Newsletter For February 2026

ARBITRATION

Date: 02 February 2026

Case Name: Rajia Begum vs. Barnali Mukherjee Civil Appeal No. Of 2026 (Arising out of SLP (C) No. 6013 Of 2021)

Forum: Supreme Court

The present dispute arose out of a partnership controversy concerning the firm M/s. S.B. Enterprise, wherein the principal controversy centred around the validity and enforceability of an "Admission Deed" dated 17 April 2007. By virtue of the said deed, Barnali Mukherjee i.e., Respondent, claimed to have been inducted as a partner into the firm, which was originally a proprietorship concern belonging to the late husband of Rajia Begum i.e., Appellant. The Admission Deed purportedly contained an arbitration clause forming the basis of subsequent arbitral proceedings. Rajia Begum, however, categorically denied the execution of the said document and alleged that the Admission Deed was forged and fabricated.

Upon the demise of her husband, Rajia Begum instituted a civil suit seeking a declaration that the Admission Deed was void, non est and unenforceable in law, and further sought a decree of permanent injunction restraining Mukherjee from interfering in the affairs and management of the business. In response, Mukherjee filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 ("the Arbitration Act"), seeking reference of the dispute to arbitration on the strength of the arbitration clause contained in the disputed Admission Deed. Parallelly, a petition under Section 11 of the Act was also preferred for appointment of an arbitrator to adjudicate the disputes between the parties.

Issues:

1. Whether a dispute can be referred to arbitration under Section 8 or an arbitrator appointed under Section 11 of the Arbitration Act when the very existence of the arbitration agreement is challenged on grounds of forgery and fabrication?
2. Whether serious allegations of fraud/forgery that go to the "root of the agreement" are non-arbitrable?

Submissions of the Parties:

The Appellant submitted that the "Admission Deed" dated 17 April 2007, which allegedly contained the arbitration clause, is a forged and fabricated document, the execution whereof is emphatically denied. It was contended that in the absence of a valid and subsisting agreement, no arbitration clause can be said to exist, and consequently, there is no privity of contract between the parties. The Respondent, it was argued, never acted as a partner from 2007 to 2016, and the document surfaced only after a lapse of nearly nine years, thereby casting serious doubt on its authenticity.

It was further urged that both the Trial Court and the First Appellate Court had concurrently held that the allegations of fraud were serious and that the statutory requirement under Section 8(2) had not been complied with. The High Court, in exercise of its limited supervisory jurisdiction under Article 227, could not have interfered with such concurrent findings of fact or directed reference of the dispute to arbitration when the very existence of the arbitration agreement was in question.

The Respondent contended that the observations made by the High Court in proceedings under Section 9 of the Arbitration Act, were merely tentative and confined to the consideration of interim relief, and therefore could not prejudice the adjudication of applications under Sections 8 and 11. It was submitted that such prima facie findings did not conclusively determine the existence or validity of the arbitration agreement.

It was further argued that mere allegations of fraud do not render a dispute non-arbitrable, and that even a challenge to the arbitration agreement can be examined by the arbitral tribunal in exercise of its jurisdiction. The Respondent maintained that the High Court had rightly invoked its supervisory powers under Article 227 to correct the erroneous approach adopted by the subordinate courts and to ensure that the dispute was referred to arbitration in accordance with the contractual stipulation.

Observations of the Court:

The Court undertook an extensive examination of the jurisprudence concerning the effect of "serious allegations of fraud" on the arbitrability of disputes and the jurisdiction of an arbitral tribunal. It reiterated that while a mere allegation of fraud simpliciter does not ipso facto render a dispute non-arbitrable, a materially different position arises where the fraud is alleged against the arbitration agreement itself or where it permeates the entire underlying contract, thereby impeaching its very validity. Relying inter alia upon the principles enunciated in Avitel Post Studioz Limited v. HSBC PI Holdings (Mauritius) Ltd., the Court reaffirmed the twin tests governing such cases: first, whether the plea of fraud is of such nature that it renders the arbitration agreement itself non-existent or void; and second, whether the allegations transcend the private domain of the parties and implicate issues in the public law sphere.

Applying the aforesaid principles to the facts at hand, the Court found that the "Admission Deed" relied upon by Rajia Begum was enveloped in a "grave cloud of doubt". The document surfaced for the first time in the 2016, nearly nine years after its alleged execution, and there was a conspicuous absence of any contemporaneous record evidencing its existence during the intervening period. The Court further noted internal inconsistencies in the Respondent's own case: although the deed recorded that the original partners had retired in 2007, it was admitted that her husband continued to function as a partner until 2010. Moreover, banking records, promissory notes, hypothecation agreements, and related financial documents from 2009–2010 consistently reflected the original partners as being in control of the business, with Rajia Begum described merely as a guarantor.

