Arbitration Act | Power To Extend Arbitral Mandate Vests In S.2(1)(e) 'Court', Not High Court Under S.11; S.14 IBC No Bar On Claims By Corporate Debtor: Supreme Court

"The moratorium provided for in Section 14 of the IBC is intended to prohibit debt recovery action against the corporate debtor so as not to adversely impact the insolvency process; however, it would not impair any claim by the corporate debtor, such as, an arbitral claim, which if successful, would only bolster the financial health thereby enhancing the value of the corporate debtor." Supreme Court on Tuesday held that the jurisdiction to extend the mandate of an arbitral tribunal under Section 29A of the Arbitration and Conciliation Act, 1996 rests exclusively with the Principal Civil Court of original jurisdiction or a High Court exercising ordinary original civil jurisdiction under Section 2(1)(e), and cannot be exercised by a High Court acting under Section 11.

 A bench comprising Justice Ujjal Bhuyan and Justice Atul S. Chandurkar further ruled that the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) applies solely to proceedings instituted against the corporate debtor, and does not bar the corporate debtor from prosecuting arbitral claims to recover its dues.

The dispute arose out of a Distribution Franchisee Agreement between South Bihar Power Distribution Company Ltd. and a special purpose vehicle subsidiary of India Power Corporation Ltd. Although the agreement stipulated a three-member arbitral panel, the Patna High Court, acting on Section 11 applications with the express consent of both sides, successively appointed sole arbitrators who conducted substantive proceedings without any jurisdictional objection being raised by the appellant. When the mandate expired, the High Court extended the arbitral timeline under Section 29A and rejected the appellant’s plea seeking the constitution of a fresh three-member tribunal, prompting the appellant licensee to approach the Supreme Court.

Whether a party’s sustained participation and consent before a sole arbitrator constitutes a waiver under Section 4 and Section 16(2) of the Arbitration Act against an agreement requiring a three-member tribunal?

Whether the statutory moratorium under Section 14 of the IBC disables a corporate debtor undergoing corporate insolvency resolution process from pursuing or continuing arbitral proceedings for the recovery of its receivables?

Whether an application for extension of an arbitral tribunal's mandate under Section 29A of the Arbitration Act must be moved before the High Court exercising Section 11 jurisdiction or before the Principal Civil Court defined under Section 2(1)(e)?

Active participation without timely jurisdictional objection operates as a waiver of arbitral composition terms

Examining the appellant's objection to the sole arbitrator, the bench observed that the appellant had repeatedly consented to the referral before the High Court and had proactively submitted its statement of defence, counter claims, and supplementary counter claims before the sole arbitrator.

The Court emphasised that Section 16(2) mandates any jurisdictional challenge to be raised not later than the submission of the statement of defence, failing which statutory waiver under Section 4 is immediately attracted.

Relying on the precedent in Union of India v. Pam Development Private Limited, the bench reiterated that orders appointing the arbitrator had attained finality without challenge, and the appellant could not belatedly seek reconstitution of the forum at the stage of Section 29A extension proceedings.

Section 14 IBC moratorium does not prohibit a corporate debtor from pursuing recovery actions

Turning to the impact of the corporate insolvency resolution process initiated against the respondent special purpose vehicle, the bench affirmed the High Court’s ruling that the protective umbrella under Section 14 of the IBC is unilateral in scope.

The bench clarified that the moratorium prohibits recovery actions against the corporate debtor to protect its asset pool during the resolution process, but does not disable the corporate debtor from enforcing its own contractual claims.

The Court noted that the resolution professional had duly authorised representatives to pursue the arbitral proceedings, an action formally sanctioned by the Committee of Creditors under Section 28(1)(h) of the IBC to preserve and enhance the corporate debtor's value.

Section 29A extensions are governed by Section 2(1)(e) Court and not Section 11 referral benches

Addressing the jurisdictional ambit of Section 29A, the Supreme Court held that the Patna High Court erred in assuming the authority to extend the arbitrator’s mandate while exercising powers under Section 11 of the 1996 Act.

The bench observed that Section 11 merely designates the Chief Justice or a nominee judge for the limited purpose of constituting the tribunal, and upon such appointment, the referral court retains no supervisory seisin over the arbitral process.

Citing the decisions in State of West Bengal v. Associated Contractors and Jagdeep Chowgule v. Sheela Chowgule, the bench affirmed that the definition of "court" in Section 2(1)(e) strictly governs Section 29A, confining the jurisdiction to extend arbitral mandates to the Principal Civil Court of original jurisdiction or a High Court having ordinary original civil jurisdiction.

Prior extension by competent commercial court cures High Court's jurisdictional error

The Supreme Court noted that during the pendency of the appeal, the parties had approached the Principal District Judge-cum-Commercial Court at Patna, which had properly exercised jurisdiction under Section 29A(5) and extended the arbitral mandate by six months.

Because the competent statutory forum under Section 2(1)(e) had already validated the tribunal's continuation in accordance with law, the invalidity of the High Court's Section 29A direction did not defeat the ongoing arbitration.

The bench concluded that arbitration must remain expeditious and litigant-centric, cautioning against narrow procedural constructions that would abort arbitral references after extensive evidentiary proceedings.

The Supreme Court partly allowed the appeals by setting aside the Patna High Court's finding that Section 11 benches hold jurisdiction under Section 29A, while affirming the High Court's findings on waiver and IBC maintainability. Vacating its earlier interim stay, the bench directed the sole arbitrator to conclude the arbitral proceedings and deliver the final award within six weeks.

Date of Decision: October 28, 2026

Case Title: South Bihar Power Distribution Company Ltd. v. India Power Corporation Ltd. & Anr. | Civil Appeal No. 9313 of 2026 (with Civil Appeal No. 9325 of 2026)

Bench: Justice Ujjal Bhuyan and Justice Atul S. Chandurkar
Counsel: Senior Advocate C.A. Sundaram and Senior Advocate Raju Ramachandran for the Appellant; Senior Advocate Atmaram Nadkarni for Respondent No. 2.