Section 15(2) Substitution Is Confined to Appointment: Courts Cannot Nullify Prior Arbitral Proceedings/Orders While Replacing an Arbitrator
Case: ANKHIM HOLDINGS PVT. LTD. v. ZAVERI CONSTRUCTION PVT. LTD.
Citation: 2026 INSC 137 (Supreme Court of India) | Date: 04-02-2026
1) Introduction
The dispute arose from a real-estate redevelopment arrangement: the appellants and the respondent (later admitted to insolvency and eventually liquidation)
formed a partnership firm, M/s Anmol Alliance, to develop an SRA project in Mumbai. Disputes led to court proceedings under Section 9 of the
Arbitration and Conciliation Act, 1996 (“the Act, 1996”), and the Bombay High Court appointed an arbitrator.
Meanwhile, the respondent was admitted to CIRP by the NCLT on 26.09.2019, triggering a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (“IBC”).
During the moratorium period, the arbitral tribunal passed (among other things) Section 17 interim orders permitting execution of agreements for sale of certain flats.
After the arbitral tribunal later terminated the proceedings, the appellants moved the High Court under Section 15(2) of the Act, 1996 seeking substitution of the arbitrator.
The High Court appointed a substitute arbitrator but additionally declared that arbitral proceedings conducted on seven dates (17.03.2022 to 25.08.2022) were a “nullity”
because they occurred during the Section 14 IBC moratorium.
The Supreme Court was thus confronted with a narrow but important procedural question: can a court, while acting under Section 15(2) to substitute an arbitrator,
also declare prior arbitral proceedings/orders void as being hit by an IBC moratorium?
2) Summary of the Judgment
- The Supreme Court set aside the High Court’s declaration that the arbitral proceedings held between 17.03.2022 and 25.08.2022 were a nullity.
- It held that the High Court, acting under Section 15(2), travelled beyond its jurisdiction by effectively setting aside:
- an order rejecting a Section 16 jurisdictional plea (non-appealable under the Act, 1996);
- Section 17 interim orders (which can only be appealed in the manner provided by Section 37); and
- other procedural orders—without any statutory basis under the Act, 1996.
- Invoking Article 142, the Court additionally declared that the relevant third-party transactions (homebuyer rights) were lawfully valid, noting long lapse of time and creation of third-party rights.
3) Analysis
3.1 Precedents Cited (and their Role)
(a) Yashwith Constructions Pvt. Ltd. v. Simplex Concrete Piles India Ltd. & Anr. (2006) 6 SCC 204
This precedent anchored the meaning of Section 15(2): a substitute arbitrator must be appointed “according to the rules” applicable to the original appointment.
The Supreme Court reaffirmed that “rules” include the arbitration agreement’s appointment mechanism or institutional rules, and that Section 11(6) is attracted only
where the authorised mechanism fails. In the present case, since the original appointment was court-made, the “original rule” effectively pointed back to the
court’s limited appointment role akin to Section 11—not a broader supervisory or appellate power over past arbitral orders.
(b) Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899, In re, (2024) 6 SCC 1
The Court relied on this five-Judge Bench articulation that the Act, 1996 is a self-contained code and what it permits must be done only in the manner indicated;
what it does not provide cannot be judicially invented through alternate procedural routes. This principle was central to rejecting the High Court’s approach:
a court acting under Section 15(2) cannot use that provision as a backdoor to do what the Act, 1996 otherwise bars (for example, interfering with non-appealable
Section 16 rejections, or bypassing Section 37 for Section 17 orders).
The excerpt in Interplay also cited and reinforced the “self-contained code” idea through:
While these cases were not applied on their individual facts, they served as doctrinal support for the statutory architecture of minimal, specified judicial intervention.
This decision was invoked for the operational consequence of Section 15: substitution preserves continuity and arbitration should proceed from the existing stage.
The Supreme Court used it to underscore that the correct response to an arbitrator’s inability/termination is replacement—not suspension, derailment, or restarting
arbitration by collateral attacks on prior steps.
The quotation in this judgment also referenced (as reaffirming substitution/continuity):
This authority supplied the classic jurisdictional limit: jurisdiction is not merely about the subject matter; it includes competence to grant the specific relief sought.
The Supreme Court used it to characterise the High Court’s “nullity” declaration as not just erroneous but ultra vires—an order the High Court “could not have passed”
while acting within the confines of Section 15(2).
(e) Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 619
Cited to reinforce the broader arbitration policy objective: speed and efficiency are best served when a substitute arbitrator continues from the point where the prior arbitrator left off,
rather than forcing a de novo restart by judicial overreach.
3.2 Legal Reasoning
(i) Section 15 must be read as an integrated scheme (15(2) + 15(3) + 15(4))
The Court treated Section 15(2) as not standalone. It is part of a calibrated framework:
- Section 15(2): provides the mechanism to appoint a substitute arbitrator.
