AKP Dispute Resolution Digest February 23, 2026

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 Conciliation

1.1. Commercial & Contractual Disputes

1.1.1 Supreme Court holds arbitral award passed after expiry of mandate is not rendered void where court subsequently extends time

The Supreme Court recently examined the effect of an arbitral award rendered after expiry of the arbitral tribunal’s mandate under Section 29A of the Arbitration and Conciliation Act, 1996 (“The Act”). The controversy arose in a situation where the tribunal delivered its award after the statutory period, including the period extended by consent of the parties, had elapsed. The High Court declined to extend the mandate retrospectively and proceeded to set aside the award solely on the ground that the tribunal lacked authority on the date of pronouncement. Disagreeing with this approach, the Supreme Court held that Section 29A of the Act cannot be construed in a manner that defeats the arbitral process on purely technical considerations. The Court noted that an arbitral award does not assume the character of a decree merely upon its pronouncement and attains enforceability only at the stage contemplated under Section 36 of the Act. Viewed in this context, the Court held that the court's jurisdiction to extend the mandate is not exhausted merely because the award has already been rendered. What weighed with the Court was the broader object of Section 29A of the Act, i.e., to ensure the timely completion of arbitral proceedings without sacrificing substantive justice. A rigid interpretation that nullifies months of proceedings for procedural delay would, according to the Court, undermine the very purpose of arbitration. The judgment reflects a purposive construction of the statute and affords relief in cases where time overruns are not attributable to deliberate inaction.

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1.1.2 Supreme Court rules disputes are non-arbitrable where execution of arbitration agreement is seriously disputed on grounds of forgery

In another decision, the Supreme Court considered whether disputes could be referred to arbitration when the very existence of the arbitration agreement is disputed on allegations of forgery. The dispute arose from a partnership arrangement in which one party relied upon an alleged deed containing an arbitration clause, while the opposite party categorically denied execution of the document and alleged fabrication. The Court clarified that while courts ordinarily undertake only a prima facie examination at the referral stage under Sections 8 and 11 of the Arbitration and Conciliation Act (“The Act”), such an exercise presupposes the existence of an arbitration agreement. Where the execution of the document itself is placed under serious doubt, the Court held that compelling parties to arbitrate would amount to forcing arbitration without establishing consent. Drawing a distinction between disputes relating to contractual performance and disputes concerning the very foundation of the arbitration clause, the Court held that allegations of forgery strike at the root of the agreement. In such cases, reference to arbitration would be inappropriate until the execution issue is adjudicated by a competent forum.

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1.1.3 Supreme Court holds a party that participates in arbitration cannot later challenge the arbitration clause

The Supreme Court also addressed the effect of participation in proceedings under Section 11 of the Act prior to the 2015 amendments. The Court held that under the pre-amendment regime, where the power exercised under Section 11 was judicial in nature, a party that participated in the proceedings and accepted the appointment of an arbitrator without objection could not later challenge the validity or existence of the arbitration agreement. The Court observed that permitting such challenges at a later stage would encourage tactical objections and undermine finality in the arbitral process. Once a party has acquiesced in the appointment, it is estopped from reopening issues that could and ought to have been raised earlier. The decision reinforces procedural discipline in arbitrations governed by the unamended regime.

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1.1.4 Supreme Court restricts appellate courts from reassessing damages in arbitration matters

The Supreme Court further reiterated the limited scope of appellate interference under Section 37 of the Arbitration and Conciliation Act (“The Act”). The dispute arose from delay in commissioning a solar power project, where liquidated damages were awarded by the arbitral tribunal and later modified by the court under Section 34 of the Act. The appellate court then recalibrated the damages further. While the arbitral tribunal awarded limited liquidated damages under Section 34 of the Act, the court enhanced the quantum. The appellate court further modified the damages. The Hon’ble Supreme Court disapproved this approach, holding that once an arbitral tribunal has taken a plausible view consistent with contractual terms, courts cannot substitute their own assessment merely because another view is possible. The ruling reinforces the narrow scope of judicial intervention in arbitral awards and provides certainty to infrastructure and energy sector arbitrations involving liquidated damages.

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2.    Insolvency and Bankruptcy Law

2.1 Real Estate

2.1.1 Supreme Court permits composite insolvency petition against intrinsically linked corporate entities

The Supreme Court examined the maintainability of a single insolvency application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) against multiple corporate entities. The proceedings arose from a real estate project executed through several entities that were alleged to function as a single economic unit. Rejecting a purely formalistic interpretation of the Code, the Court held that where the pleadings and material demonstrate deep interlinkages in management, finances, and project execution, a composite insolvency petition may be maintainable. The Court was careful to clarify that this does not amount to blanket recognition of group insolvency. Mere common shareholding or promoter identity would not suffice. The decision recognises the commercial realities of large infrastructure and real estate projects, while preserving safeguards against indiscriminate consolidation.