The Court also observed that the earlier prima facie finding of the High Court in proceedings under Section 9, wherein the existence of the Admission Deed was characterised as doubtful, had attained finality and constituted a relevant circumstance while considering applications under Sections 8 and 11 of the Act. Emphasising that arbitration is founded exclusively upon voluntary consent, the Court held that when the authenticity of the very agreement to arbitrate is seriously disputed, the matter ceases to be arbitrable as it strikes at the root of the tribunal's jurisdiction. In that backdrop, it was concluded that the High Court had transgressed the limits of its supervisory jurisdiction under Article 227 of the Constitution by reappreciating evidence and unsettling the concurrent findings of the subordinate courts.

Held:

The Supreme Court held that the dispute concerning the Admission Deed dated 17.04.2007 involved serious allegations of fraud that struck at the very root of the arbitration agreement itself and, therefore, was not amenable to arbitration at this stage. The Court observed that the High Court had erred in referring the parties to arbitration under Section 8 of the Arbitration Act, particularly when the Respondent had failed to produce the original Admission Deed or a duly certified copy thereof, as mandated under Section 8(2) of the Act. In such circumstances, the statutory preconditions for reference to arbitration were not satisfied.

Accordingly, the Court declared the High Court's order dated 24.09.2021, whereby the dispute had been referred to arbitration, to be unsustainable in law and set it aside. Conversely, the Court affirmed the High Court's separate order dated 11.03.2021 rejecting the application under Section 11, holding that appointment of an arbitrator would be legally impermissible where the very existence of the arbitration agreement is under serious dispute and necessitates a full-fledged adjudication. In the result, the appeal preferred by Rajia Begum (SLP (C) No. 6013 of 2021) was dismissed, while the appeal filed by Barnali Mukherjee (SLP (C) No. 20262 of 2021) was allowed, with no order as to costs.

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The judgment clarifies that when the existence of an arbitration agreement is stoutly denied on the basis of forgery or fabrication, the Court must prima facie determine its existence; if the validity of the signature is in serious dispute, the Court cannot refer the parties to arbitration as the arbitrator's jurisdiction itself is at stake.

CIVIL LAW

Date: 23 February 2026

Case Name: New India Assurance Co. Ltd. vs. Rekha Chaudhary and Others Civil Appeal No. 174 of 2026

Forum: Supreme Court

The appellant, New India Assurance Co. Ltd., challenged a judgment of the Delhi High Court which had fastened upon it the liability to pay a statutory penalty under Section 4A(3)(b) of the Employees' Compensation Act, 1923. The dispute arose following the death of Shri Sandeep, a commercial driver employed by Respondent No. 4, who collapsed while driving a vehicle during the course of his employment on 13 February 2017. His legal heirs instituted proceedings before the Commissioner under the Act seeking compensation for death arising out of and in the course of employment.

The Commissioner held that an employer-employee relationship existed and awarded compensation of ?7,36,680 along with interest at 12% per annum from the date of the incident. As the vehicle was covered by a valid insurance policy issued by the appellant, the insurer was directed to indemnify the compensation and interest amount. However, on account of the employer's failure to deposit the compensation within one month as mandated under Section 4A, the Commissioner imposed a penalty of 35% of the compensation amount. While the High Court upheld the award of compensation and declined enhancement, it modified the order to fasten not only the compensation and interest but also the penalty liability upon the insurer.

Aggrieved by the imposition of penalty liability, the insurer approached the Supreme Court. The principal issue before the Court was whether the statutory penalty under Section 4A(3)(b), which arises from the employer's default in making timely payment, could be indemnified by the insurer or whether it remained the exclusive liability of the employer.

Issues:

1. Whether the term "compensation" under the Act includes the "penalty" mentioned in Section 4A(3)(b)?
2. Whether the penalty is a punitive liability arising out of the personal default of the employer, distinct from the legal liability arising out of the accident itself?
3. Whether the insurer's duty as a surety extends beyond the principal compensation and interest to cover punitive costs levied due to the employer's administrative delay or negligence?

Submissions of the Parties:

The appellant contended that the High Court erred in fastening liability for payment of penalty under Section 4A(3)(b) of the Employees' Compensation Act, 1923 upon the insurer. It was submitted that while the insurer had admitted its contractual and statutory liability to indemnify the employer in respect of compensation and interest, the penalty component stood on a distinct footing. The penalty, it was argued, arises solely on account of the employer's personal default in failing to deposit compensation within one month from the date it fell due, and is punitive in nature.

Reliance was placed on the settled position of law laid down by the Supreme Court in Ved Prakash Garg v. Premi Devi, wherein it was held that an insurance company is liable to indemnify the employer only for compensation and interest, but not for the additional penalty imposed due to the employer's fault. The appellant submitted that the High Court's direction was contrary to binding precedent and amounted to imposing upon the insurer a liability not contemplated either by the statute or the insurance contract.

The respondents contended that the Employees' Compensation Act is a beneficial piece of social welfare legislation and must be interpreted in a manner that advances the object of securing prompt and effective relief to dependents of deceased employees. It was argued that Section 4A does not carve out any express distinction limiting the insurer's liability with respect to the penalty component, and that the liability to satisfy the award, including penalty, ought to be construed broadly to protect the interests of claimants.

