Newsletter For October 2025- Arbitration

ARBITRATION

Date: 07 October 2025

Case Name: Offshore Infrastructures Limited v. Bharat Petroleum Corporation Limited Civil Appeal of 2025 (Arising out of SLP (C) No. 22105-22106 of 2024)

Forum: Supreme Court

The Appellant i.e., Offshore Infrastructures Limited is a company incorporated under the Companies Act, 1956, having its registered office at Mulund (West), Mumbai. The Respondent, originally Bharat Oman Refineries Limited, stood merged with M/s Bharat Petroleum Corporation Limited with effect from 01 July 2022 and has its registered office at Bharat Bhavan, Ballard Estate, Mumbai.

The dispute arises out of a contract awarded by the Respondent for execution of composite works relating to the establishment of a new Modular Penex Unit and associated works at the Bina Refinery. Pursuant to the tendering process, the work was awarded to the Appellant under a Letter of Acceptance dated 31 December 2016, stipulating completion within five months, i.e., by 30 May 2017. The work, however, was completed only on 31 January 2018.

The Appellant raised its final bill (RA Bill No. 7) on 20 March 2018, issued a No-Claim Certificate on 03 October 2018, and received a completion certificate on 05 February 2019. The final bill was released on 26 March 2019, followed by part-payment on 11 June 2019, wherein 5% liquidated damages were deducted on account of delay.

Thereafter, the Appellant issued a consolidated claim on 26 April 2021 and invoked arbitration through notice dated 14 June 2021 in terms of Clause 8.6 of the General Conditions of Contract ("GCC"). The Appellant asserted that by virtue of amendments introduced by Act 3 of 2016 to the Arbitration and Conciliation Act, 1996 ("act"), the Managing Director of the Respondent, or any nominee, stood rendered ineligible to act as arbitrator. The Respondent rejected the demand through communication dated 02 July 2021.

Aggrieved by the failure of the Respondent to appoint the arbitrator, the Appellant preferred Arbitration Case No. 23 of 2022 under Section 11(6) of the act before the High Court of Madhya Pradesh. The High Court dismissed the petition on 19 December 2023 as time-barred. The Appellant's Review Petition No. 76 of 2024 met the same fate on 10 April 2024. The present appeals before the Supreme Court challenge both the said orders.

Issues:

1. Whether the Court is empowered to appoint an arbitrator under Section 11(6) of the act, when the contractual mechanism for appointment stands rendered invalid due to statutory amendments?
2. Whether the application filed by the Appellant under Section 11(6) of the act was within the prescribed period of limitation?

Submission of the Parties:

The Appellant contended that the petition under Section 11(6) was filed within limitation, relying upon the judgment in Arif Azim Company Limited v. Aptech Limited (2024) 5 SCC 313, wherein it was held that limitation commences only from the date of valid invocation of arbitration followed by refusal of the opposite party. It was further submitted that even assuming limitation commenced earlier, the part-payment made by the Respondent on 11 June 2019 extended limitation in terms of Section 19 of the Limitation Act, 1963.

The Appellant additionally relied upon the COVID-19 extension orders issued by the Supreme Court in In Re: Cognizance for Extension of Limitation (2022) 3 SCC 117, which excluded the period from 15 March 2020 to 28 February 2022 from computation of limitation.

On the invalidity of the arbitration clause, the Appellant argued that in Perkins Eastman Architects DPC v. HSCC (India) Limited (2020) 20 SCC 760, despite the named authority becoming ineligible to act as arbitrator after the 2015 Amendment, the Supreme Court appointed an independent arbitrator. The Appellant submitted that the arbitration agreement continues to subsist, and only the procedure for appointment has become inoperative.

The Respondent argued that limitation commenced on 21 April 2018, being 30 days from the date of submission of the final bill, and expired on 21 April 2021. The application of the Appellant filed in 2022 was therefore hopelessly time-barred.

It was further submitted that Clause 8.6 of the GCC vests exclusive authority in the Managing Director or his nominee to act as sole arbitrator, and once such person is rendered legally ineligible, the clause becomes void and incapable of being enforced. Consequently, no arbitration could be invoked, and the Appellant had no right to seek appointment of an arbitrator through the Court.

Observations of the Court:

On the Power of the Court to Appoint an Arbitrator

The Supreme Court referred to Perkins Eastman and TRF Limited v. Energo Engineering Projects Limited (2017) 8 SCC 377 and reiterated that if the named arbitrator becomes ineligible under Section 12(5) of the act, the ineligibility also extends to his power of nomination. However, such statutory ineligibility does not extinguish the arbitration agreement itself.

