Mohit RohatgiPartner
Ashwini TakAssociate
Pravah RankaAssociate
Key Developments
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Supreme Court rules that clauses allowing a party to mandate other party to select arbitrators only from a panel curated by it are invalid
In a significant ruling, the Supreme Court has held that arbitration clauses in contracts where one party is mandated to appoint an arbitrator from a panel curated by the counterparty are inherently exclusionary and violate the principle of equal treatment of parties and procedural equality.1 The Court has held such clauses to be invalid. The Court has further held that unilateral appointment clauses in public-private contracts violate Article 14 (right to equality) of the Constitution of India. The law laid down in this judgment will only apply prospectively to arbitrator appointments.
(To read our detailed update on the five-judge bench’s ruling, click here.)
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Bombay High Court holds that arbitrators are empowered to change the venue of arbitration without consent of the parties
In a recent decision, the Bombay High Court has held that arbitrators have the power to change the venue of arbitration, even if parties have expressly agreed to a specific venue in their arbitration agreement.2 The Court opined that this power is derived from Section 20(3) of the Arbitration and Conciliation Act, 1996, which allows arbitrators to change the venue if they determine that conducting proceedings at the agreed-upon location would be detrimental to the arbitration process.
In the case before the Court, the parties had agreed to conduct the arbitration in Nashik. However, the arbitrator shifted the venue, citing difficulties encountered by previous arbitrators at the agreed location. The petitioner challenged this decision, arguing that the arbitration agreement should be binding. The Court upheld the arbitrator's decision, emphasising that Section 20(3) allows for flexibility in determining the venue if conducting proceedings at the agreed venue is detrimental to the arbitration process. The Court recognised that factors such as undue influence or logistical challenges at a particular location could hinder the fair and efficient conduct of arbitration proceedings. In this case, the detriment was that the petitioner was not cooperating with arbitrators, and even the previous arbitrators had refused to conduct proceedings at Nashik for the same reason.
While the Court’s decision to permit flexibility to arbitrators regarding venue may be seen to promote fairness and neutrality, it raises concerns of limiting party autonomy by allowing their original venue choice to be overridden. This can potentially undermine the level of control that parties have over the arbitration process.
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Supreme Court clarifies the procedure for withdrawal of corporate insolvency resolution process under Section 12A of the Insolvency and Bankruptcy Code, 2016
In a recent decision, the Supreme Court clarified the procedure for withdrawing a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC).3 The Court held that withdrawal of CIRP requires adherence to specific procedures outlined in Section 12A of the IBC and Regulation 30A of the CIRP Regulations, 2016. Section 12A provides for withdrawal of CIRP against a corporate debtor upon an application being made before the National Company Law Tribunal (NCLT) with the approval of at least ninety per cent voting share of the Committee of Creditors (CoC).
The Court outlined the following circumstances for withdrawal and the corresponding procedure to be followed.
- An application for withdrawal before the NCLT has admitted the company into CIRP is to be made in terms of Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, which allows the applicant to approach the NCLT to permit it to withdraw the insolvency application filed by it.
- When withdrawal is sought after admission to CIRP but before formation of the CoC, the NCLT should stay the constitution of the CoC and direct the parties to follow the prescribed procedure for withdrawal. That is, the application for withdrawal of CIRP must be submitted to the NCLT through the Interim Resolution Professional or Resolution Professional.
- When withdrawal is sought after CoC formation but before the Expression of Interest (EoI) is issued by the Resolution Professional, the same procedure as above applies.
- When withdrawal is sought after the EoI is issued, the NCLT must carefully consider the implications for all stakeholders and ensure that the withdrawal does not prejudice their interests.
The Court also emphasised that the NCLT cannot merely rubber-stamp withdrawal applications. It must actively review applications, hear all parties concerned, and consider all relevant factors before approving a withdrawal. By highlighting that the proceedings change from ‘in personam’ to ‘in rem’ after a debtor is admitted in CIRP, the Court underscored that once CIRP is initiated, it cannot be unilaterally altered by the parties through informal settlements that bypass the established legal framework. This judgment reinforces the importance of adhering to the established legal framework for withdrawing CIRP proceedings and, consequently, safeguards the interests of all stakeholders.
[1]Central Organisation for Railway Electrification v ECI SPIC SMO MCML (JV) A Joint Venture Co., 2024 SCC OnLine SC 3219
[2]Dhule Municipal Commissioner v Borse Brothers Engineers and Contractors Pvt. Ltd., Writ Petition No.7735 Of 2024
[3]GLAS Trust Co. LLC v Byju Raveendran, (2024) 247 Comp Cas 687
