Supreme Court Binds Bihar Discom to Sole Arbitrator; Is Silence Consent?
NEW DELHI: The Supreme Court of India on 28 October 2026 held that South Bihar Power Distribution Company Ltd. waived its contractual right to a three-member arbitral tribunal by consenting twice to a sole arbitrator and then fighting a counter claim before him for years, affirming the High Court on waiver but ruling that the Patna High Court had no power to extend the arbitrator's time under Section 29A of the Arbitration and Conciliation Act, 1996.
A Bench of Justice Ujjal Bhuyan and Justice Atul S. Chandurkar dismissed both civil appeals, lifted its own embargo of 12 February 2024 on the award, and directed the sole arbitrator, former Chief Justice of India Justice Dipak Misra, to pass the award within six weeks. The Court also settled that the power to extend an arbitrator's mandate belongs to the civil court defined in Section 2(1)(e), and not to the High Court acting under Section 11.
Case at a Glance
Case Title: South Bihar Power Distribution Company Ltd. v. India Power Corporation Ltd. & Anr.
Case No.: Civil Appeal No. 9313 of 2026 (arising out of SLP (Civil) No. 27403 of 2023), heard with Civil Appeal No. 9325 of 2026 (arising out of SLP (Civil) No. 24988 of 2026)
Citation: 2026 INSC 1165 (marked reportable)
Bench: Justice Ujjal Bhuyan and Justice Atul S. Chandurkar (judgment authored by Justice Bhuyan)
Date of Judgment: 28 October 2026
What Was Challenged: Judgment dated 15 September 2023 of the Patna High Court in Request Case No. 36 of 2021 and Request Case No. 78 of 2022
Statute: Sections 4, 11, 16, 2(1)(e), 29A and 42 of the Arbitration and Conciliation Act, 1996, read with Section 14 of the Insolvency and Bankruptcy Code, 2016
Appearing: Mr. Sundaram and Mr. Raju Ramachandran, learned senior counsel, for the appellant; Mr. Atmaram Nadkarni, learned senior counsel, for respondent No. 2
The Question Behind the Headline
A distribution franchisee agreement said that disputes must go to a panel of three arbitrators. The dispute went to one. Years later, the power company that signed the agreement said the entire process was invalid. Can a party stay silent, take part in the arbitration, file its own counter claim, and then call the tribunal illegal when time runs out? The Supreme Court said no.
The answer to the title is yes, in this case silence was consent. Under Section 4 and Section 16(2) of the 1996 Act, a party that knows a requirement of the arbitration agreement has not been followed, yet carries on with the arbitration without objecting in time, is deemed to have waived the right to object. The Court added a second answer that matters just as much to practitioners: the time for the sole arbitrator could not have been extended by the High Court at all.
Background
The Franchisee Agreement and the Three-Arbitrator Clause
South Bihar Power Distribution Company Ltd. is a distribution licensee under the Electricity Act, 2003 for four supply areas in Bihar, namely Patna, Central, Magadh and Bhagalpur. After competitive bidding, India Power Corporation Ltd. emerged as the successful bidder, and its wholly owned special purpose vehicle, India Power Corporation (Bodhgaya) Ltd., entered into a tripartite Distribution Franchisee Agreement dated 31 December 2013 with the licensee. The parent signed as the confirming party.
Clause 17.2.5 provided that disputes not resolved through negotiation and the dispute resolution procedure would be exclusively submitted to arbitration under the 1996 Act "by a panel consisting of three arbitrators".
How the Sole Arbitrator Came In
India Power issued an arbitration notice on 9 November 2016. When no arbitrator was appointed, the special purpose vehicle approached the Patna High Court under Section 11 in Request Case No. 77 of 2018. With the consent of the parties, the High Court on 4 April 2018 appointed a retired High Court Judge, Justice Shashank Kumar Singh, as sole arbitrator. Proceedings began on 12 April 2018. The licensee's application under Sections 13 and 16(1) was rejected as not pressed, and it then filed a counter claim on 2 February 2019 and a supplementary counter claim on 28 March 2019.
The arbitrator could not continue beyond the stage of recording evidence. In Request Case No. 14 of 2020, again with the consent of the parties, the High Court on 10 March 2021 appointed former Chief Justice of India Justice Dipak Misra as the new arbitrator. His procedural order of 7 April 2021 recorded that all parties had no objection to the composition of the tribunal or to him acting as sole arbitrator.
