AKP Dispute Resolution Digest December 15, 2025

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 Law

1.1. Manufacturing and Construction

1.1.1. Supreme Court held, Courts Cannot Review or Recall Section 11 Appointment Orders

The Supreme Court has held that a High Court cannot exercise review powers to recall its own order appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), especially after the arbitral proceedings have substantially progressed. This ruling came in an appeal by Hindustan Construction Company Ltd. against Bihar Rajya Pul Nirman Nigam Limited. The dispute arose from a construction contract where the arbitration clause empowered the Managing Director to appoint the arbitrator. After the Managing Director failed to act, the High Court appointed a retired judge as the sole arbitrator. Three years later, after extensive hearings, the High Court reviewed and recalled its own appointment order, citing a subsequent judgment that invalidated unilateral appointment clauses. The central issue was whether a Section 11 court becomes functus officio after appointing an arbitrator and whether it can revisit its decision based on later legal developments. The Court ruled that the Arbitration Act is a self-contained code that does not confer review powers on the High Court. Once an appointment is made, the court's role ends, and any challenge to the arbitrator's jurisdiction must be raised before the tribunal itself under Section 16. Furthermore, the Court held that the respondent’s active participation in the arbitration for three years amounted to a waiver of their right to object under Section 4 of the Act.

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1.2. Banking and Finance

1.2.1. Supreme Court Rules Arbitrator's Discretion to Award High Interest Rates Is Not Against Public Policy

The Supreme Court has held that an arbitral award granting interest at a contractual rate of 24 per cent per annum does not violate the fundamental policy of Indian law, nor is it "immoral" or "unconscionable" merely because the rate is high. This ruling came in an appeal by Sri Lakshmi Hotel Pvt. Limited against Sriram City Union Finance Ltd. regarding a dispute over unpaid loans amounting to approximately Rs. 1.57 Crore (Indian Rupees One Crore Fifty-Seven Lakh only). The arbitrator had awarded the principal amount along with 24 per cent interest, which the appellant challenged as usurious and contrary to public policy under Section 34 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act"). The Court emphasized that while pre-award interest is subject to the agreement between parties, post-award interest is a statutory mandate to ensure timely payment. The Court rejected the argument that the interest rate violated the Usurious Loans Act, 1918, noting that commercial contracts with high risk justify higher interest rates. It further held that "public policy" is a restrictive ground for setting aside awards and cannot be invoked simply because a borrower finds the agreed interest rate burdensome after defaulting. The appeal was dismissed, affirming the award.

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2.   Negotiable Instruments

2.1. Manufacturing Industry

2.1.1. Supreme Court Clarifies Jurisdiction for Cheque Bounce Cases lies in the payee’s home branch

The Supreme Court has held that the territorial jurisdiction to try an offence under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) for account payee cheques lies exclusively with the court where the payee’s “home branch” is situated, declaring the contrary view in Yogesh Upadhyay v. Atlanta Ltd. as per incuriam . This ruling came in a transfer petition filed by Jai Balaji Industries Ltd. against M/s HEG Ltd. regarding a dishonoured cheque of Rs. 19,94,996/- (Indian Rupees Nineteen Lakh Ninety-four Thousand Nine Hundred Ninety-six only). The complaint, originally filed in Kolkata where evidence recording had commenced, was returned to be filed in Bhopal (the payee’s bank location) following the 2015 Amendment to the NI Act. The Court illustrated through a diagram that jurisdiction is anchored to the specific branch where the payee maintains the account, not merely where the cheque is handed over, to prevent forum shopping. However, despite holding that jurisdiction legally lay in Bhopal, the Court allowed the transfer back to Kolkata. Relying on the Dashrath Rupsingh Rathod exception, the Court ruled that since the trial had already reached the advanced stage of recording evidence in Kolkata, restarting in Bhopal would be procedurally improper.

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3.   Insolvency Law

3.1. Banking and Finance

3.1.1. Supreme Court Held Defective Affidavit Does Not Render Insolvency Petition Void; Specific Notice Mandatory for Rejection

The Supreme Court has held that a financial creditor's application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) cannot be rejected for procedural defects, such as a defective affidavit, without providing specific notice to the applicant as mandated by the proviso to Section 7(5)(b). This ruling arose from an appeal by Livein Aqua Solutions Private Limited against an order restoring an insolvency petition filed by HDFC Bank Limited. The bank had initiated proceedings for a default of ₹5.5 Crore (Indian Rupees Five Point Five Crore only), but the NCLT rejected the application because the supporting affidavit was sworn prior to the verification of the petition. The judgment establishes that procedural irregularities are curable and do not render a petition non existent. The Court ruled that the NCLT Registry's method of issuing a consolidated notice for 26 defective petitions on a notice board was insufficient to satisfy the statutory obligation of providing specific notice to the applicant to rectify defects within 7 days. While upholding the restoration of the petition, the Court directed HDFC Bank Limited to cure the defective affidavit within seven days before the Tribunal proceeds on merits.

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4. Taxation law

4.1. Manufacturing

4.1.1. Allahabad High Court Held Reserving Judgment Without Notice Is Invalid, Fresh Decision Must Be Given

The Allahabad High Court has held[1] that an appellate authority under the GST Act cannot reserve a judgment on a fixed date and deliver it later without notifying the parties or providing a specific legal provision empowering such a procedure. This ruling came in a writ petition filed by M/S Sun Glass Works Private Limited, a glass bottle manufacturer, against the State of U.P. and others. The petitioner had challenged an order by the Additional Commissioner, Grade – 2 (Appeals), Mainpuri, which upheld a demand for tax and penalty based on alleged fraudulent availing of Input Tax Credit (ITC). The core grievance was that the appellate authority reserved the judgment on the hearing date of September 18, 2024, and delivered it on September 25, 2024, without giving any notice to the petitioner. The value chain of this judgment focuses on reinforcement of procedural fairness. Relying on its earlier decision in M/s Wonder Enterprises, the Court found that the affidavit filed by the Additional Commissioner failed to cite any provision allowing such a practice. Consequently, the Court quashed the appellate order as unsustainable and remanded the matter for a fresh decision after granting a due opportunity of hearing.

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[1] Writ Tax 2192 of 2025

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

info@akandpartners.in