION RESPONDENT(S)
LTD. & ANR.
WITH
CIVIL APPEAL NO. 9325 OF 2026
(Arising out of Special Leave Petition (Civil) No. 24988 of 2026)
J U D G M E N T
UJJAL BHUYAN, J.
Facts of both the appeals being inter-related and
parties being the same, those were heard together and are being
disposed of by this common judgment and order.
Signature Not Verified
Digitally signed by
IRAMNAZ
Date: 2026.10.28
16:08:34 IST
Reason:
2. The two appeals take exception to the judgment and
order dated 15.09.2023 passed by the High Court of Judicature
at Patna (briefly ‘the High Court’ hereinafter) in Request Case
No. 78 of 2022 and Request Case No. 36 of 2021.
3. By the aforesaid judgment and order dated 15.09.
2023 (‘impugned judgment and order’ hereinafter), High Court
held that the jurisdiction to extend the period of time has to be
exercised by the High Court under Section 29A of the
Arbitration and Conciliation Act, 1996 (briefly ‘the 1996 Act’
hereinafter). Accordingly, the High Court directed that there
shall be an extension of the mandate of the arbitral tribunal by
four months starting from the date of appearance of the parties
before the arbitral tribunal as per the extension granted by the
High Court. Consequently Request Case No. 36 of 2021 was
allowed and Request Case No. 78 of 2022 was rejected.
4. Relevant facts may be briefly noted.
5. Appellant i.e. South Bihar Power Distribution
Company Ltd. is a company incorporated under the Companies
Act, 1956. Electricity Act, 2003 provides for a distribution
licensee and contemplates appointment of a distribution
franchisee by a distribution licensee. Appellant is a distribution
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licensee under the provisions of the Electricity Act, 2003. It has
the license to supply electricity in four electric supply areas i.e.
(i) Patna Electric Supply Unit, (ii) Central Electric Supply Area,
(iii) Magadh Electric Supply Area, and (iv) Bhagalpur Electric
Supply Area within the State of Bihar. For facilitating such
supply of electricity, appellant is also entitled to act through a
franchisee.
5.1. A competitive bidding process was initiated by the
appellant for selecting a franchisee pursuant to which India
Power Corporation Ltd., a company also incorporated under the
Companies Act, 1956, came out as the successful bidder. As per
the terms of the letter of intent, the successful bidder through
a special purpose vehicle was required to enter into a
distribution franchisee agreement with the appellant.
India Power Corporation (Bodhgaya) Ltd. was accordingly
incorporated as a 100% subsidiary of India Power Corporation
Ltd. to act as a special purpose vehicle whereafter a tripartite
agreement was entered into between the three companies i.e.
the successful bidder, the special purpose vehicle and the
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distribution licensee, called the Distribution Franchisee
Agreement, dated 31.12.2013.
5.2. India Power Corporation (Bodhgaya) Ltd. i.e. the
special purpose vehicle was to undertake and perform the
obligations under the distribution franchisee agreement entered
into by the parties with the first respondent i.e. India Power
Corporation Ltd. to act as the confirming party.
5.3. In the implementation of the franchisee agreement,
disputes arose which led the first respondent i.e. India Power
Corporation Ltd. to issue arbitration notice to the appellant
dated 09.11.2016 in accordance with Article 17 of the
distribution franchisee agreement. Since no arbitrator was
appointed, the special purpose vehicle i.e. the second
respondent approached the High Court under Section 11 of the
1996 Act vide Request Case No. 77 of 2018. The said request
case was disposed of with the consent of the parties vide the
order dated 04.04.2018 whereby the High Court appointed a
retired Judge of the said High Court Mr. Justice Shashank
Kumar Singh as the sole arbitrator.
4
5.4. The arbitration proceedings commenced on
12.04.2018 and proceeded upto the stage of recording of
evidence whereafter the learned arbitrator could not continue
further. In the meanwhile, the sole arbitrator had rejected the
application filed by the appellant under Section 13 read with
Section 16(1) of the 1996 Act vide the order dated 12.05.2018
as not pressed. Appellant thereafter filed counter claim on
02.02.2019 and supplementary counter claim on 28.03.2019
before the sole arbitrator.
5.5. In the meanwhile, the National Company Law
Tribunal, Kolkata (NCLT) admitted an application under Section
9 of the Insolvency and Bankruptcy Code, 2016 (briefly referred
to as ‘IBC’ hereinafter) for initiating corporate insolvency
resolution process against respondent No. 2. Vide the order
dated 08.11.2019, NCLT admitted the said application and also
appointed an interim resolution professional (IRP). Though the
interim resolution professional made a public announcement
on 28.05.2020 regarding initiation of corporate insolvency
resolution process, appellant did not file its claim before the
interim resolution professional as per provisions of the IBC.
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5.6. Respondents approached the High Court again vide
Request Case No. 14 of 2020 for appointment of another
arbitrator. Once again, with the consent of the parties, the High
Court vide the order dated 10.03.2021 appointed a former Chief
Justice of India, who was also a former Chief Justice of the High
Court, Mr. Justice Dipak Misra, as the new arbitrator.
5.7. Arbitral proceedings commenced under the new
arbitrator and proceeded from the stage where the earlier
arbitrator had left. A procedural order was passed by the new
arbitrator on 07.04.2021 whereby it was recorded that the
parties had no objection to the composition of the arbitral
tribunal or the sole arbitrator arbitrating the dispute between
the parties. However, within a period of one year, the arbitration
proceedings could not be completed. Therefore, after expiry of
one year, time was extended by another six months in
accordance with the 1996 Act, again on the consent of the
parties. But the arbitration proceedings could not be completed
even within the extended period. As the extended period was
expiring on 07.08.2021, respondents filed Request Case No. 36
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of 2021 before the High Court seeking extension of four months
for completion of the arbitration proceedings.
5.8. Appellant resisted the request on the ground that the
High Court had no jurisdiction to extend the time and also
challenged the arbitration proceedings initiated by the sole
arbitrator when the distribution franchisee agreement
specifically mentions of an arbitral tribunal comprising of three
arbitrators. Appellant also questioned the consent given before
the High Court for waving the condition of the agreement which
required an arbitral tribunal comprising of three arbitrators. In
this regard, appellant filed Request Case No. 78 of 2022 for
appointment of an arbitral tribunal as contemplated under the
distribution franchisee agreement.
