Dispute Resolution Quarterly Milestones (April-June 2026)

In MCM Worldwide Private Limited v Construction Industry Development Council,¹ the Supreme Court clarified that where an arbitral tribunal rejects a jurisdictional objection under Section 16(2) of the Arbitration and Conciliation Act, 1996 (Arbitration Act), the aggrieved party cannot challenge that decision before the court until the final arbitral award is made. The Court held that an order rejecting a jurisdictional plea is neither an interim award nor independently amenable to challenge under Section 34 of the Arbitration Act.

The dispute arose from unpaid dues under two memoranda of understanding. The award debtor’s challenge to the arbitral tribunal’s jurisdiction was rejected by the tribunal. The award debtor approached the Delhi High Court under Section 34, without awaiting the final award. The High Court entertained the challenge and set aside the tribunal’s order. Reversing the High Court’s decision, the Supreme Court undertook a detailed review of the statutory scheme and precedents to hold that while an order accepting a jurisdictional objection is expressly appealable under Section 37, no corresponding remedy is available where the tribunal rejects such an objection. In such cases, the objection remains available to the aggrieved party but may only be raised in proceedings challenging the final arbitral award under Section 34.

The decision resolves a procedural uncertainty that had led to premature judicial intervention in ongoing arbitrations. By clarifying that a rejected jurisdictional objection cannot be challenged at an interlocutory stage, the Court reinforced the principle of minimal judicial interference and preserved the continuity of arbitral proceedings. The ruling also curbs attempts to delay arbitration through piecemeal court challenges, while ensuring that jurisdictional objections remain available for consideration as part of a single, consolidated challenge to the final award.

In Home Care Retail Marts Pvt. Ltd. v Haresh N. Sanghavi,² the Supreme Court clarified that an unsuccessful party in arbitration may also seek interim measures under Section 9 of the Arbitration Act after an arbitral award has been made but before it is enforced. Section 9 empowers courts to grant interim measures of protection before, during or after arbitral proceedings to preserve assets or safeguard the subject matter of the dispute. The Court held that the provision is available to any “party” to the arbitration agreement and does not distinguish between successful and unsuccessful parties.

The decision arose against the backdrop of conflicting High Court decisions, some of which had interpreted Section 9 as conferring post-award relief only on the successful party. Rejecting this approach, the Supreme Court held that importing such a distinction would be contrary to the plain language and scheme of the Arbitration Act. The Court observed that an unsuccessful party may ultimately succeed in setting aside or modifying an arbitral award under Section 34, and denying interim protection in the meantime could render that challenge ineffective if the disputed assets were dissipated or became otherwise unavailable.

At the same time, the Court clarified that such relief is exceptional rather than automatic, and that the threshold for granting such relief to an award-debtor (i.e., the unsuccessful party) would be higher than in the case of a successful award-holder. An unsuccessful party seeking interim protection must still satisfy well-established principles for seeking interim relief under Section 9, namely, the existence of a prima facie case, balance of convenience, and likelihood of irreparable harm or injury. Further, in rare and compelling cases, interim protection for the unsuccessful party may be demonstrably required to prevent irreparable prejudice and preserve the efficacy of the challenge proceedings against the award.

The ruling fills an important gap in the post-award framework by recognising that interim protection may, in appropriate cases, be necessary to preserve the efficacy of proceedings under Section 34. At the same time, by requiring courts to exercise this power sparingly, the decision seeks to balance the finality of arbitral awards with the need to ensure that a meritorious challenge is not rendered infructuous before it is decided.

In Parvinder Singh v Directorate of Enforcement,³ the Supreme Court held that a court cannot take cognisance of an offence under the Prevention of Money Laundering Act, 2002 (PMLA) without first giving the accused an opportunity of being heard, as required by the first proviso to Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS). The Court also clarified that any order that takes cognisance without complying with this requirement is void from the outset. Cognisance refers to the stage at which a court first applies its judicial mind to the allegations in a complaint or charge sheet to determine whether proceedings should be initiated against the accused.

The issue arose because the complaint had been filed before the BNSS came into force, but cognisance was taken thereafter. The Directorate of Enforcement argued that the proceedings should continue to be governed by the erstwhile Code of Criminal Procedure, 1973 (CrPC). Rejecting this contention, the Supreme Court held that the law applicable to the stage of cognisance is the law in force on the date cognisance is taken. Consequently, where cognisance is taken after the BNSS came into effect, the mandatory hearing requirement under Section 223(1) applies, irrespective of when the complaint was instituted.

The ruling marks a significant departure from the position under the CrPC, which did not require courts to hear the accused before taking cognisance. Under the earlier regime, an accused could ordinarily challenge the proceedings only after process had been issued. By introducing a mandatory pre-cognisance hearing, the BNSS affords an accused an opportunity to raise threshold objections before criminal proceedings formally commence.

The decision has important implications for complaint-based prosecutions, including under the PMLA. It makes the pre-cognisance hearing a mandatory procedural safeguard and reinforces that compliance with Section 223(1) is a condition precedent to the valid exercise of jurisdiction. The Court also recognised that the right to be heard at this stage is not a mere procedural formality but a substantive safeguard flowing from the guarantee of a fair trial under Article 21 of the Constitution.

In State Bank of India & Ors. v Doha Bank Q.P.S.C. & Anr.,⁴ the Supreme Court held that a corporate guarantee executed by a corporate debtor constitutes “financial debt” under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC). This entitles the guarantee holder to recognition as a “financial creditor” and a seat on the Committee of Creditors.

The dispute arose after rival creditors challenged the admission of claims founded on corporate guarantees, arguing that: (i) the guarantees had been executed shortly before the borrower’s default, (ii) were not disclosed in the corporate debtor’s financial statements, (iii) were not initially filed with the proof of claim, and (iv) were inadequately stamped. Rejecting these objections, the Supreme Court held that a guarantee executed as part of a bona fide debt restructuring prior to the account being reclassified as a non-performing asset cannot be viewed with suspicion merely because the borrower group had previously defaulted. The Court further held that any failure by the corporate debtor to disclose the guarantees in its financial statements does not extinguish the lender’s contractual rights under the guarantee.

Reaffirming settled principles of guarantee law, the Court observed that liability arising under a guarantee for money borrowed against payment of interest falls squarely within the definition of “financial debt” under the IBC. It also reiterated that a guarantor’s liability is coextensive with that of the principal borrower and remains enforceable in accordance with the terms of the guarantee.

The decision provides greater certainty for lenders relying on corporate guarantees as credit support by reaffirming that genuine guarantee-backed claims cannot be defeated on technical or procedural grounds. It also reinforces the ability of guarantee holders to participate as financial creditors in the corporate insolvency resolution process, strengthening their position in insolvency proceedings.