AKP Dispute Resolution Digest September 28, 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 Mediation
1.1. Infrastructure and Construction
1.1.1. Supreme Court holds scope of an “excepted matters” clause is for the Arbitral Tribunal, not a Section 11 court, to decide
The Hon'ble Supreme Court has held that the question whether a particular claim is covered by, or falls outside, an “excepted matters” clause of a works contract is a matter squarely within the competence of the Arbitral Tribunal under Section 16 of the Arbitration and Conciliation Act, 1996 (“A&C Act”), and not a question for a court exercising even the wider, appointment-stage jurisdiction under Section 11 of the A&C Act, much less a court exercising discretionary judicial review under Article 226 of the Constitution. The dispute arose out of a works contract for the doubling of a railway track between Guntur and Guntakal, awarded to a construction company by the South Central Railway. Following termination of the contract, the Telangana High Court had granted the construction company liberty to raise its claims before an Arbitral Tribunal, while directing that the claims be decided strictly in accordance with the terms of the contract. When the construction company challenged this direction as an impermissible constraint on the Tribunal's jurisdiction to decide arbitrability of the termination dispute, including whether it fell within “excepted matters”, the Hon'ble Supreme Court agreed. The Court explained that Section 16 of the A&C Act incorporates the principle of kompetenz-kompetenz and, following the 2015 amendment restricting the scope of a Section 11 court's examination to the existence of the arbitration agreement, neither a court exercising appointment-stage jurisdiction nor a writ appellate court has jurisdiction to predetermine the touchstone by which the Tribunal is to adjudicate a claim said to fall within an “excepted matters” clause. The Court accordingly clarified that its earlier direction should not be construed as impinging upon the Tribunal's jurisdiction to independently adjudicate the arbitrability of the termination dispute.
1.2. Banking and Finance
1.2.1. Supreme Court holds personal guarantor bound by arbitration clause incorporated by reference into loan agreement
The Hon'ble Supreme Court has held that a personal guarantee executed as a mandatory pre-disbursement condition under a loan agreement, and expressly deemed to form an integral part of that agreement, stands incorporated with the arbitration clause contained in the loan agreement, thereby binding the guarantor to arbitration notwithstanding the absence of any independent arbitration clause in the guarantee itself. The dispute arose out of loans disbursed for the establishment of Model Training Centres under the “Pradhan Mantri Kaushal Kendra” scheme, accompanied by personal guarantees executed by the managing director of the borrower company. Following default, arbitral proceedings were initiated against all parties, including the guarantor. The guarantor successfully applied under Section 16 of the Arbitration and Conciliation Act, 1996 for his deletion from the array of parties, contending that the personal guarantee contained no arbitration clause of its own, a position upheld by the Delhi High Court on the ground that a mere general reference to another document could not import an arbitration clause absent conscious acceptance by the parties. Reversing this position, the Hon'ble Supreme Court held that the loan agreement's own definitional and miscellaneous clauses declared that all “Facility Agreements”, including personal guarantees, were deemed part of the principal agreement “as if the provisions thereof were set out herein in extension”. The Court held that this deeming fiction, read with the contemporaneity of execution of the guarantee and the loan agreement, established that the documents were designed to operate not as isolated contracts but as component parts of a single composite transaction, such that the arbitration clause contained in the loan agreement stood incorporated into the personal guarantee under Section 7(5) of the Arbitration and Conciliation Act, 1996. The guarantor was accordingly restored to the array of parties to the arbitral proceedings.
2. PMLA/White Collar
2.1. Pharmaceuticals
2.1.1. Supreme Court lays down three-stage test for attributing mens rea to corporations, refuses to quash prosecution for non-identification of natural person
The Hon'ble Supreme Court has held that the question of attributing the guilty mind of a natural person to a corporation is an intricate, fact-dependent inquiry that must be resolved at trial, and cannot be used as a ground to quash criminal proceedings against a company at the threshold merely because the chargesheet does not conclusively establish attribution. In doing so, the Court has, for the first time, laid down a structured three-stage framework governing how corporate criminal liability is to be fixed in cases involving mens rea. The appellant, a pharmaceutical manufacturer, had been arrayed as an accused in an FIR alleging that a Scientific Officer at the Bhabha Atomic Research Centre had conspired with several pharmaceutical companies to procure medicines at inflated rates by misclassifying items as proprietary and bypassing competitive bidding, without any employee of the appellant company being named as a co-accused. The appellant's plea to quash the prosecution, on the ground that a corporation cannot be prosecuted for an offence requiring mens rea without its “directing mind and will” being identified and arraigned, was rejected by the Karnataka High Court and, thereafter, by the Hon'ble Supreme Court. Undertaking a comparative survey of English and Indian jurisprudence on corporate criminal liability, the Court laid down a sequential three-stage attribution framework requiring an examination of the corporation's constitutional documents, any delegation of authority, and, failing both, the purpose of the statute creating the offence. The Court clarified that neither identification of the individual concerned nor their arraignment as a co-accused is a mandatory prerequisite for prosecuting the company, holding that such a requirement, if imported wholesale into every case, would risk stifling genuine prosecutions where the identity of the actual wrongdoer within the corporate hierarchy may not be readily ascertainable even after investigation.
