Facts: Ankhim Holdings and Zaveri Construction entered into a partnership to develop an SRA project. Disputes arose, leading to arbitration. During the arbitration, Zaveri Construction was admitted into CIRP under the IBC, imposing a moratorium. The Arbitral Tribunal continued proceedings during the moratorium. The High Court appointed a substitute arbitrator but declared the arbitral proceedings conducted during the moratorium as a nullity.
Procedural Posture: This appeal arises from a judgment and order of the Bombay High Court in a Commercial Arbitration Petition, where the High Court substituted an arbitrator but deemed the proceedings during the moratorium period as null. The appellants challenged the High Court's decision to nullify the proceedings.
Issue: Did the High Court exceed its jurisdiction under Section 15(2) of the Arbitration and Conciliation Act, 1996, by declaring the arbitral proceedings conducted during the moratorium period under Section 14 of the IBC as a nullity, and what is the effect of Section 15 on the validity of prior arbitral rulings upon the substitution of an arbitrator?
Holding: Yes, the High Court exceeded its jurisdiction. The Supreme Court held that the High Court should have appointed a substitute arbitrator to continue from the existing stage of the proceedings and that the prior proceedings should not have been declared a nullity. The impugned order of the High Court was modified accordingly.
Reasoning: The Supreme Court reasoned that Section 15(2) of the Arbitration and Conciliation Act, 1996, should be read with Section 15(4), which states that prior orders of the arbitral tribunal are not invalid solely because of a change in the composition of the tribunal. The Court emphasized that the Arbitration Act is a self-contained code and that the High Court's action interfered with the arbitral process beyond what is permissible under the Act. The Court also invoked Article 142 of the Constitution of India to validate transactions with third parties (home buyers) considering the lapse of time and the creation of third-party rights. The Court relied on Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd. to reiterate that a substitute arbitrator must be appointed according to the rules applicable to the original arbitrator's appointment.