- Introduction
1.1 Section 37 of the Arbitration and Conciliation Act, 1996 (the Act), which is a non-obstante provision, enumerates appealable orders. It provides that an appeal may be preferred against an order:
- refusing to refer the parties to arbitration under section 8;
- granting or refusing to grant any measure under section 9;
- setting aside or refusing to set aside an arbitral award under section 34.
- order of the arbitral tribunal accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or granting or refusing to grant an interim measure under section 17.
1.2 Section 37, expressly prohibits any second appeal, except the right to appeal to the Supreme Court, from an order passed in appeal under it.
1.3 On 02.08.2024, the High Court of Bombay (HC), decided two arbitration appeals under section 37(2)(b) of the Act. [Ambrish H. Soni v. Chetan Narendra Dhakan and Others, 2024 SCC OnLine Bom 2820] This case study briefly discusses the legal principle as to the extent the Appellate Court can interfere with the impugned order under section 37 of the Act.
- Brief facts
2.1 A Partnership deed was executed between the partners of a firm (the disputing parties) on 21.10.2016.
2.2 Respondent No.1 (Chetan/claimant) filed a Commercial Arbitration Petition under Section 9 of the Act on 02.11.2018 before a Single Judge bench of the HC. (the first petition).
2.3 In the first petition, the order dated 20.12.2018 recorded the statement of Appellant No.1 (Ambrish) who agreed to abide by clauses 11 and 17 of the deed.
2.4 Thereafter, Respondent No.1 filed another Commercial Arbitration Petition, under section 11 of the Act. (the second petition)
2.5 The order dated 20.01.2020, addressing both petitions, appointed a sole Arbitrator to adjudicate the disputes. It was also directed that section 9 Petition be heard and disposed of, as an application under section 17 of the Act by the sole Arbitrator. Further, the status-quo order was extended until the sole Arbitrator renders a final award.
2.6 Before the Arbitrator, section 17 application filed by Respondent No.1 was disposed of vide order dated 18.10.2022, wherein the status quo granted by the HC was extended to all the properties (including Virar property owned by Appellant No.2/Ilaben) disclosed by the appellants.
2.7 A review against the order dated 18.10.2022 preferred by Appellant No.1 was dismissed on 23.11.2023.
2.8 During the pendency of the arbitration proceedings, a fresh section 9 Petition was filed by Respondent No.1 seeking appointment of the Court Receiver with regard to the Virar property, in wake of the fact that the appellants had started construction on the Virar property. (the third petition)
2.9 The order dated 18.10.2022 was challenged by Appellant No.1 under section 37(2)(b) of the Act. (the first appeal)
2.10 The Single Judge Bench of the HC, vide order dated 16.07.2024, allowed the third petition and dismissed the first appeal.
2.11. Being aggrieved by the said order, the appellants approached the division bench of the HC in Appeal.
- Observation
3.1 The HC while deciding the appeals relied on the judgment of the SC in Wander Limited v. Antox India Pvt Ltd., 1990 Supp SCC 727 [Also see, Monsanto Technology LLC v. Nuziveedu Seeds Ltd., (2019) 3 SCC 381; Shyam Sel & Power Ltd v. Shyam Steel Industries Ltd., 2022 SCC OnLine SC 313; Stoughton Street Tech Labs Pvt Ltd. v. Jet Skyesports Gaming Pvt Ltd., 2022 Appeal (L) No. 16492; Halliburton India Operations Private Limited v. Vision Projects Technologies Pvt. Ltd., 2024 : BHC-OS : 8918 DB], with respect to the section 37 appeal. The Court observed that the appellate court under Section 37 must exercise its power with caution, respecting the findings of the trial court unless there is a clear error or a failure of justice.
3.2 The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except:
3.2.1. where the discretion has been shown to have been exercised:
- arbitrarily, or
- capriciously, or
- perversely; or
3.2.2. where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions.
3.3 As to the appeal preferred by Appellant No.1, the HC relied on the judgment in Ravinder Singh Ahluwalia v. Kuljinder Singh Ahluwalia, 2009 SCC OnLine Bom 712 which laid down a settled law to the effect that when a notice of dissolution of partnership is issued, the Appointment of Court's receiver is necessary to protect the assets of a partnership firm.
- Decision
4.1 While disposing of the appeals, the HC primarily relied on the following factual events:
4.2 The first Section 9 petition was filed by the Respondent No.1 prior to the arbitration proceedings commenced before the sole Arbitrator, and the second Section 9 petition was filed while the arbitration proceedings were in progress.
4.3 Admittedly, the Appellant No. 1 did not challenge the orders dated 20.12.2018 and 20.01.2020 passed by the Single Judge of the HC, therefore, both the orders have attained finality, and the appellants were supposed to comply with the directions given in the orders.
4.4 The Sole Arbitrator while hearing the Section 17 application of the Claimant further extended the status-quo order granted by the Single Judge of the HC, also to the Virar property. The sole Arbitrator held that prima facie, the appellants, had acted contrary to the spirits of the terms and conditions of the deed.
4.5 The Single Judge while hearing both the petitions, one filed under Section 9 by the Respondent No.1 seeking appointment of the Court Receiver with regard to the Virar property and another filed by the appellants under Section 37(2)(b) challenging the order of the sole Arbitrator, held that there were sufficient evidence on record to prove that the Appellants had started constructions on the Virar property, though there was status-quo order, hence, as an interim measures of protection to safeguard and preserve the Virar property, the Court Receiver needs to be appointed. Hence, the Single Judge allowed Section 9 Petition and dismissed Section 37(2)(b) Petition of the appellants. Admittedly, the appellants did not challenge the order passed by the Single Judge of the HC under Section 37(2)(b) in the Supreme Court.
4.6 The section 9 petition filed by Appellant No.2 was signed and verified by the Appellant No.1, who had been participating in Arbitration proceedings since beginning. Appellant No.2 had claimed that she became entitled to the Virar property after death of her husband, who was the owner of the Virar property. However, records indicated that there was transaction between her husband and the partnership firm, wherein monies were transferred in respect of the Virar property. Hence, the Single Judge of the HC did not find any merit in the appeal filed by Appellant No.2.
4.7 Thus, the Appeal filed by the Appellant No. 2 was devoid of merit, as it was evident that she was aware of the previous proceedings and orders.
- Conclusion
5.1 Based on the settled legal principles and the reasons discussed above, the HC dismissed both the appeals filed by the Appellants. The judgment underscores that an appeal under Section 37 of the Act is confined to determining whether the order under challenge satisfies the conditions stipulated in the provision. The Appellate Court can set aside or uphold the arbitral award, but cannot examine the merits of the claim. In short, the power of the Appellate Court under section 37 of the Act is narrow and limited. If at all, the aggrieved party may approach the Supreme Court under article 136 of the Constitution
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Originally published 22nd Jan 2025 .
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