The Insolvency Twist
Meanwhile, the National Company Law Tribunal, Kolkata admitted a Section 9 application under the Insolvency and Bankruptcy Code, 2016 against the special purpose vehicle on 8 November 2019 and appointed an interim resolution professional. The licensee did not file a claim before the interim resolution professional. The creditors approved the resolution plan of Rankini Power Generation Private Limited on 13 February 2021, the NCLT approved it on 18 July 2022, and the company was renamed Vikriti Power Limited from 28 August 2023.
Time Runs Out
The one-year statutory period could not be completed. It was extended by six months on consent. Before it expired on 7 August 2021, the respondents filed Request Case No. 36 of 2021 before the High Court for a further four months. The licensee resisted, challenged the sole arbitrator for the first time as contrary to the three-member clause, questioned its own earlier consent, and filed Request Case No. 78 of 2022 seeking a three-member tribunal.
By judgment dated 15 September 2023, the High Court held that there was consent and acquiescence amounting to waiver, rejected the plea that the company in insolvency lacked locus standi, held that it had jurisdiction to extend time under Section 29A, extended the mandate by four months, allowed Request Case No. 36 of 2021 and rejected Request Case No. 78 of 2022. On 12 February 2024, the Supreme Court allowed the proceedings to continue but directed that no award be declared.
During the pendency of the appeal, the respondents also applied under Section 29A(5) to the Principal District Judge-cum-Commercial Court, Patna. On 21 January 2026, the Supreme Court directed that court to decide the application on merits within two months. By judgment dated 23 March 2026, the Commercial Court extended the sole arbitrator's mandate by six months from that date.
Arguments Before the Supreme Court
For the Appellant
Mr. Sundaram pointed to clauses 17.2.5 and 17.2.6 and submitted that any dispute could only be decided by a tribunal of three arbitrators. He argued that India Power was only a proforma party whose consent was immaterial, that the corporate debtor had ceased to exist so there could be no arbitration for a non-existent party, and that the High Court had foisted a solitary arbitrator on the appellant. He sought setting aside of the judgment and relegation to a fresh three-member tribunal. Mr. Raju Ramachandran supported these submissions in the connected appeal.
For Respondent No. 2
Mr. Atmaram Nadkarni supported the High Court judgment and submitted that sufficient progress had been made within the extended period. He argued that aborting the arbitration now would cause serious prejudice to the respondents and sought dismissal of the appeals.
What the Supreme Court Held
The Court examined the three questions framed by the High Court one by one. It first reviewed Section 29A and its own recent decisions in Rohan Builders (India) (P) Ltd. v. Berger Paints (India) Ltd., (2025) 10 SCC 802, and C. Velusamy v. K. Indhera, (2026) 5 SCC 340, which restate the structure of the provision: twelve months for the award, six more by consent, termination of mandate thereafter unless the court extends the period, before or after expiry, on sufficient cause.
Issue One: Did the Licensee Waive the Three-Arbitrator Clause?
Yes. The Court found no infirmity in the High Court's view and affirmed it.
The Statutory Test
Section 4 deems a party to have waived its right to object if it knows that a requirement under the arbitration agreement has not been complied with, 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.
The Conduct the Court Counted
The Court noted that the licensee appeared through counsel and consented, not once but twice, to the appointment of a sole arbitrator. It continued to participate in the proceedings, consented to the extended period, and filed a counter claim and a supplementary counter claim before the sole arbitrator. The appointment orders of 4 April 2018 and 10 March 2021 were never assailed, and they had attained finality and bound the parties.
Union of India v. Pam Development Private Limited
The Court relied on Pam Development, (2014) 11 SCC 366, where a party that took part in arbitration before a sole arbitrator appointed under Section 11(6), despite a three-member clause, was held to have waived the requirement under Section 4 read with Section 16. The objection raised only when extension of time was sought under Section 29A(4) came, in the Court's words, at a "very belated stage".
Issue Two: Could a Company in Insolvency Pursue the Arbitration?
Yes. The Court agreed with the High Court that Section 14 of the Insolvency and Bankruptcy Code does not necessarily stop a corporate debtor from initiating proceedings to recover its dues, and that an arbitral claim, if it succeeds, only bolsters the financial health and value of the corporate debtor. The moratorium is meant to prevent recovery action against the debtor. The resolution professional had also authorised the signatories to pursue the arbitration, and the committee of creditors approved this in compliance with Section 28(1)(h) of the Code.
Issue Three: Who Can Extend the Arbitrator's Time?
Here the Court reversed the High Court. It held that the view that the Chief Justice of the High Court or his designate, empowered under Section 11, can extend time under Section 29A(4) is "clearly unsustainable in law".