- Section 15(3): addresses whether prior hearings “may be repeated” (party autonomy first; otherwise tribunal discretion).
- Section 15(4): protects the validity of prior “order or ruling” from being invalidated solely due to substitution.
This architecture signals continuity as the default and limits the court’s role to substitution and appointment mechanics—not retrospective invalidation of what the tribunal did.
(ii) Section 15(2) cannot be used to exercise barred appellate/supervisory powers
The High Court’s “nullity” finding effectively set aside:
- a Section 16 rejection (which the Act, 1996 does not make appealable),
- Section 17 orders (appealable only under Section 37 and only in that procedural posture), and
- other procedural directions (for which the Act, 1996 provides no such intervention).
The Supreme Court reasoned that once the Act, 1996 specifies how and when an order can be challenged, courts cannot invent a new review channel under the guise of Section 15(2).
This was framed as a direct application of the “self-contained code” principle from Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899, In re.
(iii) The judgment’s handling of the IBC moratorium point
Notably, the Supreme Court’s ratio does not primarily turn on a substantive re-determination of whether Section 14 IBC moratorium did or did not apply to the arbitral steps.
Instead, the Court held that even assuming the moratorium issue existed, the High Court could not decide it in the manner it did while exercising Section 15(2) powers—particularly by
declaring prior proceedings a “nullity”.
(iv) Article 142 relief to protect third-party/homebuyer rights
The Court separately invoked Article 142 to declare the relevant transactions “lawfully valid”, expressly citing:
- the long lapse of time, and
- creation of third-party rights (home buyers’ rights).
This is significant: even where procedural controversy might cloud the status of transactions, the Court used its constitutional power to ensure legal certainty and prevent inequitable fallout.
3.3 Impact
-
Clear boundary on Section 15(2): Courts substituting an arbitrator must confine themselves to appointment/substitution and cannot adjudicate, annul, or “declare nullity”
of prior arbitral steps/orders through that route.
-
Reinforcement of “minimal judicial intervention”: The decision operationalises the Act, 1996 as a self-contained code—especially the idea that courts cannot bypass
Section 37 or resurrect non-appealable issues through creative procedural postures.
-
Continuity as default: The substituted arbitrator should ordinarily proceed from the existing stage, with rehearing governed by Section 15(3) (party agreement/tribunal discretion),
and with prior rulings protected by Section 15(4).
-
Transaction certainty in insolvency-adjacent disputes: By validating transactions under Article 142, the Court signalled heightened sensitivity to third-party/homebuyer reliance
interests where prolonged procedural battles risk destabilising completed (or substantially acted-upon) arrangements.
4) Complex Concepts Simplified
-
Section 15(2) (Substitution of arbitrator): If the arbitrator’s mandate ends, a new arbitrator is appointed using the same appointment method as the original one.
It is a “continuation” tool, not an “appeal” tool.
-
Section 15(3) (Rehearing): After substitution, earlier hearings may be repeated—depending first on what parties agree, otherwise on the tribunal’s discretion.
-
Section 15(4) (Validity of earlier orders): Prior orders are not invalid merely because the arbitrator changed.
-
Section 16 (Competence-competence): The arbitral tribunal can rule on its own jurisdiction. Under the Act, 1996, rejection of a Section 16 plea is generally not immediately appealable.
-
Section 17 (Interim measures by tribunal) & Section 37 (Appeals): If you want to appeal certain interim orders, Section 37 is the route; you cannot use a different section to achieve the same outcome.
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IBC Moratorium (Section 14): A statutory “pause” on certain proceedings/actions against the corporate debtor during insolvency resolution to preserve its assets and enable collective resolution.
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Functus officio: A person/authority has exhausted its mandate and no longer has power to act (the High Court had earlier assumed this about the IRP, which later proved incorrect on facts).
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Article 142: The Supreme Court’s power to pass orders necessary to do “complete justice,” sometimes used to protect settled rights and prevent cascading inequity.
5) Conclusion
ANKHIM HOLDINGS PVT. LTD. v. ZAVERI CONSTRUCTION PVT. LTD. establishes a pointed procedural rule with broad practical consequences:
Section 15(2) proceedings are for substitution, not for nullification. A court cannot, while replacing an arbitrator, retrospectively invalidate arbitral proceedings or set aside
Section 16/Section 17 decisions through a jurisdiction the Act, 1996 does not confer. The decision strengthens arbitration’s statutory design—continuity, party autonomy, and tightly
channelled judicial intervention—while also demonstrating the Court’s willingness (via Article 142) to protect third-party/homebuyer reliance interests from collateral procedural upheaval.