5.9. In the meanwhile, following the corporate insolvency
resolution process of respondent No. 2, the consortium of
creditors in its meeting held on 13.02.2021 approved the
resolution plan of Rankini Power Generation Private Limited.
This was approved by the NCLT vide its judgment dated
18.07.2022.
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5.10. Consequently, the name of the second respondent
was changed to Vikriti Power Limited on and from 28.08.2023.
5.11. By the impugned judgment and order dated
15.09.2023, the High Court held that there was proper consent
by the appellant to the appointment of a sole arbitrator which
constituted waiver of the special condition of the agreement for
appointment of an arbitral tribunal of three members; further
conduct of the appellant amounted to acquiescence to the
arbitral proceedings conducted by the sole arbitrator. The High
Court rejected the objection of the appellant that respondent
No. 2 i.e. the special purpose vehicle undergoing corporate
insolvency resolution process had no locus standi to initiate the
arbitration proceedings. The High Court also held that it has
the jurisdiction to extend the time of the learned arbitrator
under Section 29A of the 1996 Act and exercising such
jurisdiction, the High Court extended the mandate of the
learned arbitrator by four months. Consequently, Request Case
No. 36 of 2021 was allowed while Request Case No. 78 of 2022
was rejected.
8
6. This Court vide the order dated 12.02.2024
permitted continuance of the arbitral proceedings before the
learned arbitrator but directed that the award should not be
declared by the learned arbitrator.
7. It appears that during the pendency of SLP(C) No.
27403 of 2023 out of which Civil Appeal No. 9313 of 2026
arises, an application under Section 29(5) of the 1996 Act
was filed by the respondents before the Court of the
Principal District Judge-cum-Commercial Court, Patna seeking
extension of mandate of the arbitral tribunal by 6(six) months,
which was registered as Arbitration Case No. 54 of 2024.
8. On 21.01.2026, an order was passed by this Court
directing the District Court to consider the said application on
its own merit and in accordance with law within a period of two
months from 24.01.2026 which was stated to be the hearing
date of Arbitration Case No. 54 of 2024. This Court clarified that
decision on the extension application would be irrespective of
the fact that the special leave petition is pending before this
Court.
9
9. Thereafter, the Principal District Judge-cum-
Commercial Court, Patna passed judgment and order dated
23.03.2026 allowing the application filed under Section 29A(5)
of the 1996 Act by extending the mandate of the sole arbitrator
for a further period of 6(six) months to be reckoned from the
date of the judgment to enable completion of the arbitral
proceedings.
10. Mr. Sundaram, learned senior counsel for the
appellant has referred to clauses 17.2.5 and 17.2.6 of the
distribution franchise agreement and submits that it is clear
therefrom that under the provisions of the aforesaid agreement,
any dispute can only be gone into by an arbitral tribunal
comprising three arbitrators. Therefore, the High Court was not
justified in rejecting the contention of the appellant for
appointment of a three-member arbitral tribunal.
10.1. The High Court also committed an error in not taking
into consideration the fact that the first respondent is only a
proforma party. Contesting parties are the appellant and the
second respondent. Therefore, its consent is really not material.
Now, the corporate debtor i.e. respondent No. 2 has ceased to
10
exist. Therefore, there cannot be any arbitration with regard to
the claim of any non-existent party.
10.2. The High Court ought to have considered that no
claim was ever raised by the first respondent against the
appellant. First respondent is only a proforma party. Therefore,
notwithstanding the alleged consent, the dispute could not have
been referred to an arbitral tribunal having a solitary member
during the subsistence of the distribution franchisee
agreement. By the impugned judgment and order, the High
Court has caused serious prejudice to the appellant in as much
as the fora for adjudication of the dispute as provided under the
distribution franchise agreement has been taken away; instead
of a three-member arbitral tribunal, the High Court has foisted
a solitary arbitrator on the appellant.
10.3. In any view of the matter, the impugned judgment
and order of the High Court cannot be sustained and the same
should be set aside and quashed. Parties should be relegated to
a new arbitral tribunal comprising of three arbitrators, he
submits.
11
11. Mr. Raju Ramachandran, learned senior counsel
appearing for the appellant in the connected appeal has
supported the submissions of Mr. Sundaram and seeks
relegation of the parties to a new arbitral tribunal comprising of
three arbitrators after setting aside the impugned judgment and
order of the High Court.
12. Per contra, Mr. Atmaram Nadkarni, learned senior
counsel appearing for respondent No. 2 has supported the
impugned judgment of the High Court and submits that no case
for interference is made out. Sufficient progress has been made
by the learned arbitrator within the extended period. If the same
is aborted now, serious prejudice will be caused to the
respondents. He, therefore, seeks dismissal of the civil appeals.
13. Submissions made by learned counsel for the parties
have received the due consideration of the Court.
14. At the outset, let us consider the relevant provisions
of the distribution franchisee agreement dated 31.12.2013.
From a perusal of the recital of the agreement it is seen that the
agreement is primarily between the appellant and the second
12
respondent with the first respondent entering into the
agreement in its capacity as the confirming party. Clause 17 of
the agreement deals with the governing law and dispute
resolution. Clause 17.2 provides for amicable settlement. As per
clauses 17.2.1 to 17.2.4, either party is entitled to raise any
dispute or difference of any nature arising out of or in
connection with the distribution franchisee agreement
including the existence of its validity by giving a written notice
to the other party. The parties are mandated to constitute a
permanent dispute resolution body having equal representation
from each of the parties. The disputes or differences shall be
referred to this body for resolution which shall communicate its
decision within 30 days. In case of non-settlement of such
disputes or differences by the permanent dispute resolution
body, such disputes or differences shall be referred for decision
to a high-powered body constituted by the Chairman/Managing
Director of the distribution licensee and the head of the
distribution franchisee which shall communicate its decision
preferably within a period of 15 days.
