In a significant legal development, the Supreme Court of India resolved complex procedural conflicts concerning arbitration agreements and insolvency. On October 28, 2026, the Court passed the order in Civil Appeal No. 9313 of 2026, which arose out of Special Leave Petition (Civil) No. 27403 of 2023, along with a connected appeal. The dispute involved South Bihar Power Distribution Company Ltd. as the appellant against India Power Corporation Ltd. and another respondent. The core issues revolved around the composition of the arbitral tribunal, the impact of the corporate insolvency resolution process on arbitration, and the correct judicial authority to grant a time extension under Section 29A of the Arbitration and Conciliation Act, 1996.
Background of the Dispute The appellant is a distribution licensee operating under the Electricity Act, 2003. Following a competitive bidding process, a tripartite Distribution Franchisee Agreement was executed on December 31, 2013, involving a successful bidder and a special purpose vehicle. Clause 17.2.5 of this agreement explicitly stated that any dispute failing mutual negotiation must be resolved by an arbitral panel consisting of three arbitrators. However, when disputes arose, the High Court appointed a sole arbitrator by consent of the parties in 2018, and later substituted a new sole arbitrator in 2021. Eventually, the statutory arbitration timeline expired, prompting a request for an extension. The appellant objected, demanding a panel of three arbitrators as originally agreed. Furthermore, the special purpose vehicle had entered the corporate insolvency resolution process, raising questions about its legal standing to pursue arbitration claims.
Waiver of Arbitral Tribunal Composition Addressing the tribunal composition, the Court analyzed whether the appellant waived its right to a three member panel. The Court noted that the appellant participated extensively before the sole arbitrator, filing counter claims and consenting to initial time extensions. By proceeding with the arbitration without raising immediate objections to the non compliance of the original agreement terms, the appellant effectively surrendered this right under Section 4 of the Arbitration and Conciliation Act, 1996. The Court passed the order affirming the High Court decision that this conduct constituted clear acquiescence, barring the appellant from challenging the sole arbitrator at a belated stage.
Arbitration During Insolvency Regarding the corporate insolvency resolution process, the appellant argued that the moratorium under the Insolvency and Bankruptcy Code, 2016 prohibited the special purpose vehicle from initiating arbitration. The Court firmly rejected this argument. Section 14 of the IBC is designed to halt debt recovery actions against a corporate debtor to protect its assets. It does not bar the corporate debtor from pursuing its own recovery claims, which could potentially improve its overall financial health.
Jurisdiction for Section 29A Extension The final legal question was identifying the competent court to grant an extension of the arbitrator mandate. The High Court had assumed it held jurisdiction under Section 29A. The Supreme Court ruled this assumption incorrect. The power to extend an arbitral timeline under Section 29A strictly vests in the principal civil court of original jurisdiction in a district, which may include a High Court only if it possesses ordinary original civil jurisdiction. The Chief Justice or their designate acting under Section 11 does not qualify as the court for this specific purpose. Consequently, the Court set aside this portion of the High Court judgment.
Final Outcome Despite correcting the jurisdictional error, the Court upheld the underlying arbitration proceedings and lifted a previous embargo. The Court passed the order directing the sole arbitrator to conclude the matter and issue the award within six weeks, dismissing the appeals.