The Court observed that Clause 8.6 of the GCC contains two components: (i) reference of disputes to arbitration, and (ii) procedure for appointment of arbitrator. While the latter may have become legally unenforceable due to statutory amendments, the foundational agreement to arbitrate survives. The Court held that it would be impermissible to interpret the clause so literally as to defeat the contractual intention of resolving disputes through arbitration merely because the named authority has become ineligible.

On Limitation

The Court referred to Geo Miller & Co. Pvt. Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd. (2020) 14 SCC 643 to hold that limitation ordinarily begins when the final bill becomes due. On such computation, the claim appeared time-barred. However, the Court held that the exclusion of time ordered by the Supreme Court during the COVID-19 pandemic must be given full effect.

By excluding the period from 15 March 2020 to 28 February 2022, the Court held that the application under Section 11(6) was within limitation and could not have been dismissed as time-barred.

Held:

The Supreme Court allowed the appeals, set aside the orders of the High Court dated 19 December 2023 and 10 April 2024, and held that the arbitration agreement survives notwithstanding the inoperability of the appointment mechanism. It directed that the matter be referred to the Delhi International Arbitration Centre for appointment of a sole arbitrator in accordance with applicable rules.

This judgment reaffirms that statutory ineligibility of a named arbitrator does not invalidate the arbitration agreement, thereby preserving party intent and strengthening the pro-arbitration framework. It clarifies the applicability of COVID-19 limitation extensions, preventing dismissal of claims on technical grounds. Overall, the decision enhances certainty in arbitration law and reinforces India's jurisprudential shift toward arbitration-friendly interpretation.

CIVIL LAW

Date: 07 October 2025

Case Name: S. Santhana Lakshmi & Ors. v. D. Rajammal Civil Appeal of 2025 (arising out of SLP (C) No. 18943 of 2024)

Forum: Supreme Court

The dispute pertains to dry land measuring 1.74½ acres originally owned by Rangaswamy Naidu. The respondent-plaintiff i.e., D. Rajammal, claimed exclusive right over half share of the property on the strength of a Will dated 30 September 1985 executed by her father. Under the Will, the property was bequeathed equally to the plaintiff and her brother Govindarajan. The third sibling, Munuswamy, the original defendant, was in possession of the entire suit property. The plaintiff asserted that Munuswamy was inducted as a tenant by their father and continued as such, whereas the defendant contended that he occupied the property as a co-owner pursuant to an oral family arrangement in 1983 by which the property was divided between himself and Govindarajan.

Earlier, Rangaswamy Naidu had instituted OS No. 895 of 1984 seeking possession and arrears of rent from Munuswamy. After his death, the plaintiff and Govindarajan were substituted as legal heirs, but the suit was dismissed for default. A subsequent attempt to continue proceedings based on the Will also ended in dismissal. Thereafter, in 2003, the present suit was filed by the plaintiff for injunction simpliciter, seeking to restrain alienation of the property and interference with alleged peaceful possession. Significantly, the plaintiff admitted that the defendant was in possession, yet proceeded on the basis of a tenancy claim. The property purchased in 1934 formed the subject matter of the suit, whereas a house property purchased in 1984 was excluded.

Issue:

The High Court in second appeal framed two questions relating to the nature of the property and construction of a documentary exhibit; however, before the Supreme Court, the issues that arose for consideration were:

1. Whether the Will dated 30 September 1985 was validly proved and whether the testator had the right to bequeath the property?
2. Whether an injunction restraining interference with possession could be granted where the plaintiff admittedly did not have possession?
3. Whether a suit for injunction simpliciter, without a prayer for declaration of title or recovery of possession, was maintainable in law?

Submission of the Parties:

The appellants contended that they were in continuous possession of the suit property, which was expressly admitted by the plaintiff in her pleadings and evidence. It was submitted that the suit, being one for bare injunction without a prayer for declaration or recovery of possession, was not maintainable when the defendant was admittedly in possession. The appellants relied upon the agreement allegedly executed in 1983 by which the property was divided and asserted that the plaintiff adduced no evidence to establish her possession. It was argued that the trial court and High Court erred in granting injunction against interference when the plaintiff had neither possession nor sought declaration of title.