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14.1. Clause 17.2.5 of the agreement is relevant and is
extracted hereunder:
17.2.5. Any dispute arising out of, in connection with or
with respect to this agreement, the subject matter hereof, the
performance or non performance of any obligation hereunder,
which cannot be resolved by negotiation between the parties
and the dispute resolution procedure as stated in the
foregoing articles, shall be exclusively submitted to
arbitration at the request of either party upon written notice
to that effect to the other party and the proceedings shall be
conducted subject to the provisions of the Arbitration and
Conciliation Act, 1996 (the Arbitration Act) by a panel
consisting of three arbitrators.
14.2. From a perusal of the above, it is seen that if the
disputes or differences are still not resolved in the manner
provided for in clauses 17.2.1 to 17.2.4, the same shall be
exclusively submitted to arbitration at the request of either
party upon written notice to that effect to the other party. The
arbitration proceedings shall be conducted as per provisions of
the 1996 Act by a panel consisting of three arbitrators.
15. We have noticed from the narration of facts that
initially Justice Shashank Kumar Singh was appointed as the
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sole arbitrator, who commenced the arbitration proceedings on
12.04.2018. However, the learned arbitrator could not continue
beyond the stage of recording of evidence. Leaving aside for a
moment the intervening developments before the NCLT under
the IBC pertaining to the corporate insolvency resolution
process of respondent No.2, we find that with the consent of the
parties, the High Court appointed Mr. Justice Dipak Mishra, a
former Chief Justice of India, as the new arbitrator. The arbitral
proceedings under the new arbitrator commenced from the
stage where the earlier arbitrator had left the proceedings.
Within the statutory period of one year, the arbitration
proceedings could not be concluded. On consent of the parties,
the time period for arbitration was extended by six months.
However, the arbitration proceedings could not be completed
even within the extended period. Before expiry of the extended
period, respondents filed Request Case No. 36 of 2021 before
the High Court seeking extension of four months for completion
of the arbitral proceedings. Appellant not only resisted the
request but also instituted Request Case No. 78 of 2022 for
appointment of an arbitral tribunal as contemplated under the
15
distribution franchisee agreement. Vide the impugned
judgment and order dated 15.09.2023, the High Court held that
it has the jurisdiction to extend the time of the arbitrator under
Section 29A of the 1996 Act. Exercising such jurisdiction, the
High Court extended the mandate of the learned arbitrator by
four months.
16. In these circumstances, as noticed above, Section
29A of the 1996 Act assumes significance. Section 29A, as it
stands now, is extracted hereunder:
29-A. Time limit for arbitral award.— (1) The award in
matters other than international commercial arbitration
shall be made by the arbitral tribunal within a period of
twelve months from the date of completion of pleadings
under sub-section (4) of Section 23.
Provided that the award in the matter of international
commercial arbitration may be made as expeditiously as
possible and endeavour may be made to dispose of the
matter within a period of twelve months from the date of
completion of pleadings under sub-section (4) of Section
23.
(2) If the award is made within a period of six months from
the date the arbitral tribunal enters upon the reference,
16
the arbitral tribunal shall be entitled to receive such
amount of additional fees as the parties may agree.
(3) The parties may, by consent, extend the period specified
in sub-section (1) for making award for a further period not
exceeding six months.
(4) If the award is not made within the period specified in
sub-section (1) or the extended period specified under sub-
section (3), the mandate of the arbitrator(s) shall terminate
unless the court has, either prior to or after the expiry of
the period so specified, extended the period:
Provided that while extending the period under this
sub-section, if the court finds that the proceedings have
been delayed for the reasons attributable to the arbitral
tribunal, then, it may order reduction of fees of
arbitrator(s) by not exceeding five per cent for each month
of such delay:
Provided further that where an application under
sub-section (5) is pending, the mandate of the arbitrator
shall continue till the disposal of the said application:
Provided also that the arbitrator shall be given an
opportunity of being heard before the fees is reduced.
(5) The extension of period referred to in sub-section (4)
may be on the application of any of the parties and may be
granted only for sufficient cause and on such terms and
conditions as may be imposed by the court.
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(6) While extending the period referred to in sub-section
(4), it shall be open to the court to substitute one or all of
the arbitrators and if one or all of the arbitrators are
substituted, the arbitral proceedings shall continue from
the stage already reached and on the basis of the evidence
and material already on record, and the arbitrator(s)
appointed under this section shall be deemed to have
received the said evidence and material.
(7) In the event of arbitrator(s) being appointed under this
section, the arbitral tribunal thus reconstituted shall be
deemed to be in continuation of the previously appointed
arbitral tribunal.
(8) It shall be open to the court to impose actual or
exemplary costs upon any of the parties under this section.
(9) An application filed under sub-section (5) shall be
disposed of by the court as expeditiously as possible and
endeavour shall be made to dispose of the matter within a
period of sixty days from the date of service of notice on
the opposite party.
17. Before we analyse the provisions of Section 29A, it
would be apposite to see as to how this Court has examined the
aforesaid provisions. There are two recent judgments of this
Court dealing with Section 29A though in somewhat different
contexts.
18
18. Rohan Builders (India) (P) Ltd. Vs . Berger Paints
1
(India) Ltd. is a two-Judge Bench decision of this Court where
the question for consideration was whether an application for
extension of time under Section 29A of the 1996 Act can be filed
after the expiry of the period for making of the arbitral award?
It was in that context that this Court analyzed the contours of
Section 29A. Adverting to Section 29A(1) and Section 29A(3),
this Court observed that two time limits for making of an
arbitral award are provided for under the aforesaid provisions.
As per the first provision i.e. Section 29A(1), the award is
required to be made by the arbitral tribunal within a period of
12 months. The second provision i.e. Section 29A(3), stipulates
that the parties by consent can extend the time for making the
award beyond 12 months, upto an additional period of 06 months.
Under Section 29A(4), where the award is not made within the
specified period of 12 months or 18 months, as the case may be,
the mandate of the arbitral tribunal will terminate. However, this
provision does not apply if the court has extended the period
either before or after the expiry of the initial period or the
1
(2025) 10 SCC 802
19
extended term. This Court held that Section 29A(4) empowers
the court to extend the period for making of the arbitral award
beyond the period of 12 months or 18 months, as the case may
be. To be more specific, this Court has held that an application
for extension of time for passing an arbitral award under
Section 29A(4) read with Section 29A(5) is maintainable even
after the expiry of the 12 months or the extended 6 months
period, as the case may be.
