AKP Dispute Resolution Digest April 20, 2026
- AK & Partners
- Apr 20
- 8 min read
We are delighted to share this month's AKP Dispute Resolution Monthly Digest. Please feel free to write to us with your feedback at info@akandpartners.in.
1. Arbitration and Dispute Resolution
1.1. Infrastructure
1.1.1. Arbitration Referral Not Automatic: Supreme Court Carves Out ‘Rarest of Rare’ Exception at Section 11 Stage
In a significant development in arbitration jurisprudence, the Supreme Court has clarified the scope of judicial intervention at the stage of appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. The Court held that referral to arbitration may be declined only in the rarest of rare cases where, even on a prima facie assessment, no arbitration agreement exists between the parties. Reaffirming the principle of minimal judicial interference, the Court emphasised that the role of courts at the referral stage is confined to examining the prima facie existence of an arbitration agreement. It reiterated the pro-arbitration approach encapsulated in the principle “when in doubt, do refer”, particularly in view of the statutory scheme which does not provide for an appellate remedy against orders passed under Section 11. However, the Court carved out a narrow exception, holding that where the absence of an arbitration agreement is evident on the face of the record, and such a conclusion can be reached without delving into disputed questions of fact, courts would be justified in declining reference to arbitration. In the present case, the Court found that a Letter of Intent issued during a tender process did not create a binding contractual relationship in the absence of a formal agreement or work order.
1.1.2. Project Taken Over for Use Defeats Liquidated Damages: Delhi High Court Upholds Arbitral Award Granting Balance Payment
In a notable reaffirmation of the limited scope of judicial interference in arbitral awards, the Delhi High Court upheld an arbitral award directing the release of the balance contractual payment to a contractor, holding that liquidated damages cannot be sustained where delay is attributable to both parties and the project has already been taken over for operational use. The Court emphasised that findings based on appreciation of evidence and contractual interpretation fall squarely within the domain of the arbitral tribunal and are not amenable to re-evaluation under Section 34 of the Arbitration and Conciliation Act, 1996, unless vitiated by patent illegality or perversity. The dispute arose from a contract executed on 10 August 2018 between Corporate Infotech Private Limited and the National Technical Research Organisation for the establishment of a secure intranet infrastructure across multiple locations in India. While the contractor completed supply and installation with a delay, disputes subsequently emerged regarding site readiness, completion formalities, and commencement of the warranty period. The employer withheld the final 10 per cent (ten per cent) payment, refused to release the Performance Bank Guarantee, and sought to levy liquidated damages, alleging delay in performance. The arbitral tribunal, upon a comprehensive evaluation of the material on record, concluded that delays were attributable to both parties, noting that the employer had failed to ensure timely site readiness and connectivity. It further found that the employer’s takeover of system access for operational use effectively signified completion of contractual milestones. Upholding these findings, the Court held that in the absence of proven loss and in light of shared delay, the rejection of liquidated damages and direction for release of the withheld balance amount were legally justified. Accordingly, the challenge to the award was dismissed.
1.1.3. Reasons Are the Soul of an Award: Delhi High Court Sets Aside Arbitral Decision for ‘Acute Reasoning Deficit’
Reiterating the fundamental requirement that arbitral awards must be reasoned and transparent, the Delhi High Court set aside an arbitral award on the ground that it lacked intelligible reasoning. The Court held that arbitral tribunals are statutorily bound to provide reasoned decisions under Section 31(3) of the Arbitration and Conciliation Act, 1996. The Court clarified that an arbitral award must disclose a clear and logical reasoning process and cannot merely reproduce pleadings or record conclusions without analytical evaluation of the issues in dispute. Upon examining the award, the Court found that the reasoning was largely a verbatim reproduction of the parties’ submissions, with conclusions appearing as unsupported assertions. Holding that the absence of intelligible reasoning constituted a fundamental legal defect, the Court concluded that the award suffered from a fatal infirmity and was therefore liable to be set aside under the statutory framework governing arbitral review.
