AKP Dispute Resolution Digest May 18, 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 Law

1.1. Construction

1.1.1.   Supreme Court holds that the maintainability of arbitral proceedings cannot be reopened after attaining finality

The Hon’ble Supreme Court of India has held that once the issue relating to maintainability of arbitral proceedings and jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996 has attained finality through prior judicial determination, the same cannot subsequently be reopened while considering a challenge to the arbitral award under Sections 34 or 37 of the Act. The dispute arose from arbitral proceedings initiated pursuant to the appointment of an arbitrator under Section 11, which appointment had earlier been upheld by the Supreme Court despite objections regarding the applicability of the Chhattisgarh Madhyastham Adhikarna Adhiniyam, 1983. Following the culmination of proceedings and the passing of the arbitral award, the State unsuccessfully challenged the award under Section 34. However, in an appeal under Section 37, the High Court set aside the award on the ground that the arbitral proceedings themselves were not maintainable under the Adhiniyam, 1983. Setting aside the High Court’s decision, the Supreme Court held that the issue of maintainability had already been conclusively adjudicated and had attained finality upon dismissal of the earlier challenge to the appointment of an arbitrator. The Court observed that reopening the jurisdictional issue at the stage of challenge to the award was impermissible and contrary to principles of finality and res judicata. Accordingly, the impugned judgment was set aside, and the matter was remanded to the High Court for adjudication of the appeal on merits in accordance with law.

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1.1.2.   Supreme Court reiterates limited scope of inquiry under Section 11 and refers arbitrability objections to the tribunal

The Hon’ble Supreme Court of India has reiterated that at the stage of exercising jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996, the Court is required to confine itself to a prima facie examination of the existence of an arbitration agreement and issues relating to limitation, arbitrability, or scope of disputes are to be decided by the arbitral tribunal. The dispute arose out of a Sale of Shares Agreement containing a non-compete covenant and an arbitration clause, in which allegations were raised of breaches of contractual obligations and misuse of the trade name and logo during the subsistence of the contractual non-compete period. The Respondents opposed the appointment of an arbitrator on grounds including limitation and non-arbitrability of disputes. Rejecting such objections, the Supreme Court observed that once the existence of a valid arbitration agreement is admitted, all other contested issues fall within the arbitral tribunal's domain. The Court accordingly appointed a sole arbitrator and clarified that the arbitration proceedings would remain confined to disputes arising out of the Sale of Shares Agreement and would not impact separate intellectual property proceedings pending before the Delhi High Court.

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1.1.3.   Supreme Court holds non-signatory collaborator forming an integral part of the contract entitled to invoke the arbitration clause

The Hon’ble Supreme Court of India has held that a non-signatory collaborator forming an inseparable and integral part of the contractual framework is entitled to invoke the arbitration agreement contained in the principal contract. The dispute arose from a large infrastructure project in which the contractor relied on the collaborator's technical qualifications and experience to satisfy the bid documents' eligibility criteria. The collaborator had also executed a Deed of Joint Undertaking (“DJU”), assuming joint and several liability for the performance of the contract. Following the contractor's liquidation and subsequent disputes regarding performance obligations and the encashment of bank guarantees, the collaborator invoked arbitration against the employer. The High Court declined to appoint an arbitrator on the grounds of the absence of privity of contract. Setting aside the High Court’s decision, the Supreme Court held that the collaborator was a “veritable party” to the contract in view of the contractual structure, the DJU, subsequent tripartite arrangements, and repeated communications acknowledging the collaborator’s obligations under the contract. The Court observed that the collaborator’s participation was indispensable to the execution of the contract and consequently held that the arbitration clause extended to such collaborator notwithstanding the absence of a direct signature on the principal agreement.

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1.1.4.   Delhi High Court holds rejection of recall application against termination of arbitral proceedings challengeable under Section 14

The Hon’ble Delhi High Court has held that an order rejecting a recall application against termination of arbitral proceedings under Section 25 of the Arbitration and Conciliation Act, 1996, is challengeable under Section 14(2) of the Act and not under Section 34. The appeal arose from the dismissal of a petition filed under Section 34 challenging an arbitral tribunal’s refusal to recall an earlier order terminating arbitral proceedings on account of non-prosecution. Relying upon the decision of the Supreme Court in Harshbir Singh Pannu v. Jaswinder Singh, the Court observed that once arbitral proceedings stand terminated, a subsequent rejection of an application seeking recall of such termination cannot itself be treated as a fresh termination order under Section 25. The Court held that the only statutory remedy available against a refusal to recall a termination lies under Section 14(2), which specifically governs disputes concerning the termination of an arbitrator's mandate. Consequently, the Court held that the proceedings instituted under Section 34 were not maintainable in law.