19. Section 29A was again examined by a two-Judge
2
Bench of this Court in C. Velusamy Vs. K. Indhera . This Court
referred to the amendment which inserted Section 29A in the
1996 Act with effect from 23.10.2015 to effectively deal with
delays in arbitral proceedings. In this connection, the Bench
examined the statement of objects and reasons necessitating
such amendment. The objective was to make arbitration more
user friendly, cost effective and expeditious. Accordingly, time
limit of 12 months was fixed with liberty to the parties to extend
the said period by a further period of six months; any further
extension beyond such period being permissible only by order
2
(2026) 5 SCC 340
20
of the court on sufficient cause being shown. This Court also
noted that upon further amendment of Section 29A with effect
from 30.08.2019, it has been made explicitly clear that where
an application seeking extension of time under sub-section (5)
of Section 29A is pending, the mandate of the arbitrator shall
continue until such application is finally decided. This Court
held thus:
18. It is in the above-referred background that the
Arbitration Act was amended with retrospective effect
from 23-10-2015 to effectively deal with delays in arbitral
proceedings by inserting Section 29-A. The Statement of
Objects and Reasons records that practical difficulties
had arisen, necessitating amendments to make
arbitration more user-friendly, cost-effective, and
expeditious. Accordingly, provision was made requiring
the Arbitral Tribunal to render the award within twelve
months from the date it enters upon the reference, with
liberty to the parties to extend the period by a further six
months, any extension thereafter being permissible only
by order of the Court on sufficient cause being shown.
Thereafter, the 1996 Act was further amended w.e.f. 30-
8-2019 to provide, inter alia, that, where an application
seeking extension of time under sub-section (5) of Section
29-A is pending, the mandate of the arbitrator shall
continue until such application is finally decided.
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19.1. After threadbare analysis of each of the sub-sections
of Section 29A, this Court recorded its conclusions qua
assessment of Section 29A in the following manner:
21. Section 29-A, as explained in recent decisions of this
Court in Rohan Builders , Lancor Holdings [ Lancor
Holdings Ltd. Vs . Prem Kumar Menon , (2026) 4 SCC 392]
and Jagdeep Chowgule Vs . Sheela Chowgule [ Jagdeep
Chowgule Vs . Sheela Chowgule , (2026) 5 SCC 667 : 2026
SCC OnLine SC 124 : 2026 INSC 92] can be formulated
as under:
21.1 . Sub-section (1) of Section 29-A mandates that the
award shall be made within 12 months of the completion
of pleadings before the Arbitral Tribunal. While sub-
section (2) incentivises expeditious making of the award,
proviso to sub-section (4) and sub-section (8) authorises
the Court to impose penalty for delay in making the
award.
21.2. Sub-section (3) enables parties, by consent, to
extend the period of 12 months for making the award by
a further period not exceeding 6 months.
21.3. If the award is not made within the stipulated
period of 12 months or the extended period of 6 months,
the mandate of the arbitrator(s) shall terminate.
21.4. This termination is subject to the power of the
Court to extend the period.
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21.6. There is no statutory prescribed time-limit for the
Court to exercise the power under Section 29-A(4) for
extending the period, except for its own discretion. The
Court can exercise the power before or after the expiry of
the period under sub-sections 29-A(1) or (3). Further,
there is no prescription of an outer limit for extending the
time for the conclusion of arbitral proceedings. Given this
power, the Court will exercise it with circumspection, balancing the
remedy with the rights of other stakeholders.
21.7. The power of the Court to extend the time under
sub-section (4) may be exercised on an application by any
of the parties. Once such an application for extension of
time is pending, the mandate of the arbitrator shall
continue till the disposal of such application under sub-
section (9). The Court shall endeavour to dispose of such
an application within 60 days.
21.8. Delay in the delivery of an arbitral award, by itself,
is not sufficient to set aside that award. It is only when
the effect of the undue delay in the delivery of an arbitral
award is explicit and adversely reflects on the findings
therein, such delay and, more so, if it remains
unexplained, can be construed to result in the award
being in conflict with the public policy of India.
21.9. Under Section 29-A(6), while exercising the power
of extension, it shall be open to the Court to substitute
one or all the arbitrators. This is a discretionary power
that the Court would exercise in the facts and
circumstances of the case. Upon substitution, the
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reconstituted Tribunal shall be deemed to be in
continuation of the previously appointed Tribunal as per
Section 29-A(7) and shall continue from the stage already
reached and on the basis of evidence already on record.
The newly appointed arbitrators shall be deemed to have
received the evidence and materials.
20. Before proceeding further, it would be apposite to
examine the impugned judgment and order of the High Court.
In the factual backdrop narrated supra, the High Court posed
three questions for its consideration. We will proceed our
analysis question wise.
21. The first question framed by the High Court was
whether there was a proper consent by the appellant so as to
constitute waiver of the specific condition of the agreement for
appointment of an arbitral tribunal of three members? If the
answer to this question was in the negative, the High Court
posed the further question as to whether it could not be
presumed that there was acquiescence on the part of the
appellant who had participated in the arbitration proceedings
for about 18 months and thereafter has raised the objection as
to the coram of the arbitral tribunal?
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21.1. The High Court referred to clause 17.2.5 which
provides for arbitration by an arbitral tribunal consisting of
three arbitrators and also referred to its earlier proceedings in
Request Case No. 77 of 2018 in which appellant had appeared
through counsel and his consent was specifically recorded for
appointing a retired Judge of the High Court as the sole
arbitrator. High Court also referred to the subsequent Request
Case No. 14 of 2020 which was also disposed of in the presence
of the counsel for the appellant whereby and whereunder a new
arbitrator was appointed to continue with the arbitration
proceedings from the stage of recording of evidence. In the
proceedings of Request Case No. 14 of 2020, it was specifically
recorded that appreciable efforts were put in by the learned
counsel appearing for both the parties whereafter the matter
was amicably resolved and it was agreed that the dispute would
be adjudicated through the new arbitrator. High Court noted
that the arbitrator so appointed had completed 18 months
including the extended period of six months consented to by
both the parties. Now the respondents have requested for
continuance of the arbitral proceedings under the arbitrator so
25
appointed for a further period of four months to which objection
regarding consent and constitution of arbitral tribunal was
raised by the appellant.