It was further submitted that once the insurer had stepped into the shoes of the employer under a valid policy and admitted liability for compensation and interest, it could not selectively disclaim liability for penalty. According to the respondents, the entire amount directed by the Commissioner formed part of the statutory award, and fastening full liability upon the insurer ensured expeditious payment to the claimants without compelling them to pursue separate recovery proceedings against the employer.

Observation of the Court:

The Supreme Court undertook a detailed and purposive interpretation of Section 4A of the Employees' Compensation Act, 1923, which governs the obligation to pay compensation and the consequences of default. The Court noted that the statutory scheme contemplates a clear tripartite classification of financial liability namely, the principal compensation, the compensatory interest, and the penal

component. While the principal amount and interest flow directly from the statutory liability arising out of the employment injury, the penalty under Section 4A(3)(b) constitutes a distinct and additional statutory liability. Such penalty is not intrinsic to the accident itself but is triggered exclusively by the employer's failure to discharge the compensation within the prescribed period of thirty days from the date it fell due.

Relying upon the authoritative pronouncement in Ved Prakash Garg v. Premi Devi, the Court observed that the insurer, under a contract of indemnity, acts as a surety for the employer's statutory liability to compensate the employee for injury or death arising out of and in the course of employment. However, such indemnity does not automatically extend to the employer's contumacious conduct or deliberate non-compliance with statutory mandates. The imposition of penalty is contingent upon a specific finding by the Commissioner that there was "no justification" for the delay, thereby underscoring its punitive character. In the absence of an express contractual stipulation to the contrary, wherein the insurer unequivocally undertakes to bear statutory penalties upon receipt of a corresponding premium, the burden of such punitive liability must rest solely upon the employer. The Court consequently held that the High Court had erred in law in transferring a penal obligation onto the insurer, whose contractual undertaking was confined to the accidental risk and the compensatory interest arising therefrom.Top of Form

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Held

The Supreme Court allowed the appeal preferred by the Insurance Company and set aside the judgment of the Delhi High Court to the limited extent that it had fastened liability for payment of penalty upon the insurer. The Court categorically held that, under the statutory scheme of the Employees' Compensation Act, 1923, the insurer cannot be made liable for the penalty imposed under Section 4A(3)(b). While reaffirming that the insurer is bound to indemnify the employer in respect of the principal compensation and statutory interest both of which arise from the accidental risk covered under the policy, the Court clarified that the penalty of ?2,57,838/- was a punitive consequence of the employer's own default in failing to discharge the compensation within the prescribed period.

Accordingly, the Court fastened exclusive liability for payment of the penalty upon the Employer (Respondent No. 4) and directed that the said amount be deposited with the claimants within a period of eight weeks from the date of judgment. All other findings of the High Court, including those affirming the insurer's liability to satisfy the compensation and interest at 12% per annum, were left undisturbed. By this ruling, the Supreme Court reiterated the settled principle that, in the absence of a specific contractual stipulation supported by premium to cover statutory penalties, the financial burden arising from the employer's administrative default cannot be shifted to the insurer.

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The judgment clarifies that an insurance company is not liable to pay the penalty imposed under Section 4A(3)(b) of the Employees' Compensation Act, 1923, unless specifically covered by the insurance contract. While the insurer must indemnify the employer for the principal compensation and interest (which arise from the accident itself), the penalty is a punitive liability triggered solely by the employer's personal failure to pay on time. Consequently, the Court shifted the liability for the Rs. 2,57,838/- penalty exclusively onto the employer, affirming that administrative defaults and "contumacious conduct" cannot be passed on to the insurer.

CRIMINAL LAW

Date of Order: 10 February 2026.

Case Name: Binay Kumar Singh & Anr. vs. State of Jharkhand & Ors. Writ Petition (Criminal) No.55/2026

Forum: Supreme Court

The Petitioners approached the Supreme Court under Article 32 of the Constitution alleging a systematic abuse of the criminal process by State authorities through successive registration of multiple FIRs to ensure the continued custody of Petitioner No. 1. It was submitted that while Petitioner No. 1 was cooperating with the Anti-Corruption Bureau ("ACB"), Ranchi, in connection with FIR No. 9/2025 on 20 May 2025, a fresh FIR No. 11/2025 was registered against him by the ACB, Hazaribagh. The Petitioners alleged that these FIRs were retaliatory in nature, arising from his refusal to tender a "convenience confession". Thereafter, two additional FIRs, FIR No. 20/2025 dated 24 November 2025 and FIR No. 458/2025 dated 26 November 2025, were lodged concerning alleged illegal forest land mutations and irregularities under the Jharkhand Excise Policy.

It was contended that successive remand orders were obtained to prolong custody and that the State deliberately suppressed the existence of subsequent FIRs during bail proceedings to defeat his release. The State, in defence, maintained that the allegations involved serious economic offences and that custodial interrogation was warranted based on material emerging from preliminary inquiries into the forest land and excise matters.

