AKP Dispute Resolution Digest June 01, 2026
- AK & Partners
- Jun 1
- 10 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 Conciliation
1.1. Mining Industry
1.1.1. The Hon’ble Supreme Court holds that an unstamped Arbitration Agreement survives, and any objections must first be raised before the Arbitrator
The Supreme Court has held that an arbitration agreement does not become invalid merely because it is unstamped or insufficiently stamped. The Hon’ble Division Bench ruled that such defects are curable and that the arbitral tribunal has the primary jurisdiction to deal with stamping objections, not the High Court. The Hon’ble Court emphasised that the agreement remains legally operative despite the stamping defect and that the deficiency can be rectified at any stage, after which the document becomes fully admissible. The arbitral tribunal's rejection of a stamping objection may be challenged only after the final award, in keeping with the principle of minimal judicial interference during arbitration proceedings. The dispute arose from an iron ore sale agreement dated February 12, 2004, between an individual mine owner and Sunflag Iron and Steel Company Limited. After the Petitioner raised a stamping objection during arbitration in February 2024, the sole arbitrator rejected it in May 2024. The Petitioner challenged this before the Orissa High Court, where a single judge initially upheld his objection, but the Division Bench reversed that order. The Hon’ble Supreme Court dismissed the Petitioner's appeal, holding that the Single Judge had exceeded writ jurisdiction by entering into the merits of the dispute while the arbitration was still pending. The Hon’ble Division Bench confirmed that the Division Bench of the High Court was justified in restoring the Tribunal's order and left the parties free to raise the stamping issue post-award.
1.2. Construction
1.2.1. Supreme Court declines to set aside a “Patently Illegal” Arbitral Award and instead modifies the relief granted
The Supreme Court declined to set aside an arbitral award even after finding it patently illegal, opting instead to modify it directly to bring finality to a dispute that has been pending since 2012. The Hon’ble Division Bench held that setting aside the award at this stage would compel the parties to restart litigation from scratch, causing further hardship and delay. The case arose from a reconstruction agreement dated April 9, 2010, under which the builder agreed to reconstruct the owners' property within 14 months. The builder abandoned construction in August 2011, leading the owners to terminate the agreement in November 2011. The disputes were referred to arbitration pursuant to a Delhi High Court order in 2012. The Arbitrator held the builder liable for breach and awarded INR 72 lakh in delay compensation to the owners, while also directing the refund of amounts paid and awarding the construction costs to the builder. After rounds of litigation before the Delhi High Court, the Division Bench denied the owners all compensation, finding no separate proof of loss. The Hon’ble Supreme Court disagreed, holding that contractual penalty clauses themselves demonstrate implied loss, making separate proof unnecessary. The Hon’ble Supreme Court recalculated the owners' entitlement to INR 6.30 lakh for 63 days of delay and directed the owners to pay INR 25.62 lakh to the builder's legal heirs. Invoking Article 142 of the Constitution to do complete justice, the Hon’ble Supreme Court modified the award rather than ordering a fresh round of arbitration.
1.2.2. Supreme Court clarifies that the power to rectify clerical errors in Arbitral Awards cannot be invoked to alter the award substantially
The Hon’ble Supreme Court has reiterated that the limited statutory power to correct clerical, computational, or typographical errors in an arbitral award cannot be used to make substantive changes to the award, such as replacing simple interest with compound interest. A Division Bench set aside orders of the Gujarat High Court and a Commercial Court that had dramatically increased the Petitioner's financial liability from approximately INR 30.38 crore to INR 144.93 crore through such a modification. The dispute arose from supply contracts awarded by the Petitioner to the Respondent between 1998 and 2002 for PVC pipes. Following an audit report alleging excess payments, the Petitioner blocked the company in 2003. The parties agreed to arbitration in 2012, and in 2015, the Arbitrator awarded the respondent a sum with simple interest at 21.675 per cent for the pendente lite period. The Respondent then successfully sought a modification before the Commercial Court to replace simple interest with compound interest. The Hon’ble Supreme Court held that the nature of interest, whether simple or compound, reflects a substantive merits determination and not an inadvertent arithmetic or clerical error. The Petitioner was, however, held estopped from challenging the Arbitrator's mandate, having participated in proceedings without a timely objection. The Court also rejected the Petitioner's natural justice argument, noting that the Petitioner’s own delays had contributed to the elongated proceedings. The appeal was accordingly allowed and the original award as regards simple interest was restored.