The plaintiff submitted that two distinct properties were involved, one purchased in 1934 and the other in 1984, and that the present suit concerned only the former. It was contended that the Will conferred title upon the plaintiff and that she had reserved her right to take further proceedings with respect to the house property purchased later. It was urged that the injunction was justified and that the plaintiff was entitled to protect her interest in the suit property.

Observations of the Court:

The Supreme Court held that the Will (Ex. A6) stood proved, as the signature of the testator was affirmed by PW-1 and one of the attesting witnesses, now deceased, was identified by his son PW-2. However, the Court noted that although the Will was proved in evidence, the right of the testator to bequeath the property remained doubtful in view of competing claims of co-ownership.

The Court further found that the plaintiff unequivocally admitted that possession of the property was with Munuswamy. In such circumstances, a suit for injunction simpliciter, without seeking declaration of title or recovery of possession, was legally untenable. The Court observed that if the plaintiff asserted title on the basis of the Will, she was required to seek a declaration and recovery of possession, particularly when the defendant claimed co-ownership and asserted possession with improvements. Correspondingly, the defendant too had failed to seek declaration based on the alleged partition arrangement.

The Court held that the plaint was ill-drafted and that both the trial court and High Court erred in granting injunction restraining interference with possession when the plaintiff did not have possession. However, the Court upheld the injunction restraining alienation, as neither party had sought a declaration of title, and alienation during pendency of litigation would prejudice the rights of both sides.

Held:

The Supreme Court set aside the injunction granted in favour of the plaintiff insofar as it restrained interference with possession, holding that such relief was impermissible in the absence of possession or a prayer for recovery of possession. The injunction restraining alienation of the property was maintained. The Court reserved liberty to either party to institute fresh proceedings seeking declaration of title and consequential reliefs, within a period of three months. It was further directed that any such proceedings shall be adjudicated independently, uninfluenced by observations in the present judgment. All pending applications were disposed of, and the appeal stood disposed of in the above terms.

The judgment reiterates that a suit for injunction simpliciter is not maintainable where the plaintiff is admittedly not in possession and fails to seek declaration of title or recovery of possession. It reinforces the settled principle that pleadings must match the nature of relief sought specially in property disputes involving rival claims of ownership and possession. The Court's refusal to adjudicate title without proper pleadings safeguards procedural discipline while preserving substantive rights through liberty to file fresh proceedings.

CRIMINAL LAW

Date: 17 October 2025

Case Name: Kannaiya vs. State of Madhya Pradesh Criminal Appeal No. 116 of 2012 arising out of SLP (Criminal) No. 116 of 2024

Forum: Supreme Court

The present appeal arises from an incident that occurred on 28 September 1990 at about 9:00 p.m. in village Chak, where ten persons, including the present appellant i.e., Kannaiya, were alleged to have been causing damage to a temporary hut belonging to one Jagya. When Ramesh, son of the informant Gobariya, attempted to intervene and pacify the assailants, he was allegedly assaulted by all ten accused. The assailants were stated to be armed with various weapons: the appellant with an axe, several others with sword, sticks, while some were unarmed and used fists and kicks. Ramesh sustained multiple injuries and was taken first to the Primary Health Centre, Manpur, and thereafter referred to M.Y. Hospital, Indore where he succumbed to his injuries on 05 October 1990.

The incident was stated to have been the result of political rivalry, as the complainant and accused belonged to rival groups aligned with the Congress Party and the Bharatiya Janata Party respectively. The oral statement of the informant was recorded the next morning and treated as an FIR. Initially, offences under Sections 307, 147 and 148 read with Section 149 of the Indian Penal Code, 1860 ("IPC") and Sections 25 and 27 of the Arms Act were registered; Section 302 IPC was added upon the death of Ramesh. Postmortem examination revealed multiple sharp and blunt force injuries, confirming homicidal death.

Upon completion of investigation, chargesheet was filed and the case was committed to the Court of the First Additional Sessions Judge, Mhow. The trial court, by judgment dated 22 October 1999, acquitted six of the accused but convicted four, including the appellant, under Section 302 read with Section 34 IPC and sentenced them to life imprisonment. The High Court of Madhya Pradesh dismissed the appeal of the four convicts on 09 April 2009. Only the present appellant pursued a further appeal before the Supreme Court, the remaining three convicts not having challenged their conviction.