Issues:

1. Whether the actions of the Respondents in repeatedly invoking and deploying the criminal process against the Petitioners, specifically through successive FIRs, were arbitrary, mala fide, and unconstitutional?
2. Whether the repeated registration of FIRs and the continued incarceration of the Petitioners amounted to a gross abuse of process and a violation of their fundamental rights under Articles 14, 19, and 21 of the Constitution of India?

Submissions of the Parties:

The Appellants contended that the State authorities had engaged in a manifest abuse of the criminal process by registering successive and strategically timed FIRs against Petitioner No. 1 with the deliberate objective of ensuring his continued incarceration. It was urged that these "serial FIRs" were actuated by mala fide intent and were instituted each time the petitioner was on the verge of securing bail in pending matters, thereby effectively circumventing judicial scrutiny and frustrating the grant of liberty. The Appellants further alleged that such coercive measures were adopted in retaliation for Petitioner No. 1's refusal to furnish a so-called "convenience confession" during custodial interrogation. On this premise, they sought a declaration that the impugned actions were unconstitutional and violative of Articles 14, 19, and 21 of the Constitution, and prayed for appropriate directions restraining the State from initiating further criminal proceedings without prior leave of the Court.

The Respondents, representing the State, raised a preliminary objection as to the maintainability of the writ petition under Article 32, contending that the Petitioners had an efficacious alternative remedy before the jurisdictional High Court, particularly in relation to bail. It was submitted that the FIRs in question emanated from bona fide preliminary inquiries into serious irregularities concerning illegal forest land mutations and alleged infractions under the Jharkhand Excise Policy. The State asserted that the gravity and complexity of the alleged offences warranted custodial interrogation and that the investigations were being conducted in accordance with law, devoid of any mala fide intent. It was further contended that the inquiry was at a nascent stage and necessitated the active participation of the petitioners to ascertain the full scope of the alleged financial and administrative improprieties.

Observations of the Court:

The Court observed that Article 32 of the Constitution embodies the "heart and soul" of the constitutional framework, guaranteeing a direct remedy before the Supreme Court where there is prima facie infringement of fundamental rights. It held that the existence of an alternative remedy does not preclude the exercise of jurisdiction under Article 32 where the facts disclose a credible allegation of violation of rights under Part III of the Constitution. In the present case, the Court found it appropriate to entertain the petition in light of the serious allegations of misuse of criminal law to curtail personal liberty.

The Court further noted that the initiation of criminal proceedings nearly fifteen years after the alleged illegal mutation of forest lands in April 2010 appeared prima facie unusual and warranted scrutiny. It was particularly troubled by the apparent pattern of successive FIRs being registered in close proximity to bail hearings, suggesting a deliberate attempt to ensure the continued incarceration of Petitioner No. 1. The Court also expressed concern that during the bail proceedings on 12 December 2025, the State had failed to disclose the existence of two additional FIRs—FIR Nos. 20/2025 and 458/2025, which were registered thereafter and were only revealed through a counter-affidavit. In view of these circumstances, the Court observed that the criminal process appeared to have been invoked in an arbitrary and improper manner, raising serious concerns regarding deprivation of liberty in violation of constitutional safeguards.

Held:

In the connected criminal appeal, the Court made the earlier interim order of bail absolute, directing that the appellant be enlarged on bail subject to such terms and conditions as may be imposed by the jurisdictional court. It further directed that no coercive steps shall be taken against Petitioner No. 2, provided she continues to cooperate with the ongoing investigation. These directions were issued upon the Court's prima facie conclusion that the successive registration of FIRs concerning incidents dating back nearly fifteen years appeared to reflect a mala fide and arbitrary use of criminal law aimed at perpetuating the incarceration of Petitioner No. 1.

INSOLVENCY AND BANKRUPTCY LAW

Date: 12 February 2026.

Case Name: B. Prashanth Hegde vs. State Bank of India & Anr. B. Prashanth Hegde vs. State Bank of India & Anr. Civil Appeal No. 477 Of 2022

Forum: Supreme Court

Metal Closures Pvt. Ltd. ("Corporate Debtor") had availed diverse credit facilities from a consortium of banks led by the State Bank of India ("SBI"), the lead financial creditor. Upon failure of the Corporate Debtor to service its outstanding liabilities and consequent classification of the account as non-performing, SBI instituted an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") seeking initiation of the Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor.

One of the appellants, a promoter of the Corporate Debtor, opposed the initiation of CIRP, inter alia, on the ground that the underlying financial debt was barred by limitation, contending that the date of default had occurred well prior to the filing of the Section 7 application and that the claim was therefore not legally enforceable. It was further alleged that the sanction and disbursement of the credit facilities were vitiated by fraud attributable to certain bank officials, against whom criminal proceedings were stated to be pending. The appellant additionally asserted that a substantial counter-claim of approximately ?1500 crores had been raised against the consortium of banks and argued that the pendency of such disputes warranted suspension or deferment of the insolvency proceedings.

The National Company Law Tribunal ("NCLT"), upon consideration of the material on record, admitted the Section 7 application and commenced CIRP against the Corporate Debtor. The order of admission was affirmed by the National Company Law Appellate Tribunal ("NCLAT"). Aggrieved thereby, the appellant preferred an appeal before the Supreme Court challenging the concurrent findings and the initiation of insolvency proceedings.