2. PMLA
2.1. FMCG
2.1.1. PMLA Appellate Tribunal sets aside the order retaining frozen assets of the Kwality Ex-Director
The PMLA Appellate Tribunal has set aside an Enforcement Directorate order permitting retention and continued freezing of properties linked to the former director of Kwality Limited, and associated entities. The case arises from an alleged Rs 1,400.62-crore bank fraud involving the company. The Tribunal held that the Adjudicating Authority had failed to provide an independent, reasoned finding on whether the seized properties were connected to money laundering, and that an ongoing investigation alone cannot justify retaining the assets. The ED case is rooted in a 2020 CBI FIR registered based on a complaint by the Bank of India. The CBI alleged that Kwality Limited falsified its books of account and misrepresented its sales, purchases, and debtor-creditor figures to defraud a consortium of banks. The ED further alleged that the accused persons created dummy entities, conducted bogus transactions, siphoned loan funds, and acquired assets through beneficially owned entities using proceeds of crime. The Tribunal found that the Adjudicating Authority's order largely reproduced the ED's application and submissions without independent analysis and reduced its conclusion to a single omnibus sentence asserting prima facie involvement. The Tribunal held that Section 8(3) of the PMLA requires a detailed, reasoned finding based on all relevant materials placed on record, and that such a bare assertion fails that standard. The matter has been remanded for fresh adjudication within three months, with directions to pass a speaking order with reasoned findings. The parties are to maintain the status quo regarding the properties in the interim.
3. Insolvency & Bankruptcy
3.1. Banking & Finance
3.1.1. Supreme Court holds that a successful resolution applicant cannot renegotiate the resolution plan after approval by the Committee of Creditors
The Supreme Court of India has reiterated that once a resolution plan is approved by the Committee of Creditors (‘CoC’), the successful resolution applicant cannot seek to renegotiate, modify, or delay the plan's implementation based on subsequent objections or commercial considerations. The dispute arose after a successful resolution applicant sought to avoid implementing an approved resolution plan by relying on alleged conditionalities in the Letter of Intent and raising objections after the CoC had exercised its commercial judgment and approved the plan. The applicant contended that certain conditions precedent had not been satisfied and, therefore, implementation could not proceed. Rejecting this approach, the Supreme Court observed that the insolvency framework under the Insolvency and Bankruptcy Code, 2016, is founded upon certainty, finality, and time-bound resolution. The Court held that once the CoC, after evaluating competing proposals, approves a resolution plan, the successful resolution applicant is bound by the terms of the plan and cannot subsequently reopen commercial negotiations or adopt a “wait and watch” approach. The Court further observed that permitting post-approval renegotiations would undermine the sanctity of the CIRP process, create uncertainty for creditors and stakeholders, and frustrate the objective of timely insolvency resolution. This ruling reinforces the binding nature of approved resolution plans and enhances certainty in the insolvency process by preventing successful resolution applicants from revisiting commercial commitments after obtaining CoC approval.
4. Negotiable Instruments Act
4.1. Banking & Finance
4.1.1. Supreme Court holds that an office bearer of a society cannot be prosecuted for cheque dishonour absent a specific role in the conduct of business
In a significant ruling concerning vicarious liability under Sections 138 and 141 of the Negotiable Instruments Act, 1881 (‘NI Act’), the Supreme Court in the case of M/s Mansi Finance (Chennai) Ltd. v. M. Lalitha & Ors. held that an office bearer of a society cannot be prosecuted merely by virtue of holding a designation unless the complaint specifically discloses that such a person was actively involved in and responsible for the conduct of the affairs of the society at the relevant time. The proceedings arose from a cheque-dishonour complaint in which an executive member of a society was arrayed as an accused, despite the absence of any specific allegations regarding his role in the transaction or in the management of the society’s affairs. The complainant relied primarily upon the individual’s designation within the organisation to justify prosecution. Quashing the proceedings, the Supreme Court reiterated that Section 141 creates a form of penal vicarious liability and therefore must be construed strictly. The Court held that a complaint must disclose the factual basis demonstrating how and in what manner the accused was in charge of and responsible for the conduct of the business of the entity when the offence occurred. Mere membership, designation, or participation in the governing body is insufficient to attract criminal liability. The judgment reinforces settled principles governing vicarious liability under the NI Act. It protects office-bearers from being mechanically impleaded in cheque-dishonour proceedings without specific pleadings establishing their role in the transaction.
4.1.2. Supreme Court refers to a larger Bench the issue of whether the IBC moratorium bars cheque dishonour proceedings against company directors
The Supreme Court has referred the question to a larger Bench as to whether the moratorium imposed under the Insolvency and Bankruptcy Code, 2016, completely bars the continuation of cheque dishonour proceedings under Section 138 of the Negotiable Instruments Act, 1881, against directors and persons in charge of the affairs of a corporate debtor. The reference arose from conflicting interpretations concerning the interaction between insolvency moratorium provisions and criminal prosecutions arising from dishonour of cheques issued on behalf of a company undergoing insolvency proceedings. While earlier decisions have recognised that proceedings under Section 138 possess a quasi-criminal character, uncertainty persisted regarding whether the protection afforded by the moratorium extends only to the corporate debtor or also shields directors and officers who face vicarious liability under Section 141 of the NI Act. While referring, the Supreme Court observed that the issue raises important questions concerning the intersection between the compensatory and penal features of cheque dishonour proceedings and the objectives underlying the insolvency regime. The Court noted that an authoritative pronouncement is necessary to reconcile the competing statutory frameworks and provide clarity regarding the continuation of Section 138 proceedings during the subsistence of a moratorium. The eventual decision of the larger Bench is expected to have significant implications for insolvency proceedings, creditor remedies, and criminal liability of directors in cases involving dishonoured cheques issued by corporate debtors undergoing CIRP.