2. PMLA
2.1. Banking and Finance
2.1.1. Bail Under PMLA Cannot Be Cancelled Without Misuse of Liberty: J&K and Ladakh High Court Reaffirms Strict Threshold for Cancellation
In a significant ruling on the principles governing cancellation of bail, the Jammu and Kashmir and Ladakh High Court has held that bail granted under the Prevention of Money Laundering Act, 2002 (PMLA) cannot be cancelled merely on the ground that the trial court allegedly failed to properly appreciate the rigour of statutory provisions. The Court clarified that once bail has been granted on merits, its cancellation requires the existence of supervening circumstances, such as misuse of liberty, violation of bail conditions, tampering with evidence, influencing witnesses, or procurement of bail by fraud or misrepresentation. The application seeking cancellation of bail was filed by the Directorate of Enforcement in connection with an alleged leakage of the Jammu and Kashmir Services Selection Board examination conducted for recruitment of Police Sub-Inspectors. The Enforcement Directorate had registered an ECIR in 2023 based on allegations of criminal conspiracy and cheating, wherein candidates were purportedly charged substantial sums of money to secure selection, resulting in proceeds of crime estimated at approximately INR 2.52 Crore (Indian Rupees Two Crore Fifty-Two Lakhs only). The accused persons were arrested under the provisions of the PMLA and were subsequently granted bail by the designated Special Court. While examining the legal framework governing cancellation of bail, the High Court reiterated that cancellation of bail stands on a different footing from refusal of bail at the initial stage and requires cogent and overwhelming circumstances demonstrating abuse of liberty or interference with the administration of justice. Finding no such supervening circumstances, the Court dismissed the application, reaffirming that bail once granted cannot be rescinded in a routine or mechanical manner.
3. Consumer Law
3.1. Healthcare
3.1.1. Consumer Commission holds medical reimbursement cannot be restricted without disclosure of policy terms
The Hon’ble District Consumer Disputes Redressal Commission-II, Chandigarh, has held that medical reimbursement cannot be arbitrarily restricted to government rates in the absence of proper disclosure of policy terms and informed consent of the claimant. The case arose from a complaint filed by a retired Deputy District Attorney who underwent treatment for prostate cancer at a private hospital and incurred expenses amounting to INR 4,01,951 (Indian Rupees Four Lakh One Thousand Nine Hundred Fifty-One only). Upon submission of the reimbursement claim, the authorities sanctioned only INR 1,11,750 (Indian Rupees One Lakh Eleven Thousand Seven Hundred Fifty only) on the basis of government-prescribed rates. The Opposite Parties contended that the Complainant had furnished an undertaking agreeing to accept reimbursement as per applicable rules and policies. Rejecting this contention, the Commission observed that no material was placed on record to establish that the relevant policy terms, package rates or limitations were ever disclosed or explained to the Complainant. It was further held that the mere execution of a standard affidavit, without demonstrating informed consent, cannot bind the claimant to restrictive conditions. The Commission also noted that the medical expenses incurred were genuine, duly supported by documents, and related to the treatment of a serious illness. In these circumstances, the act of restricting reimbursement without transparency was held to constitute a deficiency in service. Accordingly, the complaint was partly allowed, and the Opposite Parties were directed to pay the balance amount of INR 2,90,201 (Indian Rupees Two Lakh Ninety Thousand Two Hundred One only) along with interest at 9 per cent (nine per cent) per annum from the date of filing, and INR 20,000 (Indian Rupees Twenty Thousand only) towards compensation and litigation costs, to be complied with within 45 days.