Issues:

1. Whether a Section 7 application under the IBC is liable for rejection if it does not specify the exact date of default but mentions the date of declaration of the account as NPA?
2. Whether the application filed by the SBI was barred by the law of limitation under Article 137 of the Limitation Act?
3. Whether an acknowledgment of debt in a company's balance sheet can extend the limitation period under Section 18 of the Limitation Act for the purposes of IBC proceedings.

Submissions of the Parties:

The appellant primarily contended that the application under Section 7 of the IBC, filed by the SBI, was barred by limitation. It was urged that the relevant date of default was 31 January 2010, when the Corporate Debtor's account was classified as a NPA following the first instance of non-payment. In view of Article 137 of the Limitation Act, 1963, which prescribes a limitation period of three years for such applications, it was argued that the initiation of CIRP in 2018 was ex facie beyond the permissible period and therefore not maintainable in law.

The appellant further submitted that the balance sheets relied upon by the respondent banks as acknowledgments of liability under Section 18 of the Limitation Act were legally insufficient to extend the limitation period. It was contended that the said financial statements were either unauthenticated, not duly approved by shareholders, or qualified with remarks in light of pending disputes and litigation, and hence could not be treated as unequivocal acknowledgments of subsisting debt. Additionally, the appellant alleged that the insolvency proceedings had been instituted with mala fide intent to overreach pending criminal proceedings and counter-claims amounting to ?1500 crores filed against the banks, and that such circumstances warranted judicial intervention to halt the CIRP.

The respondents refuted the plea of limitation and asserted that the Section 7 application was well within the prescribed period. It was submitted that the Corporate Debtor had repeatedly acknowledged the outstanding debt in writing, thereby attracting the operation of Section 18 of the Limitation Act. Particular emphasis was placed on the negotiations undertaken between 2010 and 2014 for restructuring of the debt and the execution of fresh Working Capital Consortium Agreements, which constituted clear and valid acknowledgments of liability.

The respondents further submitted that the Corporate Debtor's balance sheets for the financial years 2013–14 and 2014–15, signed on 30 September 2015, expressly reflected the outstanding dues without any qualifying disclaimer negating liability. These acknowledgments, it was contended, extended the limitation period until at least September 2018, rendering the Section 7 application timely. With regard to the allegations of fraud and pending criminal proceedings, the respondents maintained that such matters were independent of the determination of financial debt and default under the IBC and did not operate as a legal bar to the initiation or continuation of the Corporate Insolvency Resolution Process.

Observations of the Court:

The Court observed that Form-1 under the IBC serves the main objective of showing that the date of the default is different from the date that the debt will be deemed time-barred because of a lack of initiation of processes to recover debts. The Court found that the IBC and its associated rules should be given a liberal and purposive interpretation rather than being interpreted narrowly or in a pedantic manner, both of which would defeat the purpose of the IBC. The Court determined that the Adjudicating Authority i.e NCLT has the authority to permit additional documents or amendments to be filed prior to the passing of an order and that once a default has been established (where that default is in excess of the monetary limit referred to in the NCLT, the NCLT has no discretion to not admit the application once it has been submitted in its complete form.

In relation to the idea of balance sheets serving as acknowledgments, the Court stated that, in general, the net amount of a debt listed on a balance sheet is considered an acknowledgment of a liability for the purposes of Section 18 of the Limitation Act unless the liability is expressly qualified by caveats. In this respect, the Court determined that the CD's auditor's report only indicated that the company was not a "going concern", and did not provide any expressions of a caveat with respect to the actual debt listed on the company's balance sheet. The Court also noted that the mere pendency of a counterclaim for damages against the bank's officers and the existence of a criminal case against bank officers will not prevent a financial creditor from invoking the IBC; those issues would be dealt with on their own merits, and do not nullify the existence of the financial debt.

Held:

The Supreme Court dismissed the appeal and affirmed the judgment of the NCLAT upholding admission of the application under Section 7 of the IBC against the Corporate Debtor. The Court held that the application was well within the prescribed period of limitation, as the limitation stood extended by virtue of valid and subsisting acknowledgments of debt executed by the Corporate Debtor. These acknowledgments were reflected not only in the Working Capital Consortium Agreements executed during the restructuring process but also in the balance sheets for the financial years 2013–14 and 2014–15.

The Court rejected the contention that the classification of the account as a NPA on 31 January 2010 conclusively determined the limitation period. It observed that the NPA date is primarily relevant for prudential regulatory purposes under RBI norms and does not ipso facto foreclose the effect of subsequent acknowledgments or restructuring arrangements. The latest acknowledgment, contained in the balance sheet signed on 30 September 2015, extended the limitation period until 29 September 2018, thereby rendering the Section 7 application timely.

The Court further held that the pendency of criminal proceedings against certain bank officials or the existence of counterclaims for damages did not operate as a bar to the initiation of insolvency proceedings. Once the twin requirements under Section 7, existence of a financial debt and occurrence of default, are established, the Adjudicating Authority is bound to admit the application. Accordingly, the Supreme Court concluded that the CIRP had been validly initiated and declined to interfere with the concurrent findings of the NCLT and NCLAT.