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2.    PMLA & White-Collar Crimes

2.1. Infrastructure

2.1.1.   Delhi High Court holds ED action under PMLA must align with the Supreme Court’s Article 142 framework governing PACL restitution mechanism

The Hon’ble Delhi High Court has held that enforcement action under the Prevention of Money Laundering Act, 2002 (“PMLA”) concerning assets linked to PACL Ltd. must operate in consonance with the restitution framework devised by the Supreme Court under Article 142 of the Constitution through the Justice R.M. Lodha Committee mechanism. The writ petitions arose from provisional attachment orders issued by the Directorate of Enforcement (“ED”) under Section 5 of the PMLA against properties allegedly connected to PACL-related transactions. The petitioners contended that the impugned attachment orders were contrary to the special mechanism already established by the Supreme Court for protection and restitution of investors’ interests through the Lodha Committee. The ED subsequently filed applications seeking the disposal of the writ petitions by restoring the attached properties to the Lodha Committee in accordance with Section 8(8) of the PMLA. The High Court observed that the statutory framework under the PMLA, which ordinarily culminates in the vesting of attached properties with the Central Government, stood in stark contrast with the restitution-oriented mechanism evolved by the Supreme Court under Article 142 for the disbursement of assets to affected investors. The Court further noted that the ED itself had, in the past, acted in coordination with the Lodha Committee and had acknowledged the supremacy of the Supreme Court-devised mechanism. Holding that continuation of the attachment proceedings under the strict framework of the PMLA would defeat the special restitution scheme formulated by the Supreme Court, the Court set aside the impugned provisional attachment orders and relegated the matter to the Lodha Committee for adjudication in accordance with law. The Court additionally directed that the subject properties shall not be alienated or encumbered pending determination by the Lodha Committee.

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3.    Electricity & Energy Law

3.1. Power Sector

3.1.1.   Supreme Court holds consumers cannot be burdened with depreciation cost for the period during which electricity was not supplied

The Hon’ble Supreme Court of India has held that consumers cannot be burdened with tariff recovery and depreciation costs for a period during which the generating utility did not supply electricity. The appeal arose from a dispute concerning the recovery of depreciation cost relating to the Rithala Combined Cycle Power Plant established by Tata Power Delhi Distribution Limited (“TPDDL”) as a temporary power generation project intended to operate for a limited period of 5 to 6 years in view of the anticipated power requirements during the Commonwealth Games 2010. Although the Delhi Electricity Regulatory Commission (“DERC”) had accepted the plant's technical useful life as 15 years, the operational approval and tariff recovery framework were expressly restricted until March 2018. Subsequently, the Appellate Tribunal for Electricity (“APTEL”) permitted TPDDL to recover the entire capital cost of the plant through depreciation over 15 years, notwithstanding the cessation of electricity supply after March 2018. Setting aside the APTEL judgment, the Supreme Court held that the tariff determination under the Electricity Act, 2003, is a regulatory balancing exercise, where the consumer interest under Section 61(d) remains a paramount consideration. The Court observed that depreciation provisions under the applicable tariff regulations cannot be read in isolation and must be harmoniously construed with the approved Power Purchase Agreement and the regulatory framework that limits the operational and recovery periods of the plant. The Court further held that Regulation 6.32 governing depreciation over useful life does not confer an absolute right upon the generating utility to recover depreciation from consumers even after the asset ceases to supply electricity. Accordingly, the Supreme Court restored the DERC's order restricting depreciation recovery to the approved operational period ending in March 2018.

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4.    Consumer Law

4.1. Insurance Company

4.1.1.   Delhi State Commission holds that an insurer cannot repudiate a claim based on unproven lifestyle diseases and undisclosed exclusion clauses

The Hon’ble Delhi State Consumer Disputes Redressal Commission has held that an insurance company cannot repudiate a life insurance claim merely based on alleged non-disclosure of common lifestyle diseases such as diabetes, particularly in the absence of cogent medical evidence and where the insurer failed to conduct a pre-policy medical examination. The dispute arose after the insurer repudiated a death claim under a group credit life insurance policy on the ground that the deceased life assured had allegedly concealed pre-existing ailments, including diabetes and chronic kidney disease, at the time of obtaining the policy. Setting aside the order of the District Commission, the State Commission observed that the insurer had failed to place on record any concrete documentary evidence establishing the existence of a serious pre-existing disease or any direct nexus between the alleged ailments and the cause of death. The Commission further noted that the investigation report relied upon by the insurer contained inherent contradictions, was substantially based on hearsay evidence, and lacked supporting medical documentation, such as treatment records, a death summary, or past medical history. The Commission reiterated that common lifestyle diseases such as diabetes and hypertension cannot automatically be treated as material suppression disentitling an insured from policy benefits, particularly where the insurer itself issued the policy without conducting a medical examination, despite the insured being nearly 50 years of age. The Commission also held that exclusion clauses cannot be enforced where the insurer failed to prove that the policy terms and conditions were ever supplied or explained to the insured. It was further observed that repudiation of the claim after a delay of 213 days was contrary to the IRDA claim settlement guidelines and constituted a deficiency in service. Accordingly, the appeal was allowed, and the insurer was directed to pay the sum assured of INR 20,00,000 along with interest, compensation for mental agony, and litigation costs.

