This judgment does not decide the underlying franchisee disputes or the merits of the appellant's counter-claims, which remain before the sole arbitrator. It decides only waiver, the moratorium's scope, and the correct forum for a Section 29A extension. The award itself has not been passed; the arbitrator must pass it within six weeks from 28 October 2026.
- Case
- South Bihar Power Distribution Company Ltd. v. India Power Corporation Ltd. & Anr.
- Court
- Supreme Court of India
- Decision
- Citation
- 2026 INSC 1165
- Bench
- Ujjal Bhuyan; Atul S. Chandurkar
- Judgment by
- Ujjal Bhuyan
- Case numbers
- Civil Appeal No. 9313 of 2026; Civil Appeal No. 9325 of 2026
- Outcome
- Common judgment dismissing two civil appeals against the Patna High Court's 15 September 2023 order. The underlying franchisee disputes and counter-claims remain with the sole arbitrator; no award has yet been passed.
Supreme Court corrects the Patna High Court on Section 29A, but leaves the arbitration on track
The Supreme Court has held that a High Court acting under Section 11 of the Arbitration and Conciliation Act, 1996 cannot extend an arbitrator's mandate under Section 29A of the Act. That power belongs to the "court" as defined in Section 2(1)(e) — the principal civil court of original jurisdiction in the district, or a High Court exercising ordinary original civil jurisdiction.
The ruling came in appeals by South Bihar Power Distribution Company Ltd. against a 15 September 2023 order of the Patna High Court, which had answered three questions in the respondents' favour: waiver by consent and acquiescence, the insolvency moratorium, and the Section 29A forum. The Supreme Court upheld the High Court on the first two questions and set aside its answer on the third. Because the Principal District Judge-cum-Commercial Court, Patna had already extended the sole arbitrator's mandate by six months on 23 March 2026, the correction has no bearing on the outcome: the appeals were dismissed, the embargo on declaring the award imposed on 12 February 2024 was lifted, and the arbitrator must now pass the award within six weeks.
A franchisee dispute, two sole arbitrators, and an insolvency in between
South Bihar Power Distribution Company Ltd., a distribution licensee for four electricity supply areas in Bihar, appointed India Power Corporation Ltd. as franchisee through a competitive bidding process. A tripartite Distribution Franchisee Agreement dated 31 December 2013 was signed between the licensee, the successful bidder as confirming party, and its wholly owned subsidiary, India Power Corporation (Bodhgaya) Ltd., as the special purpose vehicle that would perform the franchisee obligations.
Disputes led to an arbitration notice on 9 November 2016 under Article 17 of the agreement. By a consent order dated 4 April 2018 the Patna High Court appointed retired High Court judge Shashank Kumar Singh as sole arbitrator, although clause 17.2.5 of the agreement provided for a three-member tribunal. Proceedings ran from 12 April 2018 to the evidence stage; the appellant filed a counter-claim on 2 February 2019 and a supplementary counter-claim on 28 March 2019. In the meantime, the National Company Law Tribunal, Kolkata admitted insolvency proceedings against the special purpose vehicle on 8 November 2019.
After the first arbitrator could not continue, the parties again consented before the High Court, which appointed former Chief Justice of India Dipak Misra as the new arbitrator on 10 March 2021. A procedural order dated 7 April 2021 recorded that the parties had no objection to the composition of the tribunal or to the sole arbitrator. The twelve-month period plus a further six months consented to by both parties expired on 7 August 2021, and the respondents sought four more months in Request Case No. 36 of 2021. The appellant resisted, and filed Request Case No. 78 of 2022 seeking a three-member tribunal. A resolution plan for the special purpose vehicle was approved in 2022, and the company was renamed Vikriti Power Limited with effect from 28 August 2023.
Waiver by conduct: consent twice given, objection raised too late
The Supreme Court affirmed the High Court on waiver. Section 4 of the 1996 Act deems a party to have waived its right to object where it knows that a requirement of the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating its objection without undue delay. Section 16(2) requires a plea that the tribunal lacks jurisdiction to be raised not later than the submission of the statement of defence.
On the facts, the appellant had appeared through counsel and consented to a sole arbitrator twice — in Request Case No. 77 of 2018 and again in Request Case No. 14 of 2020 — and neither appointment order was ever challenged, so both attained finality. It then participated in the proceedings, consented to an extended period, and filed a counter-claim and a supplementary counter-claim before the sole arbitrator. The Court held that "by its conduct, the appellant had clearly waived its right to object to the composition of the arbitral tribunal within the time limit provided by the statute", and that it was not open to the appellant to question the sole arbitrator's appointment at the belated stage of a Section 29A(4) extension application. The Court relied on Union of India v. Pam Development Private Limited, where participation before a sole arbitrator, including filing a counter-claim, was held to waive the three-member panel requirement under Sections 4 and 16.