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An application under Section 7 of the IBC cannot be rejected solely for failing to strictly adhere to the technicalities of "Form-1" if the essential ingredients of debt and default are established through the provided documents. While an NPA date is primarily for RBI's regulatory classification, it can serve as a valid reference point for default in legal pleadings, especially when preceded by restructuring efforts that keep the debt "alive". A balance sheet entry serves as a valid acknowledgment of debt under Section 18 of the Limitation Act, even in the context of insolvency proceedings.

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Date: 04 February 2026

Case Name: Ankhim Holdings Pvt. Ltd. & Anr. vs. Zaveri Construction Pvt. Ltd. Civil Appeal No. 779/2026 (Arising out of SLP (C) No. 11667/2024)

Forum: Supreme Court

The dispute arose out of a development arrangement between Ankhim Holdings Private Limited and Zaveri Construction Private Limited in relation to a Slum Rehabilitation Authority (SRA) project situated at Andheri, Mumbai. Owing to disputes between the parties concerning performance and rights under the development agreement, the Bombay High Court, in 2019, appointed Justice J. N. Patel (Retd.) as the sole arbitrator to adjudicate the disputes.

Subsequently, during the pendency of the arbitral proceedings, the NCLT admitted Zaveri Construction Private Limited into the Corporate Insolvency Resolution Process under the IBC. Upon such admission, a statutory moratorium under Section 14 of the IBC came into effect, inter alia, restraining the institution or continuation of proceedings and prohibiting alienation of assets of the Corporate Debtor. Notwithstanding the subsistence of the moratorium and in the absence of any specific interim orders permitting continuation, the appellants approached the High Court seeking liberty to move appropriate applications before the learned arbitrator.

By order dated March 2022, the High Court permitted the appellants to present applications before the arbitrator, proceeding on the understanding that the insolvency professional had become functus officio and that the arbitral proceedings had, in effect, ceased. Thereafter, the arbitrator heard the parties between March and August 2022 and passed awards permitting the sale of certain flats by Zaveri Construction Private Limited to third parties. On 26 August 2022, the NCLT passed an order directing liquidation of the Corporate Debtor, whereupon the arbitrator terminated the arbitral proceedings. The appellants then moved the High Court seeking appointment of a substitute arbitrator. The High Court appointed Justice R. M. Savant (Retd.) as the substitute arbitrator and simultaneously declared that all arbitral proceedings conducted during the subsistence of the moratorium were null and void.

Issues

1. Whether the High Court, while appointing a substitute arbitrator under Section 15(2), has the jurisdiction to declare previous arbitral proceedings a nullity?
2. Whether Section 15(4) of the Act protects the validity of prior rulings despite a change in the arbitrator?
3. Whether a moratorium under the IBC allows a court to annul arbitral orders via a collateral appointment petition instead of a statutory appeal?

Submissions by the parties

The Appellants contended that the High Court, while exercising jurisdiction under Sections 15(2) and 15(4) of the Arbitration Act, was empowered only to appoint a substitute arbitrator upon termination of the mandate of the earlier tribunal. It was argued that such power did not extend to adjudicating upon the validity or invalidity of prior arbitral proceedings or orders. The Appellants emphasised that Section 15(4) expressly preserves the continuity of arbitral proceedings, stipulating that the reconstituted tribunal may proceed from the stage already reached, and that evidence recorded or orders passed prior to substitution cannot automatically be rendered void merely on account of a change in the composition of the tribunal.

It was further submitted that the High Court had bypassed the statutory scheme of the Arbitration Act, particularly Section 37, which provides the limited and exclusive grounds for appeal against certain arbitral orders. By declaring several months of arbitral proceedings as a nullity, the High Court, according to the Appellants, effectively exercised appellate jurisdiction without statutory basis. The Appellants cautioned that such a declaration would have grave consequences for third-party homebuyers who had acted in reliance upon the arbitral orders, and would defeat the legislative objective of expeditious dispute resolution by compelling the parties to recommence arbitration de novo.

The Respondents, on the other hand, supported the impugned order and contended that the arbitral proceedings conducted during the subsistence of the moratorium under Section 14 of the IBC, were void ab initio. It was submitted that once CIRP was admitted and the statutory moratorium came into effect, all proceedings against the Corporate Debtor stood stayed by operation of law. Any continuation of arbitration or orders permitting alienation of assets during such period, it was argued, were in direct contravention of the statutory embargo and could not be sustained.

The SBI, appearing in support of the Respondents, further submitted that the flats forming the subject matter of the arbitral orders were mortgaged in its favour and constituted secured assets. Permitting their sale during the moratorium would prejudice the rights of the secured creditor and undermine the insolvency framework aimed at protecting the corporate debtor's estate for equitable distribution. In these circumstances, it was contended that the High Court was justified in declaring the arbitral proceedings conducted during the moratorium as null and void in order to safeguard the integrity of the insolvency process.