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3.    Consumer Law

3.1 Real Estate

3.1.1 Supreme Court holds leasing of apartment does not disentitle homebuyer from maintaining consumer complaint

The Supreme Court addressed a recurring objection raised by developers that leasing of a residential apartment converts the transaction into a commercial activity, thereby excluding the allottee from the definition of “consumer”. The Court rejected this contention, holding that the dominant purpose of the transaction remains determinative. The dispute arose when the builder objected to the maintainability of a consumer complaint, contending that the allottee had leased out the apartment and was therefore not a “consumer”, and that the transaction had assumed a commercial character. Rejecting this contention, the Court reiterated that the dominant purpose of the transaction is the determinative test. Temporary or incidental leasing of the apartment does not, by itself, convert the purchase into a commercial activity. The Court observed that residential flats are often leased due to practical exigencies such as delayed possession, relocation, or financial necessity, and such conduct cannot be used to defeat statutory consumer remedies. It further held that unless the builder establishes that the flat was purchased exclusively for commercial exploitation as a business venture, the purchaser retains the status of a consumer. The Court also emphasised that objections based on subsequent use of the property cannot override allegations relating to delay in possession, deviation from sanctioned plans, substandard construction, or breach of contractual obligations by the developer. This ruling significantly strengthens homebuyer remedies by preventing developers from raising technical objections to avoid adjudication on the merits. It also brings clarity to a recurring defence raised in consumer fora, particularly in high-value residential projects where temporary leasing is common.

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4.    White-Collar Crimes/PMLA

4.1 Real Estate & Construction

4.1.1 Supreme Court bars confiscation under PMLA while appeal against attachment confirmation is pending

The Supreme Court has held that a Special Court under the Prevention of Money Laundering Act, 2002 (“The Act”) cannot proceed to order confiscation of property under Section 8(7) of the Act while an appeal against confirmation of provisional attachment under Section 8(3) of the Act is pending before the Appellate Tribunal. The case arose from the attachment of immovable properties alleged to represent the “value of proceeds of crime”. While an appeal challenging the confirmation of attachment was pending under Section 26 of the Act, the Special Court proceeded to entertain an application under Section 8(7) and ordered confiscation of the attached properties. This action was upheld by the High Court. Setting aside the High Court’s view, the Supreme Court held that confiscation is a consequential and terminal step, which cannot precede final determination of the legality of attachment. Permitting confiscation during the pendency of appellate proceedings would render the statutory right of appeal illusory and violate basic principles of procedural fairness. The Court clarified that the PMLA contemplates a sequential statutory framework: provisional attachment, confirmation by the Adjudicating Authority, appellate scrutiny, and only thereafter confiscation. Any deviation from this sequence would upset the balance between enforcement powers and property rights. Importantly, the Court also underscored that, where third-party ownership claims are raised, authorities are duty-bound to meaningfully examine them before proceeding against the property. Confiscation without adjudication of ownership under Section 8(8) of the Act would amount to arbitrary deprivation of property. This judgment imposes an important restraint on enforcement agencies and Special Courts, ensuring that attachment proceedings under the PMLA do not culminate in irreversible confiscation before statutory remedies are exhausted. It offers significant protection to bona fide third parties and corporate entities whose assets are provisionally attached during investigations.

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5.    Negotiable Instruments Act

5.1  Banking & Finance

5.1.1 Delhi High Court holds company and directors can be prosecuted under NI Act even if cheque signatory is dropped

The Hon’ble High Court of Delhi held that dropping the individual signatory from criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) does not automatically extinguish prosecution against the drawer company and its continuing directors. The case arose from a batch of complaints filed by a non-banking financial company alleging dishonour of multiple cheques issued by GBL Chemicals Ltd. (the principal drawer) towards repayment of credit facilities. The trial court had initially dropped Ramakant Pilani, the director who signed the dishonoured cheques, from the array of accused on account of his resignation from the board. The company and other directors (including Rishi Pilani and Ramesh Pilani) sought quashing of the proceedings on the ground that, with the signatory excluded, the prosecution could not survive as there was no basis to hold the company or its other directors liable. A Division Bench of Justice Neena Bansal Krishna refused to quash the criminal proceedings. The Court observed that the offence under Section 138 NI Act is complete upon dishonour of a cheque issued towards discharge of a debt or liability and the statutory conditions (notice and failure to pay) being satisfied. The Hon’ble Court categorically observed that the cheque drawer company (GBL Chemicals Ltd.) remains primarily liable under Section 138 of the NI Act, irrespective of the individual signatory’s status, because the liability attaches to the drawer entity itself once statutory ingredients are made out. The vicarious liability of directors and company officers under Section 141 NI Act arises from statutory presumptions and principles of corporate liability, necessitating a full trial on the merits rather than premature quashing merely because the individual signatory was dropped. The Resignation of the signatory director did not ipso facto absolve the company or its continuing directors from prosecution where a prima facie case was made out under Sections 138 and 141 of the NI Act. The Court emphasised that objections to internal authority, alleged fraud or unauthorised issuance of cheques are matters to be explored at trial and are not appropriate grounds for threshold quashing. This decision clarifies that in cheque dishonour prosecutions, corporate liability and directors’ vicarious responsibility continue independently of the procedural status of the signatory and that statutory presumptions under Sections 118, 139, 138 and 141 of the NI Act must be addressed through evidence at trial.

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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