The Meaning of Court in Section 2(1)(e)
Section 2(1)(e)(i) defines court as the principal civil court of original jurisdiction in a district, including a High Court exercising ordinary original civil jurisdiction. Sections 11(3A), 11(4) and 11(6) only deal with the appointment of the tribunal and do not change that definition. Relying on State of West Bengal v. Associated Contractors, (2015) 1 SCC 32, Chief Engineer (NH) PWD (Roads) v. M/s. BSC & C and C JV, Jagdeep Chowgule v. Sheela Chowgule, (2026) 5 SCC 667, and C. Velusamy, the Court held that the Supreme Court or the High Court acting under Section 11 is not the court for Sections 29A(4) and 29A(6), and Section 42 does not apply to Section 11 applications.
Why the Fresh Commercial Court Order Mattered
The Commercial Court at Patna had already extended the mandate by six months on 23 March 2026, following the Supreme Court's order of 21 January 2026. Because of that valid order, setting aside the High Court's extension had no bearing on the outcome.
The Final Orders
The High Court judgment was upheld on questions one and two and set aside on question three. The embargo of 12 February 2024 was lifted, the sole arbitrator was directed to pass the award within six weeks from 28 October 2026, both civil appeals were dismissed, and there was no order as to costs.
Key Lines From the Judgment
"A careful examination of the aforesaid provisions coupled with the analysis of the High Court would make it abundantly clear 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."
"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."
"The conclusion reached by the High Court that the jurisdiction to extend the period of time has to be exercised by the High Court under Section 29A of the 1996 Act is not correct and is accordingly set aside."
What This Means Going Forward
Object early or lose the point. A party that wants a tribunal of the size the contract requires must say so before the statement of defence, and must not take part in the proceedings or file a counter claim as if the tribunal were valid.
Consent orders under Section 11 bind. Appointment orders passed on consent and left unchallenged become final, and the Court treated them as binding on the parties.
File extension applications in the right forum. Applications under Section 29A(4) and 29A(5) go to the principal civil or commercial court of original jurisdiction, not to the High Court that appointed the arbitrator under Section 11, unless that High Court has ordinary original civil jurisdiction.
Insolvency does not freeze the debtor's own claims. A corporate debtor can continue an arbitration to recover its dues, subject to the resolution professional's authorisation and committee of creditors approval.
Draft the arbitration clause and the process with care. Contracts that insist on a three-member panel should be backed by a clear procedure so that nobody can later claim a waiver or a defect.
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Frequently Asked Questions
Did the Supreme Court say silence amounts to consent in arbitration?
In this case, yes. The Court held that the licensee, which consented twice to a sole arbitrator, participated for years and filed a counter claim, was deemed under Section 4 read with Section 16(2) to have waived its right to insist on a three-member tribunal.
Can the High Court extend an arbitrator's mandate under Section 29A?
Not when it acts under Section 11. The Court held that the power under Section 29A(4) and 29A(6) lies with the court as defined in Section 2(1)(e), meaning the principal civil court of original jurisdiction in the district or a High Court exercising ordinary original civil jurisdiction.
Can a company in insolvency continue an arbitration to recover its dues?
Yes. The Court held that the Section 14 moratorium under the Insolvency and Bankruptcy Code does not necessarily stop a corporate debtor from pursuing recovery proceedings, which includes an arbitration, particularly when the resolution professional has authorised it and the committee of creditors has approved it.
Why were the appeals dismissed if the High Court was partly wrong?
The Commercial Court at Patna had already extended the sole arbitrator's mandate by six months on 23 March 2026, following the Supreme Court's own order. Setting aside the High Court's extension therefore had no material effect on the outcome.
What happens to the arbitration now?
The embargo on declaring the award has been lifted. The sole arbitrator, Justice Dipak Misra, must conclude the arbitration and pass the award within six weeks from 28 October 2026.
Keywords
Waiver of arbitration agreement, Section 4 Arbitration Act, Section 16(2) Arbitration Act, Section 29A Arbitration and Conciliation Act, extension of arbitrator mandate, sole arbitrator versus three-member tribunal, Section 2(1)(e) court, Section 11 appointment, Section 14 IBC moratorium, corporate debtor arbitration, Pam Development, Rohan Builders, C. Velusamy, Jagdeep Chowgule, South Bihar Power Distribution Company, 2026 INSC 1165, Justice Ujjal Bhuyan, Justice Atul S. Chandurkar.
Case Title: South Bihar Power Distribution Company Ltd. v. India Power Corporation Ltd. & Anr.
Case No.: Civil Appeal No. 9313 of 2026 (arising out of SLP (Civil) No. 27403 of 2023) with Civil Appeal No. 9325 of 2026
Citation: 2026 INSC 1165
Bench: Justice Ujjal Bhuyan and Justice Atul S. Chandurkar
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