Observation of the court

The focus of the Supreme Court's conclusions on limits of judicial interference and limits on Section 15 of the Arbitration Act was about its statutory limits. In respect to both arbitrators and arbitration, the Supreme Court read the provisions of Section 15(2) and 15(4) of the Arbitration Act. Section 15(2) relates to the appointing substitute arbitrators, but the Court held that this alone could not be viewed as giving broad supervisory or appellate power to the High Court over previous proceedings and section 15(4) must be read together stating this provision excludes any order or ruling made in the previous Arbitration Tribunal irrespective of the new Arbitration Tribunal composition unless otherwise agreed between the parties. Thus, it was determined from the legislative intent of these sections that the purpose of these sections and subsequent decisions was to augment the continuity of the arbitral process rather than disrupt it; the intent of this section when appointing a new Arbitrator is to enable him or her to "pick up the mantel" where the previous Arbitrator left off to promote speedy dispute resolution.

Furthermore, the Court observed that the Arbitration Act is a self-contained code that provides specific avenues for challenging interim orders, such as through Section 37. By declaring the proceedings held during the moratorium period a "nullity" while hearing a simple substitution petition, the High Court had effectively bypassed the statutory appeal process and exceeded its jurisdiction. The Supreme Court emphasized that courts cannot "invent" procedures to annul arbitral orders outside the frameworks provided by the Act. It also highlighted the inequity of forcing a de novo (fresh) start to the arbitration, noting that such a move would be inefficient and prejudicial. Finally, the Court observed that since third-party rights, specifically those of innocent homebuyers had already been created based on the arbitral orders passed during the moratorium, it was necessary to invoke Article 142 of the Constitution to protect these transactions and ensure complete justice, rather than allowing them to be invalidated by a procedural technicality.

Held:

The Supreme Court partly allowed the appeal and set aside that portion of the Bombay High Court's order which had declared the arbitral proceedings conducted between 17 March 2022 and 25 August 2022 as a nullity. The Court held that while exercising jurisdiction under Section 15(2) of the Arbitration Act for appointment of a substitute arbitrator, the High Court had exceeded its statutory mandate by virtually assuming appellate or supervisory powers over interim orders passed by the earlier arbitral tribunal. It was clarified that Section 15(4) expressly preserves the validity of prior proceedings notwithstanding a change in the composition of the tribunal, and that any challenge to interim orders must be pursued strictly in accordance with the statutory remedies contemplated under Section 37 of the Act.

The Court further observed that the Arbitration Act constitutes a self-contained code and does not permit annulment of arbitral proceedings through collateral orders passed in substitution proceedings. To avoid serious prejudice and inequitable consequences, particularly in light of third-party rights that had crystallised in favour of bona fide homebuyers, the Court invoked its plenary powers under Article 142 of the Constitution of India and declared such transactions to be legally valid. It directed that the substitute arbitrator shall resume the proceedings from the stage at which the previous arbitrator had demitted office, rather than recommencing the arbitration de novo, thereby reaffirming the legislative objective of ensuring continuity, finality, and efficiency in arbitral adjudication.

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The judgment clarifies that Section 15(2) of the Arbitration Act is a purely procedural power for appointing substitute arbitrators and does not grant courts the authority to nullify prior proceedings. It reinforces that the Act is a self-contained code, requiring challenges to interim orders to be made via Section 37 appeals rather than collateral appointment petitions. Finally, it establishes a presumption of continuity under Section 15(4), meaning arbitration should resume from the last stage reached rather than starting fresh.

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WHITE COLLAR CRIME

Date: 06 February 2026.

Case Name: M/s. Nav Nirman Builders & Developers Pvt. Ltd. vs. The Union of India. Criminal appeal arising out of SLP (Crl.) No. 9216 of 2023

Forum: Supreme Court

Nav Nirman Builders was initially constituted as a partnership firm on 1 April 1993, with Dharamveer Bhadoria acting as its Managing Partner. The firm was subsequently incorporated as a company with substantially the same partners. In February 2007, the company was awarded a work order and received payment amounting to ?79,11,559 in connection with execution of contractual works. However, in October 2009, a First Information Report (FIR) was lodged against the firm and its partners alleging commission of offences including cheating and forgery. It was alleged that the company had fraudulently submitted 37 invoices for purchase of bitumen, of which six were purportedly forged, and that certain public servants had facilitated release of payment on the basis of such fabricated invoices.

Pursuant to these allegations, proceedings under the Prevention of Money Laundering Act, 2002 ("PMLA") were initiated in 2012 against the accused persons. On 17 December 2017, the Ministry of Finance issued a Provisional Attachment Order (PAO) attaching two parcels of land purchased by the company in 2012 and 2014, on the premise that the value of the said properties corresponded to the proceeds allegedly derived from the fraudulent transactions. Although the company was not originally arrayed as an accused in the PMLA complaint, it was brought within the ambit of the proceedings during adjudication, and the PAO was confirmed by the Adjudicating Authority. The company preferred an appeal before the Appellate Tribunal challenging the attachment.