21.2. In the aforesaid context, the High Court referred to
the procedural order No. 1 passed by the learned arbitrator
which clearly stated that counsel and representatives of all the
parties stated that they had no objection on any ground
whatsoever to the composition of the arbitral tribunal or to the
learned arbitrator acting as the sole arbitrator to arbitrate the
dispute between the parties.
21.3. The High Court also noted that appellant had argued
before the learned arbitrator that there was neither a consent
given by the appellant nor any acquiescence could be inferred
before the sole arbitrator; there was no question of waiver of the
specific terms of the agreement which required a three-member
arbitral tribunal to be appointed. In so far consent is concerned,
the learned arbitrator held that not once but twice the appellant
had appeared through counsel and had consented to the
appointment and continuance of the sole arbitrator which
would be evident from the orders of the High Court and of the
26
arbitrator. The High Court further noted that the arbitrator had
referred to Section 4 of the 1996 Act to find that the specific
condition in the agreement requiring appointment of a three-
member arbitral tribunal was waived by the appellant. That
apart, the objection as to constitution of the arbitral tribunal
was not raised within the time prescribed in Section 16(2) of the
1996 Act which again constitutes a deemed waiver but High
Court noted that the arbitrator had rejected the application of
the appellant filed under Section 13 read with Section 16(1) of
the 1996 Act in this regard. In the aforesaid backdrop, the High
Court held that the appellant could not assail the consent given
by it earlier, the consent is evident and acquiescence is clearly
discernible. The High Court held thus:
14. On the facts, as noticed by the Arbitral Tribunal, I am
convinced that there is no sustainable ground raised by
the respondent to assail the consent given before the
High Court, which is further buttressed by the
acquiescence before the Tribunal, as recorded by the
Tribunal. The consent is evident and acquiescence is
clearly indicated which operates as a waiver under
Section 4 of the Act of 1996.
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22. There is one more aspect which we need to point out.
The first order of the High Court dated 04.04.2018 appointing
Justice Shashank Kumar Singh as the sole arbitrator as well as
the second order of the High Court dated 10.03.2021 appointing
Justice Dipak Misra as the new arbitrator were not assailed by
the appellant. Consequently, those orders have attained finality
and are binding on the parties.
23. On the question of waiver and acquiescence, we may
refer to Section 4 of the 1996 Act which reads as under:
4. Waiver of right to object.
—A party who knows that—
(a) any provision of this Part from which the parties
may derogate, or
(b) any requirement under the arbitration agreement,
has not been complied with and yet proceeds with the
arbitration without stating his objection to such non-
compliance without undue delay or, if a time limit is
provided for stating that objection, within that period of
time, shall be deemed to have waived his right to so
object.
23.1. As per this provision, a party who knows that any
requirement under the arbitration agreement has not been
complied with and yet proceeds with the arbitration without
stating his objection to such compliance without undue delay
28
or if a time limit is provided for stating that objection, within
that period of time, he shall be deemed to have waived his right
to so object.
24. We may also refer to Section 16 of the 1996 Act which
deals with competence of an arbitral tribunal to rule on its
jurisdiction. Sub-section (2) provides that a plea that the
arbitral tribunal does not have jurisdiction shall be raised not
later than the submission of the statement of defence; however,
a party shall not be precluded from raising such a plea merely
because he has appointed or participated in the appointment of
an arbitrator.
25. A careful examination of the aforesaid provisions
coupled with the analysis of the High Court would make it
abundantly clear that by its conduct, the appellant had clearly
waived its right to object to the composition of the arbitral
tribunal within the time limit provided by the statute. As
the appellant had continued to participate in the arbitral
proceedings before the sole arbitrator, including consenting
for the extended period of arbitration, it amounts to
acquiescence. That apart, appellant had filed counter claim and
29
supplementary counter claim before the sole arbitrator. Such
conduct amounts to clear acquiescence on the part of the
appellant to the arbitral proceedings conducted by the sole
arbitrator. This being the position, it was not open to the
appellant to have questioned the appointment of the sole
arbitrator as opposed to a three-member arbitral tribunal
provided for in the agreement at the very belated stage of the
respondents seeking further extension of the arbitral
proceedings under Section 29A(4) of the 1996 Act.
26. In Union of India Vs. Pam Development Private
3
Limited , the arbitral proceedings were conducted by a sole
arbitrator appointed by the High Court of Calcutta under Section
11(6) of the 1996 Act. Appellant duly participated in the
arbitration proceedings. After the award was passed accepting
the claims of the respondent, appellant challenged the same first
under Section 34 of the 1996 Act and thereafter under Section
37. On being unsuccessful, the matter came up before this
Court. On behalf of the appellant it was contended that the High
Court had committed an error of jurisdiction by appointing a
3
(2014) 11 SCC 366
30
sole arbitrator when the contractual conditions provided for a
three-member arbitration panel. It was in that context, this
Court observed that the order of the High Cout appointing the
sole arbitrator was not challenged by the appellant. Therefore,
the same had become final and binding. This Court held that
since the appellant had participated in the arbitral proceedings,
it would be deemed to have waived the requirement under the
agreement in view of the provisions contained in Section 4 read
with Section 16 of the 1996 Act. This Court adverted to Section
16(2) and observed that the said provision mandates that a plea
that the arbitral tribunal does not have jurisdiction shall be
raised not later than submission of the statement of defence.
This Court also relied upon Section 4 which provides that a party
who knows that any requirement under the arbitration
agreement has not been complied with and yet proceeds with the
arbitration without stating his objection to such non-compliance
without undue delay shall be deemed to have waived his right to
do so. This Court held thus:
16. As noticed above, the appellant not only filed the
statement of defence but also raised a counterclaim
against the respondent. Since the appellant has not
31
raised the objection with regard to the
competence/jurisdiction of the Arbitral Tribunal
before the learned arbitrator, the same is deemed to
have been waived in view of the provisions contained
in Section 4 read with Section 16 of the Arbitration
Act, 1996.
