The Bombay High Court has directed Afcons Infrastructure Ltd. to return over ₹12.76 crore it had withdrawn during a long-pending arbitration dispute with Reliance Naval and Engineering Ltd., holding that the amount cannot be retained after Reliance’s successful insolvency resolution.
Justice Somasekhar Sundaresan, who heard the matter, said the underlying arbitral award no longer survives once the resolution plan under the Insolvency and Bankruptcy Code (IBC) was approved.
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Background of the Case
The dispute traces back to an arbitral award dated August 31, 2015, under which Afcons Infrastructure Ltd. was awarded about ₹49.11 crore against Reliance Naval and Engineering Ltd. (earlier known as Pipavav Defence and Engineering Ltd.).
Reliance challenged the award before the High Court under Section 34 of the Arbitration Act. During the pendency of that challenge, the court, in February 2017, directed Reliance to deposit ₹12.76 crore with the court registry. Afcons was allowed to withdraw this amount after furnishing a bank guarantee of an equivalent value.
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While the arbitration challenge was still pending, Reliance entered the corporate insolvency resolution process under the IBC. The process concluded successfully in December 2022, with the approved resolution plan drastically reducing Afcons’ claim from ₹49.11 crore to Re.1.
The interim application before the court sought directions to bring back the ₹12.76 crore withdrawn by Afcons. Reliance also asked for interest at 18 percent per annum on the amount.
The bench noted that once the resolution plan was approved, Afcons’ right to receive the arbitral award amount stood extinguished. “The very foundation of the award has been effaced,” the court observed, explaining that the deposited money was always held under the court’s control and released only on the strength of a bank guarantee.
Referring to Supreme Court and Bombay High Court precedents, the judge said that money deposited by a company that later undergoes insolvency remains its asset and must be dealt with in line with the approved resolution plan.
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Court’s Observations
The court was clear that the arbitration challenge itself had become meaningless after the insolvency resolution. “There is nothing awarded in the arbitral proceedings that can now be enjoyed,” the bench observed.
On the interest claim, however, the court took a different view. It said the demand for interest raised a separate cause of action and could not be decided through this interim application. “There is no basis for awarding interest in these proceedings,” the judge noted, leaving Reliance free to pursue the issue separately, if advised.
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Final Decision
Allowing the application in part, the Bombay High Court directed Afcons to deposit ₹12.76 crore back with the court registry within four weeks. If Afcons fails to do so, the registry has been instructed to invoke the bank guarantee and release the recovered amount to Reliance.
The claim for interest was rejected, and the court disposed of the application without any order on costs.
Case Title: Reliance Naval and Engineering Ltd. vs Afcons Infrastructure Ltd.
Case No.: Interim Application (L) No. 9646 of 2024 in Arbitration Petition No. 1755 of 2015
Case Type: Arbitration / Insolvency
Decision Date: December 17, 2025