Subsequently, Dharamveer Bhadoria passed away on 2 May 2021, whereupon proceedings against him stood abated. Notwithstanding the pendency of the company's appeal before the Appellate Tribunal, an application for confiscation of the attached properties under Section 8(7) of the PMLA was allowed, resulting in confiscation of the company's properties. The company's challenge to the confiscation order was dismissed by the High Court, giving rise to the present appeal before the Supreme Court.

Issues:

1. Whether an order for the confiscation of property under Section 8(7) of the Prevention of Money-Laundering Act (PMLA) can be passed by a Special Court while an appeal against the confirmation of the attachment (under Section 8(3)) is still pending before the Appellate Tribunal?
2. Whether a property can be confiscated when the trial for the scheduled offence cannot proceed due to the death of the accused or because the accused is a "proclaimed offender"?

Submissions of the Parties:

The Appellants contended that the Special Court, as well as the High Court, committed a material irregularity in entertaining and allowing the Enforcement Directorate's application under Section 8(7) of the Prevention of Money Laundering Act, 2002, during the pendency of their statutory appeal before the Appellate Tribunal challenging the confirmation of attachment under Section 8(3). It was submitted that once the legality and validity of the Provisional Attachment Order had been assailed in appeal, the matter was sub judice, and any direction transferring or confiscating the property in favour of the Central Government would effectively render the appellate remedy illusory and otiose.

The Appellants further urged that Section 8(7) is an exceptional provision intended to operate in narrowly circumscribed circumstances, namely where the trial cannot proceed or conclude owing to the death of the accused or other supervening impossibility. It was argued that the invocation of such provision in the present case, without awaiting the outcome of the statutory appeal, amounted to a premature exercise of power and resulted in deprivation of property without due process. The Appellants asserted that such action not only bypassed the legislative scheme of adjudication and appeal but also infringed their constitutional right to property protected under Article 300A of the Constitution.

The Respondent submitted that the Special Court was vested with independent and substantive jurisdiction under Section 8(7) of the PMLA to pass appropriate orders in respect of property representing "proceeds of crime", particularly in circumstances where the ordinary course of trial could not be brought to its logical conclusion. It was contended that the provision operates as a standalone mechanism to ensure that tainted assets do not remain in circulation or under the control of persons connected with alleged money laundering.

The Union of India further argued that the impugned order was necessitated in order to safeguard public interest and prevent dissipation of assets allegedly derived from criminal activity. It was maintained that the pendency of proceedings before the Appellate Tribunal did not curtail the Special Court's statutory authority under Section 8(7), and that the exercise of such power was consistent with the overarching objective of the PMLA to secure and confiscate proceeds of crime in furtherance of the State's obligation to combat economic offences.

Observations of the Court:

The Supreme Court observed that the Prevention of Money-Laundering Act (PMLA) functions as a self-contained and "complete code", necessitating a harmonious construction of Section 8 to prevent any subsection from being rendered redundant. The Court noted that an order of confirmation of attachment under Section 8(3) is merely a "provisional measure" designed to freeze the property and does not constitute a final transfer of title to the State; such a final deprivation can only occur following a conclusive finding of guilt or under specific statutory exceptions. A pivotal observation was made regarding the "mutually exclusive" nature of Section 8(7) and Section 8(8). The Court clarified that Section 8(7) acts as a contingency provision for situations where a trial cannot be concluded such as the death of the accused or their status as a proclaimed offender whereas Section 8(8) serves as a restorative remedy for claimants with legitimate interests post-conviction. The Court further observed that the right to appeal under Section 26 is a substantive statutory safeguard; if a Special Court were permitted to "release" or "confiscate" property under Section 8(7) while an appeal against the attachment itself was still pending before the Appellate Tribunal, it would effectively "pre-empt" the higher forum's jurisdiction. Such an action would create an irreversible "fait accompli," rendering the appellate process illusory and stripping the aggrieved party of their legal recourse before the validity of the initial attachment had even been finalized.

Held:

The Supreme Court held that the Prevention of Money-Laundering Act, 2002 is a self-contained code requiring harmonious interpretation of Section 8. It clarified that confirmation of attachment under Section 8(3) is only a provisional protective measure and does not effectuate a final transfer of title to the State, which can occur only upon conviction or in narrowly defined statutory contingencies. The Court distinguished Sections 8(7) and 8(8) as mutually exclusive, observing that Section 8(7) applies only where trial cannot conclude (such as upon death or absconding of the accused), while Section 8(8) provides post-conviction relief to legitimate claimants. It further emphasized that the statutory right of appeal under Section 26 is a substantive safeguard, and any order of confiscation under Section 8(7) during pendency of an appeal against attachment would pre-empt the appellate forum's jurisdiction, create an irreversible fait accompli, and render the appellate remedy illusory.

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The judgment clarifies that the power of a Special Court to order confiscation under Section 8(7) of the PMLA is subject to the finality of the attachment order; therefore, a Special Court cannot proceed with confiscation if an appeal against the attachment is still pending before the Appellate Tribunal or a higher court.

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