Moratorium: a corporate debtor may still pursue its own claims
The Court also affirmed the High Court on the second question. Section 14 of the Insolvency and Bankruptcy Code, 2016 prohibits suits and proceedings against the corporate debtor after the insolvency commencement date, but the Court held that it "does not necessarily prohibit the corporate debtor from initiating proceedings for recovery of its dues, which, as in the present case, would include an arbitral proceeding". The moratorium bars debt-recovery action against the corporate debtor so as not to harm the insolvency process; it would not impair a claim by the corporate debtor which, if successful, "would only bolster the financial health thereby enhancing the value of the corporate debtor".
Both respondents were parties to the tripartite agreement, and implementation fell squarely on the special purpose vehicle, so the locus dispute was for the arbitrator rather than the courts. The resolution professional had also authorised the special purpose vehicle's signatories to pursue the arbitration, with the committee of creditors' approval under Section 28(1)(h) of the Code.
Section 29A: the Section 11 route is not the Section 2(1)(e) court
On the third question the Court disagreed with the High Court. Section 2(1)(e)(i) defines "court" for domestic arbitration as the principal civil court of original jurisdiction in a district, including a High Court in the exercise of its ordinary original civil jurisdiction. The Supreme Court or High Court referred to in Section 11 deals only with appointment of the tribunal; that role does not make it the Section 2(1)(e) "court", and Section 11 jurisdiction stands exhausted once the tribunal is constituted, leaving no residual supervisory power over the proceedings.
The Court relied on State of West Bengal v. Associated Contractors, which held that Section 11 applications are made to the Chief Justice or his designate, not to the "court" as defined, and therefore fall outside Section 42; on its decisions in Chief Engineer (NH) PWD (Roads) v. BSC & C and C JV and in Jagdeep Chowgule v. Sheela Chowgule, which located the Section 29A(4) extension power in the Section 2(1)(e) court; and on C. Velusamy, which endorsed that view. The Court therefore held that the High Court's conclusion that it could extend time under Section 29A "is clearly unsustainable in law" and set it aside.
The correction, however, changes nothing on the ground. On 21 January 2026 the Supreme Court had directed the District Court to decide the respondents' Section 29A(5) extension application on its merits, and on 23 March 2026 the Principal District Judge-cum-Commercial Court, Patna extended the sole arbitrator's mandate by six months. Setting aside the High Court's extension therefore "would have no bearing and would not materially affect the outcome of this proceeding".
What happens next: award within six weeks
The Supreme Court upheld the Patna High Court's order on questions one and two and set it aside on question three. Both civil appeals were dismissed, with no order as to costs. The embargo imposed on 12 February 2024, under which the arbitral proceedings could continue but the award could not be declared, stands lifted, and the sole arbitrator must now conclude the proceedings by passing the award within six weeks from 28 October 2026.
BANTHRY ANALYSISFor law students: three doctrines in one appeal
This judgment is a compact revision aid for three arbitration doctrines. First, waiver under Section 4 read with Section 16(2): a party that knowingly proceeds before a tribunal whose composition departs from the agreement, files pleadings and counter-claims, and lets two appointment orders become final, cannot revive the composition objection when the other side seeks more time. Second, the insolvency moratorium under Section 14 of the Code is a shield against claims against the corporate debtor, not a bar on the debtor's own recovery proceedings; a successful arbitral claim only improves the debtor's value for creditors. Third, the Section 29A extension power follows the Section 2(1)(e) definition of "court", not the Section 11 appointment route — so after appointment, extension applications go to the principal civil court of original jurisdiction — here, the Principal District Judge-cum-Commercial Court, Patna — not back to the appointing judge. The practical twist is that a wrong forum does not always mean a wrong result: because the correct forum had already extended the mandate, the correction left the arbitration exactly where it was, with an award due in six weeks.
READING PROMPTSQuestions for a closer reading
- Why did the Supreme Court hold that the appellant had waived its objection to a sole arbitrator despite clause 17.2.5 requiring a three-member tribunal?
- Why does the Section 14 IBC moratorium not prevent a corporate debtor from pursuing its own arbitral claim?
- Why can a High Court acting under Section 11 not extend an arbitrator's mandate under Section 29A, and why did that error not change the outcome here?
