AKP Dispute Resolution Digest October 19, 2026
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1. Arbitration and Conciliation
1.1. Energy
1.1.1. Supreme Court holds that where an arbitration clause names two places, the “venue” is not automatically the “seat”; seat must be determined by reading the agreement as a whole
The Hon'ble Supreme Court has held that where an arbitration clause specifies more than one place for arbitration, the place designated as the venue of the arbitral proceedings does not automatically become the juridical seat, and the seat must instead be ascertained by reading the agreement in its entirety to discern the true intention of the parties. The dispute arose out of a Franchise Agreement, in respect of which the Delhi High Court, exercising jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“A&C Act”), had appointed a sole arbitrator and left it open to the arbitrator to fix the venue of hearings in consultation with the parties. The arbitration clause contemplated arbitration at Delhi under one sub-clause, while another sub-clause provided that the proceedings would be held in Goa, and a separate clause conferred exclusive jurisdiction on the courts at Goa. Applying the tests laid down in BGS SGS SOMA JV v. NHPC Limited (2020), as affirmed in Arif Azim Company Limited v. Micromax Informatics FZE (2025), the Bench held that, since Delhi was not the only place specified, the venue could not be equated with the seat. Construing the clauses harmoniously so that neither became redundant, and reading them with the exclusive jurisdiction clause in favour of the Goa courts, the Hon’ble Court concluded that Goa was the juridical seat and Delhi merely a venue. The Delhi High Court therefore lacked jurisdiction under Section 11(6), the order appointing the arbitrator was set aside, and the parties were granted liberty to approach the jurisdictional High Court.
1.2. Banking
1.2.1. Calcutta High Court holds pendency of arbitration does not bar wilful defaulter proceedings under RBI Master Directions
The Hon'ble Calcutta High Court has held that the pendency of arbitral proceedings does not prevent a lender from issuing a show cause notice, or continuing proceedings, for classification of a borrower as a wilful defaulter under the Reserve Bank of India’s framework. The petitioners, a borrower company and others, challenged a show cause notice dated 17 June 2026 issued by SREI Equipment Finance Limited (“SEFL”) alleging wrongful sale or non-accountability of mortgaged land. SEFL had earlier obtained interim protection under Section 9 of the A&C Act, and an arbitrator had been appointed under Section 11. The petitioners contended that the notice had been issued with an oblique motive to overreach the arbitration, particularly as the genuineness of the sums disbursed was itself under adjudication, and the sole arbitrator had declined to stay the notice under Section 17 while leaving the question of default open for determination in the arbitration. The Court observed that the pendency of arbitration could not debar the issuance of a show cause notice. Relying on the decision of the Hon’ble Supreme Court in Kaustuv Ray, the Court held that SEFL was justified in issuing the notice, as the alleged disposal of secured assets without the lender’s approval is a ground of wilful default under the RBI Master Directions of 2024 and the supporting documents had been disclosed to the petitioners. The writ petition was accordingly dismissed, and the Court declined to interfere with the notice.
2. PMLA/White Collar
2.1. Financial Services
2.1.1. Delhi High Court holds mere pendency of PMLA investigation cannot indefinitely restrict right to travel, quashes Look Out Circulars
The Hon'ble Delhi High Court, has quashed Look Out Circulars (“LOCs”) issued at the instance of the Directorate of Enforcement against a senior citizen and his son, holding that an LOC is a coercive measure that requires specific justifying circumstances and cannot be resorted to routinely merely because an investigation under the Prevention of Money Laundering Act, 2002 (“PMLA”) is pending. The ED’s PMLA probe stemmed from a complaint filed by the Serious Fraud Investigation Office before a Special Court, and the petitioners were first summoned in January 2020. The father, a 77-year-old battling liver cancer since 2022, discovered the LOC on 7 March 2026 when he was stopped at the airport while travelling to Singapore for medical treatment, while the son, who resides in Singapore, apprehended a similar LOC. The Court noted that the petitioners had cooperated throughout the six-year probe, had travelled abroad several times and always returned, and that no material showed evasion or flight risk, so that indefinite restriction on their right to travel was unwarranted. While conscious that the investigation is continuing and the petitioners’ roles are yet to be conclusively determined, the Court quashed the LOCs subject to conditions, including disclosure of travel itineraries to the ED and reporting of return within 72 hours.
3. Insolvency and Bankruptcy
3.1. Hospitality
3.1.1. Supreme Court holds Section 7 IBC requires proof of default on preponderance of probabilities, not forensic reconciliation of accounts; profitability of corporate debtor is irrelevant
The Hon'ble Supreme Court has held that proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) require the financial creditor to establish financial debt and default, and not a detailed audit of every account entry, and that a corporate debtor’s profitability is no answer to the initiation of insolvency proceedings once default is shown. The Court dismissed appeals by Deepak Raheja and another against an order of the National Company Law Appellate Tribunal dated 19 August 2025 admitting insolvency petitions at the instance of an asset reconstruction company, to which the loans had been assigned in December 2022. Disputes over the exact quantum owed were held not to negate default where the statutory threshold is met. The Court also laid down a hierarchy of documentary evidence, holding that an authenticated record of default issued by an Information Utility carries high evidentiary value and is sufficient to establish default at the prima facie stage, and that a corporate debtor that allows such a record to go unchallenged through the authentication process cannot later deny the default where the principle of estoppel is attracted. The Court found defaults of ₹17.16 crore in one corporate debtor and at least ₹2.64 crore in the other, both above the statutory threshold, and held that the 2026 amendments to the IBC have clarified the law on the admission of insolvency petitions.
4. Consumer Law
4.1. Real Estate and Housing Finance
4.1.1. Supreme Court orders builder to refund homebuyer INR 1.27 crore with 12% interest, awards INR 15 lakh for mental agony, and upholds deficiency in service by housing finance bank
The Hon'ble Supreme Court has directed a builder that failed to deliver possession of a flat booked in 2009 to refund the amount paid out of the homebuyer’s own funds, with interest, and has additionally awarded compensation for mental agony, while upholding a finding of deficiency in service against the housing finance bank that funded the purchase. The homebuyer, who financed the purchase partly through savings and partly through a loan from Housing Development Finance Corporation Limited, filed a consumer complaint in 2013, and the National Consumer Disputes Redressal Commission directed the builder to refund the entire amount paid with interest. The bank appealed, contending that a full refund was impermissible and asserting its rights as a secured creditor. The Court held that the builder, having received INR 2,19,92,107 and given nothing in return, could not justly retain the amount, and that the homebuyer was entitled to a refund of INR 1,27,34,726 at 12% per annum, being the sum he had paid from his own funds, together with INR 15,00,000 as compensation for prolonged uncertainty under Section 14(1)(d) of the Consumer Protection Act, 1986. The Hon’ble Court upheld the finding that the bank had been deficient in service for failing to adequately verify construction progress and affirmed the compensation of INR 2,00,000 awarded against it, directing that the remaining amount be held pending the outcome of the bank’s pending appeal.
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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