Issue:

1. Whether the testimonies of prosecution witnesses were credible and reliable enough to sustain a conviction?
2. Whether contradictions and omissions in witness statements created reasonable doubt?
3. Whether there existed adequate corroborative evidence to sustain the prosecution's narrative?

Submission of the Parties:

The accused-appellant contended that the prosecution case was wholly unreliable, pointing out that the informant did not support the prosecution version and was declared hostile, and that Jagya, in whose hut the incident was said to have originated, also turned hostile and denied the material allegations. It was submitted that the testimony of the two eyewitnesses was mutually contradictory while one shifted the place of occurrence to a nearby agricultural field, the other claimed it took place near his residence, contrary to the FIR. It was further submitted that neither witness acknowledged the presence of the other at the crime scene, creating serious doubt about their credibility. The appellant submitted that since six other accused persons against whom identical evidence existed were acquitted, the appellant was entitled to acquittal on grounds of parity.

The State argued that the testimony of the two eyewitnesses was unimpeachable, natural, and fully supported by medical evidence. It was submitted that the omission of the name of in the FIR was not fatal and that presence of both eye-witnesses was natural in the circumstances narrated. It was further argued that the trial court and the High Court had already undertaken a detailed appreciation of the evidence and drawn proper distinction between the case of the acquitted accused and that of the convicted persons who were armed with sharp weapons, and hence no interference was warranted.

Observations of the Court:

The Court held that there was no dispute regarding the homicidal nature of Ramesh's death or the political rivalry between the parties. The issue lay in the credibility of the alleged eyewitnesses. Referring to the three-fold classification of witnesses laid down in Vadivelu Thevar v. State of Madras, the Court noted that both PW-5 and PW-12 were neither wholly reliable nor wholly unreliable, and therefore required independent corroboration. The Court found that PW-12 was not named in the FIR, his presence was not confirmed by his own father who was examined as PW-3, and he shifted the place of occurrence to a location entirely different from that asserted in the FIR. The Court held that such testimony was wholly unreliable.

With respect to PW-5, the Court found that he contradicted the FIR by denying that the accused were damaging any hut, and also contradicted PW-12 by denying his presence at the scene. The Court also noted the improbability of the witness standing "two steps away" from a collective armed assault by ten persons and escaping without injury. The shifting of the place of occurrence, absence of corroboration, and mutually destructive testimony of the two witnesses led the Court to hold that the prosecution had suppressed the genesis and true manner of the incident.

Placing reliance on Pankaj v. State of Rajasthan and Bhagwan Sahai v. State of Rajasthan, the Court held that when the prosecution suppresses the origin and genesis of the occurrence, the accused is entitled to the benefit of doubt. The Court held that the prosecution had failed to prove the case beyond reasonable doubt and that the conviction could not rest upon such infirm testimony.

Held:

The Supreme Court held that the conviction of the appellant and the remaining three convicts could not be sustained, as the entire prosecution case stood vitiated. In exercise of powers under Article 142 of the Constitution, the Court extended the benefit of acquittal to the three co-accused who had not preferred appeals, holding that it would be unjust to uphold their conviction when the foundation of the prosecution case had collapsed.

Accordingly, the conviction and sentence imposed by the trial court and affirmed by the High Court were set aside. The appellant and the three co-accused were acquitted of all charges and directed to be released forthwith, if not required in any other case. The appeal was allowed and all pending applications stood disposed of.

This judgment reinforces that when the prosecution suppresses the genesis and true manner of occurrence, and its sole eyewitnesses contradict each other on material particulars, the accused is entitled to the benefit of doubt. The Court reiterates that conviction cannot rest on speculative or unreliable testimony merely because death is proved to be homicidal. The ruling also affirms the Supreme Court's power under Article 142 to extend acquittal to non-appealing co-accused when the evidentiary foundation collapses in its entirety.

INSOLVENCY AND BANKRUPTCY LAW

Date: 28 October 2025

Case Name: EPC Constructions India Limited v. M/s Matix Fertilizers and Chemicals Limited, arising out of Civil Appeal No. 11077 of 2025

Forum: Supreme Court

The appellant i.e., EPC Constructions India Limited (formerly Essar Projects India Limited), had entered into an engineering, procurement, and construction contract dated 11 December 2009 with the respondent i.e., Matix Fertilizers and Chemicals Limited, for setting up a fertilizer plant in West Bengal. This was followed by two further contracts, an On-shore Supply Contract dated 29 July 2010 and an Off-shore Supply Contract dated 20 August 2010, relating to the supply of equipment of Indian and non-Indian origin, respectively. According to the appellant, a sum of INR 572.72 crores became outstanding from the respondent under these contracts. In August 2015, the parties agreed that the outstanding receivables would be converted into 8% Cumulative Redeemable Preference Shares ("CRPS") of the respondent, which were duly approved by the respective boards and shareholders. The CRPS were subsequently issued.

