The Bombay High Court ruled that post-facto approval by the NCLT under Section 33(5) of the IBC validates arbitration proceedings from the approval date onward, negating the claim of nullity from inception.
Bombay HC Upholds Validity of Post-Facto NCLT Approvals
The Bombay High Court has clarified that if the NCLT grants post-facto approval for arbitration proceedings, such proceedings become effective only from the date of the approval and cannot be deemed void ab initio. This ruling confirms the legal standing of arbitration initiated prior to formal approval.
The bench emphasized that while prior authorization is preferable, the absence thereof does not invalidate the proceedings once the NCLT grants its approval. This interpretation ensures continuity and respect for the arbitration process.
The decision serves as an important reminder for parties engaged in arbitration under the IBC. Legal experts should counsel their clients to seek NCLT approval expeditiously to avoid procedural complications, but also recognize that the lack of pre-approval does not nullify proceedings.
“The commencement of such proceedings will be effective only from the date of approval,” noted the Bombay HC.
Citations
- Bombay HC (2026) 123 BCR 447
