Arbitral Award Does Not Survive Once Company Exits IBC, Rules Bombay HC

New Delhi, Jan 3 (KNN) The Bombay High Court ruled that if a company exits insolvency under an approved resolution plan, an arbitral award under challenge does not survive, and any money withdrawn by the award holder from court deposits must be returned if the claim stands extinguished.

Court Orders Refund of Withdrawn Amount
Justice Somasekhar Sundaresan, in an order dated December 17, 2025, allowed Reliance Defence and Engineering Ltd’s interim application and directed Afcons Infrastructure Ltd to return Rs 12.76 crore withdrawn from court deposits during the pendency of the arbitration challenge.

“It is only proper that the amount withdrawn should now be brought back by Afcons since the underlying Arbitral Award itself stands extinguished with Reliance starting with a clean slate post-resolution under the IBC,” the court observed.

Background of the Arbitration Dispute
Reliance Defence challenged a Rs 49.11 crore arbitral award passed in favour of Afcons on August 31, 2015, before the Bombay High Court under Section 34 of the Arbitration Act. 

During the pendency of the challenge, the court in February 2017 directed Reliance to deposit Rs 12.76 crore, which Afcons was allowed to withdraw against a bank guarantee.

Impact of Insolvency Proceedings
Reliance Defence was later admitted into insolvency, with a resolution plan approved on December 23, 2022, under which Afcons’ arbitral award claim was reduced to Re 1, extinguishing its recovery rights. 

Reliance then sought return of the deposited amount, arguing that the approved plan nullified the arbitral award and related claims.

Court’s Legal Reasoning
Rejecting Afcons’ objections, the court held that the deposit remained under its custody and was released only as a discretionary, equitable arrangement pending the arbitration challenge. 

Once the resolution plan took effect, the court said the position was ‘crystal clear,’ noting that the right to receive the awarded amount stood extinguished, rendering the Section 34 petition infructuous.

Relying on the Supreme Court’s ruling in Ghanshyam Mishra and earlier Bombay High Court judgments, Justice Sundaresan held that Afcons’ rights under the arbitral award were a ‘claim’ and a ‘debt’ under insolvency law, both of which stood extinguished once the resolution plan was approved.

The court directed Afcons to deposit Rs 12.76 crore within four weeks, failing which its bank guarantee would be invoked. It rejected Reliance’s claim for 18 percent interest, holding that this would require separate proceedings.

(KNN Bureau)