During this period, the appellant underwent the Corporate Insolvency Resolution Process ("CIRP") and a Resolution Professional was appointed. A demand notice dated 27 October 2018 was issued to the respondent seeking INR 632.71 crores, comprising INR 310 crores towards redemption of matured CRPS and INR 322.71 crores as unpaid receivables. The respondent disputed liability. The appellant thereafter filed a Section 7 application under the Insolvency and Bankruptcy Code, 2016 ("IBC") before the NCLT, Kolkata, asserting that it was a financial creditor by virtue of holding CRPS. The NCLT dismissed the application on 29 August 2023, holding that the appellant was not a financial creditor. The NCLAT affirmed this decision on 09 April 2025, following which the present appeal was filed before the Supreme Court.

Issues:

1. Whether the appellant, as a holder of CRPS, could be treated as a financial creditor under the IBC and thereby maintain an application under Section 7 of the IBC?
2. Whether CRPS constitute a "financial debt" within the meaning of Section 5(8)(f) of IBC?

Submissions of the Parties:

On behalf of the appellant, it was submitted that the conversion of receivables into CRPS was, in substance, a borrowing transaction having the commercial effect of a loan, and therefore the amount payable on redemption constituted a financial debt. It was argued that the underlying intention of the parties was to treat the conversion as subordinate debt to enable Matix to maintain its debt-equity ratio while continuing to remain liable to repay the amount. Reliance was placed on judicial precedents expanding the interpretation of "financial debt" and on the fact that the CRPS liability was recorded in Matix's balance sheet as an unsecured loan.

The respondent, however, contended that preference shares are expressly treated as part of share capital under the Companies Act, not as debt, and that preference shareholders are not creditors. It was submitted that Section 5(8) of the IBC does not include preference share capital within the definition of financial debt, and that permitting a shareholder to invoke Section 7 would obliterate the fundamental distinction between equity and debt. It was further argued that entries in account books do not determine the legal character of a transaction, and that redemption of CRPS is statutorily permissible only out of profits or proceeds of a fresh issue, neither of which existed, meaning that no "default" could be said to have occurred under Section 3(12) of the IBC.

Observations of the Court:

The Supreme Court reiterated the settled legal position that preference shares are part of the company's share capital and do not create a debtor–creditor relationship. Referring to earlier authorities, including Lalchand Surana v. Hyderabad Vanaspathy Ltd., the Court held that even where preference shares have matured but cannot be redeemed due to the absence of profits or reserves, the holder does not thereby become a creditor of the company. The Court observed that a Section 7 application is maintainable only if the applicant is a financial creditor and a default has occurred, i.e., the debt has become due and payable and has not been paid. Since redeemable preference shares can only be redeemed in the manner provided under Section 55 of the Companies Act, and the respondent did not have profits or fresh issue proceeds, no default had occurred in law.

The Court further held that conversion of outstanding receivables into CRPS amounted to extinguishment of the original debt, replacing it with a shareholder relationship. The appellant, having consciously opted for CRPS in order to assist the respondent in meeting its debt-equity ratio requirements, could not subsequently contend that the transaction was a disguised loan. The Court rejected the argument based on "commercial effect of borrowing". holding that the essential ingredient of disbursal against time value of money was absent. The fact that CRPS were reflected as financial liability in accounts was held to be irrelevant, as accounting classification cannot override statutory character.

Held:

The Supreme Court dismissed the appeal and upheld the decisions of the NCLT and NCLAT, holding that the appellant, being a preference shareholder, was not a financial creditor within the meaning of the IBC and therefore could not maintain a Section 7 application. The Court further held that there was no default in redemption, as the statutory conditions for redemption had not arisen, and that preference share capital cannot be treated as financial debt. Accordingly, the appeal was rejected with no order as to costs.

The judgment reaffirms that holders of redeemable preference shares do not acquire the status of financial creditors and cannot invoke insolvency proceedings under the IBC merely because the redemption period has expired; the legal relationship remains that of shareholder and company, not creditor and debtor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.