5. Consumer Protection Law
5.1. Electricity and Public Utilities
5.1.1. Delhi Consumer Commission holds the electricity utility liable for deficiency in service for the delay in providing connection infrastructure
The District Consumer Disputes Redressal Commission-I (North), Delhi, has held Madhyanchal Vidyut Vitaran Nigam Limited (“MVVNL”) liable for deficiency in service and unfair trade practice for failing to provide electricity infrastructure despite receiving the entire estimated amount from the consumer. The dispute arose after the complainant, an organic farmer, applied for a private tube-well electricity connection and deposited INR 1,83,092/- towards the cost of transformer, poles, wires and allied infrastructure. Subsequently, the complainant discovered a substantial waiting queue for the supply of the requisite materials and that MVVNL did not have sufficient stock to fulfil the connection request within a reasonable period. The principal issue before the Commission was whether a utility provider that has collected the entire consideration amount can indefinitely delay the supply and installation of infrastructure without disclosing stock shortages and expected timelines, and whether such conduct amounts to a deficiency in service and unfair trade practice under the Consumer Protection Act, 2019. The Commission observed that the dispute related to the supply and installation of infrastructure and not to electricity billing or unauthorised use of electricity. Therefore, the complaint was maintainable under the Consumer Protection Act, 2019. Relying upon the decisions of the Supreme Court in U.P. Power Corporation Ltd. v. Anis Ahmad and Lucknow Development Authority v. M.K. Gupta, the Commission held that once full payment has been accepted, the service provider becomes obligated to perform its duties within a reasonable period. The failure of MVVNL to disclose stock availability, waiting periods and delivery timelines before demanding and collecting the entire amount was held to constitute misrepresentation and an unfair trade practice. Accordingly, the Commission directed MVVNL to supply the requisite transformer, poles, wires and associated infrastructure within forty-five days and awarded compensation of INR 75,000/- to the complainant. The Commission further directed that in the event of non-compliance, MVVNL would be liable to pay INR 1,000/- per day until the infrastructure was supplied.
Read More[1]
5.2. Insurance Sector
5.2.1. Delhi Consumer Commission upholds Tata AIA's repudiation of the insurance claim due to failure of KYC verification and applicability of the waiting period clause
The District Consumer Disputes Redressal Commission-II (South), New Delhi, has upheld Tata AIA Life Insurance Company's decision to repudiate a life insurance claim, finding that the insured failed to cooperate with the mandatory verification process and that the death occurred during the contractual waiting period. The complaint arose after the complainant's husband obtained a life insurance policy with a sum assured of INR 11,55,150/- commencing on 25 October 2021 and subsequently died due to COVID-19 on 14 December 2021. Upon submission of the insurance claim, Tata AIA repudiated the claim and refunded the premiums paid. The issue before the Commission was whether the insurer was justified in treating the policy as void ab initio where the life assured failed to cooperate in KYC verification, and whether the complainant was entitled to the assured sum despite the death occurring during the waiting period prescribed under the policy. The Commission examined the investigator's report and observed that the investigator deputed by the insurer had visited the insured's residence but was unable to meet him. The record further revealed that, despite being afforded opportunities, the insured did not present himself to the insurer to clarify discrepancies in his KYC details. The Commission held that the insurer was justified in concluding that the KYC particulars could not be verified and consequently in treating the policy as void ab initio. The Commission also noted that the policy contained a waiting-period clause providing that, where death occurred within the first ninety days from the commencement of the risk, only the premiums paid would be refundable. Since the insured passed away within approximately 50 days of the policy's commencement, the complainant was not entitled to receive the policy benefits. However, the Commission observed that Tata AIA had retained the premium amount for almost one year before refunding it and therefore directed the insurer to pay interest at 8 per cent per annum on INR 41,800/- along with compensation of INR 10,000/- towards mental agony and litigation expenses. The decision reiterates the importance of cooperation with insurer verification mechanisms and confirms that waiting period clauses in life insurance contracts remain enforceable where the terms are unambiguous.
Read More[2]
[1] DC/80/CC/437/2024
[2] DC/83/CC/276/2023
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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