4. Insurance Law
4.1. Motor Accident & Insurance Liability
4.1.1. Supreme Court directs action against Insurer for failure to report forged policy and
mandates the deposit of compensation
The Hon’ble Supreme Court of India has taken a stringent view against an insurance company for its failure to act upon knowledge of a forged/fabricated insurance policy and has emphasised the duty of insurers to exercise due diligence in matters involving public funds. The case arose from a motor accident claim wherein a dispute was raised regarding the validity of the insurance policy, which was alleged to be forged. Notably, the Court recorded that despite being aware of the alleged fraud, the insurance company had not lodged any complaint with the police authorities. The Court observed that such conduct reflects a lack of responsibility and a high degree of casualness and held that once an insurer becomes aware of a forged policy, it is incumbent upon it to inform the appropriate authorities, as such acts constitute a criminal offence. The Hon’ble Court further cautioned that failure to do so may give rise to an inference of possible connivance. In view of the seriousness of the issue, the Court directed registration of a fresh criminal case, including arraignment of concerned officials of the insurance company along with other responsible persons, and further directed the constitution of a Special Investigation Team (SIT) to carry out a thorough investigation. The Court also reiterated the settled principle that a mere allegation of fraud is insufficient and must be strictly proved in accordance with the law.
5. Negotiable Instruments Act
5.1. Banking & Finance
5.1.1. Supreme Court holds cheque dishonour complaint cannot be quashed at pre-trial stage once statutory ingredients are satisfied
In Renuka v. State of Maharashtra & Anr., the Supreme Court of India held that once the essential ingredients of an offence under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”), are prima facie made out, a complaint cannot be quashed at the pre-trial stage by examining disputed questions such as the existence of a legally enforceable debt. The dispute arose when the accused sought quashing of proceedings on the ground that the cheque in question was not issued towards a legally enforceable liability. The High Court accepted this defence and quashed the complaint. Setting aside this approach, the Supreme Court held that such an enquiry is impermissible at the threshold stage. The Court reiterated that once the complainant establishes the foundational requirements, i.e., issuance of cheque, dishonour, service of statutory notice and failure to pay, the statutory presumption under Section 139 of the NI Act comes into operation. Whether the cheque was issued towards a legally enforceable debt is a matter of evidence and can only be adjudicated during trial. The ruling reinforces that High Courts exercising jurisdiction under Section 482 CrPC must not conduct a roving enquiry into disputed facts at the pre-trial stage, and that premature quashing would undermine the statutory presumption framework under the NI Act.
6. Insolvency & Bankruptcy
6.1. Banking & Finance
6.1.1. Supreme Court holds NCLT cannot examine the merits of a pre-existing dispute while considering a CIRP application filed by operational creditors
In GLS Films Industries Pvt. Ltd. v. Chemical Suppliers India Pvt. Ltd., the Supreme Court reiterated that while considering an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), the National Company Law Tribunal (“NCLT”) is only required to examine whether a plausible pre-existing dispute exists, and cannot assess whether such dispute is likely to succeed on merits. The case arose when an operational creditor sought initiation of CIRP against a corporate debtor, which resisted the application on the ground of an existing dispute. The adjudicating authority proceeded to analyse the merits and sustainability of the dispute before admitting or rejecting the application. Clarifying the legal position, the Supreme Court held that such an approach is contrary to the scheme of the IBC. The role of the NCLT at the admission stage is limited to determining whether there is a genuine and plausible dispute that is not spurious or illusory, and not to adjudicate its correctness or ultimate success. The Court emphasized that allowing the adjudicating authority to undertake a detailed merits review would convert the summary insolvency admission process into a full-fledged adjudication of disputes, thereby defeating the objective of a time-bound insolvency framework. This ruling reinforces the Mobilox standard and provides clarity to operational creditors and corporate debtors by limiting the scope of judicial enquiry at the threshold stage of CIRP admission.
Disclaimer
The note is prepared for knowledge dissemination and does not constitute legal, financial or commercial advice. AK & Partners or its associates are not responsible for any action taken based on its contents.
For further queries or details, you may contact:
Mr. Anuroop Omkar
Partner, AK & Partners
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