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5.    Insolvency and Bankruptcy

5.1. Real Estate

5.1.1.   Supreme Court permits lifting of corporate veil to include assets of group companies in CIRP of holding company

In the matter of Alpha Corp Development Private Limited v. Greater Noida Industrial Development Authority (GNIDA) & Ors., the Supreme Court held that the corporate veil may be lifted during the Corporate Insolvency Resolution Process (“CIRP”) of a holding company to include assets of subsidiary and group companies where such entities are inextricably connected and function as part of a single economic enterprise. The dispute arose from CIRP proceedings involving a real estate developer with multiple stalled housing projects, including Earth Towne, Earth Sapphire Court, and Earth TechOne. The projects had been structured through various subsidiary entities holding leasehold rights from GNIDA, while the holding company exercised substantial control over project development, finances, and execution. GNIDA challenged the approved resolution plans before the NCLAT, contending that assets belonging to subsidiary companies could not be treated as assets of the holding company undergoing CIRP. Setting aside the NCLAT’s decision, the Supreme Court observed that while holding and subsidiary companies are ordinarily regarded as distinct legal entities, courts may pierce the corporate veil where group entities are so closely interconnected that they effectively constitute “one concern”. Relying upon principles laid down in LIC v. Escorts Ltd., the Court held that the formal corporate separation between the entities could not be permitted to defeat the objective of insolvency resolution and completion of stalled real estate projects. The Court noted that the subsidiary companies were wholly or substantially controlled by the holding company and existed primarily to facilitate land-holding arrangements with GNIDA. It further observed that the holding company was the “main driving force” behind the projects, including construction activities and payment obligations owed to GNIDA. At the same time, the subsidiaries served merely as fronts for executing the projects. In these circumstances, the Court held that the inclusion of subsidiary assets within the CIRP framework was necessary to protect the interests of homebuyers and to enable the effective implementation of the approved resolution plans. Importantly, the Supreme Court clarified that ownership of the underlying land would continue to vest with GNIDA and that the resolution plans merely contemplated the transfer of possession and development rights to successful resolution applicants for the completion of the projects and the delivery of units to allottees. This judgment is a significant development in Indian insolvency jurisprudence, as it recognises a pragmatic form of group insolvency in appropriate cases and reinforces the courts' willingness to lift the corporate veil where rigid adherence to separate corporate personality would frustrate insolvency resolution and prejudice homebuyers in stalled real estate projects.

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5.1.2.   Supreme Court holds banks cannot invoke IBC in builder-linked transactions involving predominantly contractual disputes

In Dhanlaxmi Bank Ltd. v. Mohammed Javed Sultan & Ors, the Supreme Court of India held that the Insolvency and Bankruptcy Code, 2016, cannot be invoked as a coercive recovery mechanism in disputes that are fundamentally contractual in nature and intrinsically linked to obligations arising out of a builder-buyer arrangement. The dispute arose from a quadripartite arrangement involving Dhanlaxmi Bank Ltd., the corporate debtor, the builder, and the development authority, regarding the purchase of a commercial unit in a real estate project. Under the arrangement, the bank disbursed loan amounts directly to the builder in tranches linked to construction milestones. Following the alleged default, the bank initiated proceedings under Section 7 of the IBC to commence the CIRP against the corporate debtor. While the NCLT admitted the CIRP, the NCLAT set aside the admission order on the ground that the dispute was predominantly contractual and intertwined with the builder's obligations concerning the transfer and completion of the property. Affirming the NCLAT’s view, the Supreme Court observed that the IBC is intended to address genuine insolvency and financial distress, and not to serve as a substitute for debt recovery or enforcement of disputed contractual rights. The Court noted that the structure of the transaction, including the direct disbursement of loan amounts to the builder, the linkage of payments to construction progress, and the existence of parallel proceedings before the Debt Recovery Tribunal, demonstrated that the dispute could not be treated as a straightforward financial default warranting insolvency resolution. It reiterated that where the object of the IBC invocation is to compel payment rather than resolve insolvency, such an invocation would amount to an abuse of process. This ruling is significant for financial institutions involved in builder-linked financing arrangements, as it reinforces judicial scrutiny against attempts to invoke insolvency proceedings in matters involving substantial contractual and property-related disputes. The judgment further reiterates that the IBC cannot be converted into a parallel debt recovery forum where appropriate remedies already exist before specialised adjudicatory forums such as the DRT.

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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