17. Section 16 of the Arbitration Act, 1996 provides
that the Arbitral Tribunal may rule on its own
jurisdiction. Section 16 clearly recognises the
principle of kompetenz-kompetenz. Section 16(2)
mandates that a plea that the Arbitral Tribunal does
not have jurisdiction shall be raised not later than the
submission of the statement of defence. Section 4
provides that a party who knows that any requirement
under the arbitration agreement has not been
complied with and yet proceeds with the arbitration
without stating his objection to such non-compliance
without undue delay shall be deemed to have waived
his right to so object.
27. We, therefore, do not find any error or infirmity in the
view taken by the High Court in so far the first issue is
concerned and, accordingly, affirm the same.
28. The second issue considered by the High Court was
whether the special purpose vehicle i.e. respondent No. 2 is
competent to request for arbitration, especially when the letter
32
of intent was issued to the first respondent and the dispute
includes claims by the appellant against the first respondent.
In that context, the High Court also considered whether
provisions of the IBC initiated against the second
respondent would disable the second respondent from
continuing with the request for extension of time of the sole
arbitrator.
28.1. Rejecting the contention that the second respondent
has no locus standi to initiate the arbitration proceeding, the
High Court analyzed the character of the two respondents. Both
are separate legal entities and are parties to the tripartite
agreement alongwith the appellant. Both the respondents were
parties before the High Court. As to initiation and pendency of
proceedings under the IBC against the second respondent, the
High Court observed that Section 14 of the IBC prohibits
initiation and continuation of any suit or proceeding including
execution against the corporate debtor after the insolvency
commencement date. The High Court reasoned that this does
not necessarily prohibit the corporate debtor from proceeding
with the recovery due to it, which in essence, is the arbitration
33
proceeding initiated by the second respondent. The High Court
noted that the respondents had specifically pleaded in their
reply to the objection filed by the appellant before the arbitrator
that the resolution professional appointed by the NCLT had
authorized the signatories to appear before the arbitral tribunal
which was also approved by the committee of creditors in
compliance with Section 28(1)(h) of the IBC. In such
circumstances, the High Court held that there was no infirmity
in the proceedings initiated by the second respondent on the
ground that there was moratorium under the IBC.
28.2. Insofar initiation of arbitration is concerned, though
the letter of intent was issued to the first respondent, the
responsibility for implementation of the terms of the agreement
squarely falls within the ambit of the second respondent which
is a special purpose vehicle formed in terms of the agreement.
The second respondent is also a subsidiary of the first
respondent and incorporated exclusively for the purpose of
implementation of the agreement.
28.3. The High Court proceeded to hold that such a dispute
has to be decided by the arbitrator and not by the courts. The
34
obligation of the first respondent to ensure due implementation
as also to satisfy the obligation of and under the award is one
of the issues framed by the learned arbitrator. In such
circumstances, the argument regarding the second respondent
having no locus standi to initiate the arbitration has been
rejected by the High Court.
29. We agree with the view taken by the High Court that
Section 14 of the IBC does not necessarily prohibit the corporate
debtor from initiating proceedings for recovery of its dues,
which, as in the present case, would include an arbitral
proceeding. The moratorium provided for in Section 14 of the
IBC is intended to prohibit debt recovery action against the
corporate debtor so as not to adversely impact the insolvency
process; however, it would not impair any claim by the
corporate debtor, such as, an arbitral claim, which if successful,
would only bolster the financial health thereby enhancing the
value of the corporate debtor.
30. That apart, the resolution professional has
authorized the signatories of the second respondent to pursue
the arbitral proceeding which has been approved by the
35
committee of creditors in compliance with Section 28(1)(h) of the
IBC, which is the best authority to assess the financial position
of the corporate debtor.
31. We, therefore, concur with the view taken by the High
Court qua the second issue and hold that the High Court has
rightly decided this issue.
32. The third question framed by the High Court for its
consideration was whether the Chief Justice of the High Court
or his designate empowered under Section 11 of the 1996 Act
to consider a request for arbitration, can grant extension of time
as required under Section 29A of the 1996 Act or is it the
principal civil court of original jurisdiction in the concerned
district or the High Court having original civil jurisdiction alone
which will be empowered to exercise the power under Section
29A of the 1996 Act?
32.1. The High Court referred to Section 2 of the 1996 Act
and the decisions of different High Courts and came to the
conclusion that the jurisdiction to extend the period of time has
to be exercised by the High Court under Section 29A of the
1996 Act.
36
33. Let us examine the relevant provisions of the 1996
Act and a few judgments of this Court to analyse whether the
view taken by the High Court is legally correct or not.
34. There are two parts to Section 2(1)(e). We are
concerned with the first part i.e. Section 2(1)(e)(i) which defines
‘court’ in the case of an arbitration other than international
commercial arbitration to mean the principal civil court of
original jurisdiction in a district and includes the High Court in
the exercise of its ordinary original civil jurisdiction, having the
jurisdiction to decide the questions forming the subject matter
of the arbitration if the same had been the subject matter of a
suit; but it does not include any civil court of a grade inferior to
such principal civil court or any court of small causes. This
definition of ‘court’ permeates through Part I of the 1996 Act
which deals with domestic arbitration. Reference to the
Supreme Court or to the High Court in Sections 11(3A), (4) & (6)
do not in any manner impact the definition of ‘court’ in terms of
Section 2(1)(e)(i). This is because of the specific role assigned to
the Supreme Court or to the High Court in sub-sections (3A),
(4) & (6) of Section 11 i.e. where the parties fail to appoint the
37
arbitrator or the two arbitrators (one each appointed by one
party) fail to agree on a third arbitrator, then the aforesaid
provisions come into play. In other words, these provisions deal
with appointment of an arbitral tribunal; nothing more should
be read into it. Therefore, the Supreme Court or the High Court
referred to in Section 11 cannot be deemed to be the ‘court’ as
defined in Section 2(1)(e).
35. Section 42 of the 1996 is included in Part I thereof.
It deals with jurisdiction. Section 42 starts with a non obstante
clause. As per Section 42, nothing contained in Part I of the
1996 Act or in any other law for the time being in force, where
with respect to an arbitration agreement any application under
Part I has been made in a court, that court alone shall have
jurisdiction over the arbitral proceedings and all subsequent
applications arising out of that agreement and the arbitral
proceedings shall be made in that court and in no other court.