3. Insolvency and Bankruptcy
3.1. Regulatory
3.1.1. IBBI clarifies that interim moratorium for personal guarantors has ceased even in respect of pending applications, following Bombay and Delhi High Court rulings
The Insolvency and Bankruptcy Board of India (“IBBI”) has, by Circular No. IBBI/II/106/2026 dated 21 September 2026, clarified that the interim moratorium under Section 96 (and, correspondingly, Section 124) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), in respect of a personal guarantor to a corporate debtor, ceased to operate with effect from 26 May 2026, in respect of applications pending before the Adjudicating Authority as on that date, and not merely applications filed thereafter. The circular draws attention to the Insolvency and Bankruptcy Code (Amendment) Act, 2026, which inserted sub-section (4) in Sections 96 and 124 of the IBC excluding personal guarantors to corporate debtors from the benefit of the interim moratorium, with effect from 26 May 2026. Referring to the judgment of the Hon'ble Bombay High Court in Tata Capital Financial Services Limited v. Neel Motors LLP and others, the IBBI noted the Court's observation that the phrase “where an application is filed” in Section 96(4) would bring within its sweep any application filed and pending before the Adjudicating Authority as on the date the provision took effect, such that the amendment operates prospectively while covering pending applications. The circular also refers to the judgment of the Hon'ble Delhi High Court in IDBI Trusteeship Services Ltd. v. Manish Jain and Ors., which similarly held the amendment to be “retroactive” in the sense of “quasi retroactivity”, thereby applying to pending applications. Relying on these judgments, the IBBI has accordingly clarified, in exercise of its powers under Section 196 of the IBC, that the interim moratorium in respect of personal guarantors to corporate debtors ceased to operate from 26 May 2026 for applications pending before the Adjudicating Authority as on that date.
3.2. Employment and Labour
3.2.1. Supreme Court holds limitation for a Section 62 IBC appeal runs from the date the NCLAT order is provided, not from the date a certified copy is obtained
The Hon'ble Supreme Court has held that the limitation period for filing an appeal against an order of the National Company Law Appellate Tribunal (“NCLAT”) under Section 62 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) runs from the date on which the order is provided to the parties in terms of the NCLAT Rules, 2016, and not from the date on which a certified copy of the order is subsequently obtained. The appeal before the Hon'ble Supreme Court, filed by the Employees' Provident Fund Organisation (“EPFO”), was reported by the Registry to be 28 (twenty-eight) days beyond time. EPFO contended that it had received a certified copy of the impugned NCLAT order on 25 March 2026 and that its appeal, filed within 60 (sixty) days of that date, was accordingly within limitation. The underlying dispute concerned EPFO's claim of over INR 1.78 crore against a corporate debtor undergoing corporate insolvency resolution, which the National Company Law Tribunal had allowed but which the NCLAT had set aside on the ground that EPFO could not continue assessment proceedings during the moratorium under Section 14 of the IBC. Rejecting EPFO's contention, the Court held that making limitation contingent on the date a party chooses to obtain a certified copy would allow an aggrieved party to defer applying for a certified copy indefinitely, thereby postponing the commencement of limitation. Referring to Rule 95(3) of the NCLAT Rules, 2016, which requires the Deputy Registrar to transmit the case file and order for preparation and communication of copies to the parties, the Court directed EPFO to file a fresh affidavit disclosing whether any copy of the order had been transmitted to it or its counsel by email or otherwise, before the matter is taken up further.
4. Consumer Law
4.1. Healthcare
4.1.1. Supreme Court dismisses curative petition, holds medical services continue to fall within the ambit of consumer protection law
The Hon'ble Supreme Court has dismissed a curative petition challenging the applicability of consumer protection law to medical services, thereby bringing the latest challenge to the legal position established in the landmark 1995 judgment in Indian Medical Association v. V.P. Shantha to an end. In its order dated 9 September 2026, a five-judge Bench found no grounds to entertain the curative petition filed by the Medico Legal Society of India, applying the principles governing curative jurisdiction laid down in Rupa Ashok Hurra v. Ashok Hurra. The challenge traced its origins to a 2024 observation by a two-judge Bench of the Hon'ble Supreme Court, made while considering whether lawyers could be proceeded against under consumer law, that the V.P. Shantha judgment appeared to require reconsideration. A subsequent three-judge Bench, and thereafter a review petition, had already declined to reopen the position as it applies to medical professionals, and the present curative petition represented the final stage of that litigation. As a result of the dismissal, the framework under which medical practitioners, hospitals, and nursing homes providing services for consideration continue to fall within the definition of “service” under the Consumer Protection Act, 2019 remains undisturbed. Patients alleging deficiency in medical services may accordingly continue to approach consumer commissions in appropriate cases, subject to the applicable law and facts, while the Court's dismissal does not, by itself, establish that every unsuccessful treatment outcome amounts to medical negligence or a deficiency in service.
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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