Dispute Resolution Quarterly Milestones (January-March 2026)

In Viva Highways Ltd. v M.P. Road Development Corpn. Ltd.,² the Supreme Court clarified that substitution of an arbitrator is not an automatic and inevitable consequence of the termination of his or her mandate under Section 29A (6) of the Arbitration Act.

The law prescribes strict timelines to complete arbitration proceedings. When these timelines expire, an arbitrator’s mandate terminates unless extended by a court. Here, the High Court of Madhya Pradesh relied on previous Supreme Court rulings, including Mohan Lal Fatehpuria v Bharat Textiles,³ to hold that once this timeline expires, the existing arbitrator’s mandate must be terminated and a substitute arbitrator appointed.

The Supreme Court set aside this interpretation and clarified the scope of Section 29A(6), holding that:

• While courts have the power to substitute an arbitrator after the timeline expires, such substitution is discretionary and not mandatory;
• The decision to appoint a substitute arbitrator must be based on the specific facts and circumstances of the case.

The Court emphasised that automatic substitution would lead to duplication of effort and proceedings, increased costs, and inefficiencies, particularly where substantial progress has already been made in the arbitration.

This ruling reinforces procedural flexibility in preserving efficiency in arbitral proceedings. It serves as a reminder to courts to adopt a reasoned, case-by-case approach rather than a rigid, mechanical application of timelines and provisions that could inadvertently undermine the objectives of the Arbitration Act.

The Supreme Court, in Catalyst Trusteeship Ltd. v Ecstasy Realty Pvt. Ltd.,⁴ held that ongoing settlement or restructuring discussions do not preclude a financial creditor from filing an insolvency initiation application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).

In this case, the borrower had defaulted on redeemable non-convertible debentures worth INR 600 crore. When the debenture trustee initiated insolvency proceedings, the borrower argued that such proceedings could not be undertaken when a restructuring plan was already being negotiated with one of the debenture holders via email. The insolvency application was dismissed by the National Company Law Tribunal (NCLT) and later by the National Company Law Appellate Tribunal (NCLAT). Both the authorities held that, as the debenture trustee and other debenture holders were aware of the ongoing negotiations, they had, by conduct, agreed to a moratorium on enforcement of defaults during the negotiation period.

The Supreme Court set aside these findings and clarified that:

• The concept of a “pre-existing dispute” is a defence against operational debts (like unpaid vendors), and hence operational creditors are barred, under Section 9 of the IBC, from initiating insolvency proceedings during the pendency of such disputes. However, this concept could be extended to prevent financial creditors (like lenders and bondholders) from filing insolvency applications.
• Contractual terms must be strictly enforced. The Debenture Trust Deed expressly required the written consent of all debenture holders to modify its terms. Informal negotiations with only one debenture holder could not alter or suspend the borrower’s obligations.

This decision reinforces the sanctity of contractual terms and clarifies that insolvency proceedings cannot be derailed by informal or unilateral settlement discussions. It also underscores that amendment provisions in financing documents must be complied with in both form and substance.

The Supreme Court, in Nagaraj V. Mylandla v PI Opportunities Fund-I,⁵ upheld the enforcement of a Singapore-seated arbitral award, affirming the applicability of the “transnational issue estoppel” doctrine in India.

The dispute arose from an award by a Singapore-seated arbitral tribunal directing the promoters of an Indian company (i.e., the award debtor) to pay damages equivalent to the exit price for the surrender of shares held by certain investors (i.e., the award creditor). The award debtor failed in its challenge to the award before the Singapore courts. It then attempted to resist the enforcement of the award in India by contending that the surrender of shares amounted to an illegal “buy-back” under Indian law and was therefore contrary to India’s public policy.

Rejecting this contention, the Supreme Court held that issues raised and adjudicated upon by the courts at the seat of arbitration cannot be relitigated at the enforcement stage. Such reopening of issues by the parties is precluded by the doctrine of “transnational issue estoppel.”

This decision reinforces India’s pro-enforcement stance toward foreign arbitral awards and promotes certainty by ensuring that parties do not get a ‘second bite at the cherry’ to relitigate settled issues or delay the execution of awards.