36. Question is whether the ‘court’ referred to in Section
42 would be the ‘court’ as defined in Section 2(1)(e) of the 1996
Act?
38
4
37. In State of West Bengal Vs. Associated Contractors ,
the specific question before a three-Judge Bench of the
Supreme Court was, which court will have the jurisdiction to
entertain and decide an application under Section 34 of the
1996 Act? In that context, the Bench analysed Section 2(1)(e)
and Section 42 of the 1996 Act. It concurred with an earlier
decision of this Court that the provisions of the 1996 Act leave
no room for any doubt that it is the superior most court
exercising original jurisdiction which has been chosen to
adjudicate disputes arising out of arbitration agreements.
Proceeding further, this Court observed that it is obvious that
Section 11 applications are not to be moved before the ‘court’ as
defined but before the Chief Justice either of the High Court or
of the Supreme Court, as the case may be, or their delegates.
This is despite the fact that the Chief Justice or his delegate
have now to decide judicially and not administratively. Referring
to Section 42, it has been held that it would not apply to
applications made before the Chief Justice or his delegate for
the simple reason that the Chief Justice or his delegate is not
4
(2015) 1 SCC 32
39
‘court’ as defined by Section 2(1)(e). Interestingly, this Court
held that if an application were to be preferred to a court which
is not a principal civil court of original jurisdiction in a district
or a High Court exercising original jurisdiction to decide
questions forming the subject matter of an arbitration if the
same had been the subject matter of a suit, then obviously such
application would be outside the four corners of Section 42. If
such an application were to be made to a court which is not the
principal civil court or to a High Court which has no original
jurisdiction or to a court which has no subject matter
jurisdiction, it would be outside Section 42; it would not debar
subsequent applications from being filed in a court other than
such a court.
37.1. After a threadbare analysis, the three-Judge Bench
recorded its conclusions on Sections 2(1)(e) and Section 42 as
under:
25. Our conclusions therefore on Section 2(1)( e ) and
Section 42 of the Arbitration Act, 1996 are as follows:
( ) Section 2(1)( ) contains an exhaustive
a e
definition marking out only the Principal Civil Court of
Original Jurisdiction in a district or a High Court
having original civil jurisdiction in the State, and no
40
other court as ‘court’ for the purpose of Part I of the
Arbitration Act, 1996.
( b ) The expression ‘with respect to an arbitration
agreement’ makes it clear that Section 42 will apply to
all applications made whether before or during arbitral
proceedings or after an award is pronounced under
Part I of the 1996 Act.
( c ) However, Section 42 only applies to
applications made under Part I if they are made to a
court as defined. Since applications made under
Section 8 are made to judicial authorities and since
applications under Section 11 are made to the Chief
Justice or his designate, the judicial authority and the
Chief Justice or his designate not being court as
defined, such applications would be outside Section
42.
( d ) Section 9 applications being applications
made to a court and Section 34 applications to set
aside arbitral awards are applications which are
within Section 42.
( e ) In no circumstances can the Supreme Court
be ‘court’ for the purposes of Section 2(1)( e ), and
whether the Supreme Court does or does not retain
seisin after appointing an arbitrator, applications will
follow the first application made before either a High
Court having original jurisdiction in the State or a
Principal Civil Court having original jurisdiction in the
district, as the case may be.
41
( f ) Section 42 will apply to applications made
after the arbitral proceedings have come to an end
provided they are made under Part I.
( g ) If a first application is made to a court which
is neither a Principal Court of Original Jurisdiction in
a district or a High Court exercising original
jurisdiction in a State, such application not being to a
court as defined would be outside Section 42. Also, an
application made to a court without subject-matter
jurisdiction would be outside Section 42.
38. A two-Judge Bench of this Court in SLP(C) No. 10544
of 2024 ( Chief Engineer (NH) PWD (Roads) Vs. M/s. BSC & C and
C JV ), decided on 13.05.2024, held that the power under sub-
section (4) of Section 29A of the 1996 Act vests in the court as
defined in Section 2(1)(e). It is the principal civil court of original
jurisdiction in a district which includes a High Court provided
the High Court has ordinary original civil jurisdiction. In the
facts of that case it has been held that the High Court does not
have the ordinary original civil jurisdiction. The power under
sub-section (6) of Section 29A is only a consequential power
vesting in the court which is empowered to extend the time; the
said power has to be exercised by the court which is empowered
42
to extend the time as provided in sub-section (4) of Section 29A
of the 1996 Act.
5
39. In Jagdeep Chowgule Vs. Sheela Chowgule , the
question before this Court was if an arbitral tribunal appointed
by the High Court or by the parties concerned does not complete
the proceedings within the required time frame or within the
extended time limit, can an application to extend the time limit
under Section 29A of the 1996 Act be filed before the High Court
or before the civil court? While answering this question, this
Court interpreted the expression ‘court’ appearing in Section
2(1)(e) of the 1996 Act. The Bench clarified that Section 11 will
have no bearing on the working of the provisions in Chapter V
and VI where Section 29A is located and held that the power
under sub-section (4) of Section 29A vests in the ‘court’ as
defined in Section 2(1)(e) of the 1996 Act. It is the principal civil
court of original jurisdiction in a district or a High Court
provided the High Court has ordinary original civil jurisdiction.
This Court clarified that exercise of jurisdiction under Section
11 stands exhausted upon the constitution of the arbitral
5
(2026) 5 SCC 667
43
tribunal. There is no residual supervisory or controlling power
left with the High Court or the Supreme Court over the arbitral
proceedings after the appointment is made. Turning its
attention to Section 42, this Court clarified that solely because
a superior court appoints the arbitrator, it cannot be regarded
as a court of first instance for the purpose of Section 42. In the
facts of that case, this Court set aside the order of the High
Court granting extension of time to the arbitral tribunal under
Section 29A while granting liberty to the parties to move the
commercial court for further extension under Section 29A(5) for
exercising the court’s power under Section 29(A)(4).
40. This Court in C. Velusamy endorsed the view taken
in Jagdeep Chowgule and held as follows:
21.5. The ‘Court’ under Section 29-A shall be the civil
court of ordinary original jurisdiction in a district and
includes the High Court in exercise of its original civil
jurisdiction under Section 2(1)( e ), and shall not be the
High Court or the Supreme Court under Section 11(6) of
the Act. Section 42 of the Act relating to jurisdiction for
applications will also not apply to Section 11 of the Act.
[
40.1. Elaborating further, the Bench clarified that vesting
of the power of substitution under Section 29A(6) is on the
44
‘court’ and this court is the ‘court’ as defined in Section 2(1)(e).
The text as well as the context for identifying the court in
Section 29A(6) as well as in Section 29A(4) is the court in
Section 2(1)(e). The expression court appearing in other
provisions of the 1996 Act must be guided by the meaning given
in Section 2(1)(e).
41. In Rohan Builders , this Court observed that Section
29A intends to ensure the timely completion of arbitral
proceedings. While the section allows the courts the flexibility
to grant extensions when warranted, the Bench however
cautioned against giving a narrow and restrictive meaning to
Section 29A(4) of the 1996 Act. This Court observed that if we
do so, we would be indulging in judicial legislation by
incorporating a negative stipulation of a bar or limitation which
has a severe annulling effect. A restrictive interpretation would
lead to rigour, impediments and complexities. Narrow
interpretation presents an additional challenge by relegating a
faultless party to a fresh reference or appointment of an
arbitrator under the 1996 Act, thereby impeding arbitration
rather than facilitating it. This Court went on to observe that
45
the legislature vide the 2015 amendment envisioned arbitration
as a litigant centric process by expediting disposal of cases and
reducing the cost of litigation. A narrow interpretation will be
counter-productive. This Court further observed that while
interpreting a statute, like Section 29A of the 1996 Act, we must
strive to give meaningful life to an enactment or rule and avoid
cadaveric consequences that result in unworkable or
impracticable scenarios. In the facts of that case and in the
context of the question framed, this Court held that an
application for extension of the time period for passing an
arbitral award under Section 29A(4) read with Section 29A(5) of
the 1996 Act is maintainable even after the expiry of the 12
months or the extended 6 months period, as the case may be;
of course, adjudication of such extension application would be
guided by the principle of sufficient cause.
42. In the case of C. Velusamy , while endorsing the
decision in Rohan Builders , this Court held that Section 29A(4)
is intended to enable the court to extend the period of
arbitration before or after the expiry of the mandate. After
analysing the various provisions of Section 29A, this Court
46
observed that intention of Parliament is to secure the arbitral
proceedings and to ensure that these are taken to the logical
conclusion of passing of an award as is evident from the various
provisions contained in Section 29A itself. These provisions
make it evident that the intention of Parliament is to safeguard
the conduct and conclusion of arbitral proceedings. This Court
declared that there is no automatic extension of time. The court
will and must exercise its discretion only after evaluating the
facts and circumstances after close scrutiny. Thereafter, the
Court declared that the following are the empowerments which
flow from Section 29A:
28.1. Court has the power to extend the time before or
after the expiry of the statutorily stipulated period.
28.2. Court is empowered to take measures to reduce the
fee of the arbitrators if the Court is of the opinion that the
proceedings are delayed for the reasons attributable to the
arbitrators.
28.3. Court can grant an extension of the time period
upon a finding that there is sufficient cause for such
extension.
28.4. Court, while extending the mandate even when
there is sufficient cause, is empowered to impose such
terms and conditions as it thinks fit for efficiency and
integrity of the arbitral proceedings.
47
28.5. Courts are specifically empowered to substitute any
one or all the arbitrators, if in the opinion of the Court the
facts demand. This is a discretion that the Court would
exercise with caution and circumspection.
28.6. The Court is empowered not only to grant costs but
also to impose exemplary and actual costs upon any of
the parties, if the situation so demands.
42.1. Based on the above analysis, this Court opined that
provisions of the 1996 Act, particularly Section 29A, must not
be interpreted to infer a threshold bar for an application under
Section 29A(5) for extension of the mandate of the arbitrator
even when an award is passed though after expiry of the
mandate. Therefore, this Court answered the question framed
by holding that an application under Section 29A(5) for
extension of the mandate of the arbitrator would be
maintainable even after the expiry of the time under Sections
29A(1) and (3) and even after rendering of an award during that
time. If the mandate is extended, the arbitral tribunal will pick
up the thread from where it was left and seamlessly continue
the proceedings from the stage at which the mandate had
expired and conclude the arbitration within the time granted.
48
43. Based on our above discussion and analysis, we hold
that the view taken by the High Court in so far the third
question is concerned i.e. the Chief Justice of the High Court or
his designate empowered under Section 11 of the 1996 Act can
grant extension of time under Section 29A(4) is clearly
unsustainable in law. The conclusion reached by the High
Court that the jurisdiction to extend the period of time has to
be exercised by the High Court under Section 29A of the 1996
Act is not correct and is accordingly set aside.
44. However, in view of the legal position clarified by this
Court in Associated Contractors, M/s BSC & C and C JV,
Jagdeep Chowgule and in C. Velusamy as well as the order of
this Court passed in the present proceeding on 21.01.2026
directing the District Court to consider the extension
application following which the Principal District Judge-cum-
Commercial Court, Patna passed the judgment and order dated
23.03.2026 extending the mandate of the sole arbitrator for a
further period of 6(six) months, setting aside of the impugned
judgment and order of the High Court on this issue would have
49
no bearing and would not materially affect the outcome of this
proceeding.
45. In the circumstances, we uphold and affirm the
impugned judgment and order of the High Court dated
15.09.2023 in so far question Nos. 1 and 2 are concerned. As
regards question No. 3, we set aside the impugned decision of
the High Court.
46. Thus having regard to the facts and circumstances of
the case and considering all aspects of the matter, the embargo
imposed by this Court vide the order dated 12.02.2024 stands
lifted. The learned arbitrator shall now conclude the arbitral
proceedings by passing the award within a period of 6(six) weeks
from today.
47. Civil appeals are accordingly dismissed.
48. No costs.
…...…………………………J.
[UJJAL BHUYAN]
…..….………………………J.
[ATUL S. CHANDURKAR]
NEW DELHI;
OCTOBER 28, 2026.
50