HSA | Dispute Resolution & Arbitration Monthly Update | August 2025

Harkisandas Tulsidas Pabari & Ors. [Appellant] Vs. Rajendra Anandrao Acharya & Ors. [Respondent] & Harkisandas Tulsidas Pabari & Ors. [Appellant] Vs. Nandkishor Anandrao Acharya & Ors. [Respondent]

Background facts

• On July 20, 1994, Harkisandas Tulsidas Pabari, the Appellant, and others entered into a Memorandum of Understanding (MoU) with Rajendra Anandrao Acharya and Nandkishor Anandrao Acharya, the Respondents, for the sale of undivided shares in a property at Girgaon for ₹18 lakhs.
• On the same day, Rajendra and Nandkishor executed a General Power of Attorney in favour of Harkisandas and others, authorising them to develop the property and deal with tenants.
• Between 1994 and 1996, Harkisandas and others paid ₹7.5 lakhs to Rajendra and Nandkishor and began negotiating with tenants, securing consent from two of them.
• On November 04, 1996, Rajendra terminated the MoU citing non-payment of the second instalment and other alleged breaches; Harkisandas and others disputed this.
• On July 01, 1997, Harkisandas referred the dispute to arbitration, and later, on April 01, 1998, an award was passed in their favour.
• On September 28, 1998, the Bombay High Court set aside the award due to lack of a fair hearing.
• Harkisandas and others approached the same arbitrator, without a fresh notice under Section 21. Rajendra and Nandkishor objected to this, but however, the arbitrator proceeded.
• On September 21, 2005, the arbitrator again passed an award granting specific performance to Harkisandas and others.
• Rajendra and Nandkishor challenged the second award. On October 11, 2006, a Single Judge set it aside and imposed costs.
• Harkisandas and others filed the present appeals under Section 37 of the Arbitration and Conciliation Act, 1996.

Issue(s) at hand

• Whether the learned arbitrator was legally authorised to recommence proceedings post-setting aside of the initial award.
• Whether there was proper compliance with Section 21 of the Arbitration and Conciliation Act, 1996, requiring fresh notice to the Respondents.
• Whether the MoU constituted a concluded and specifically enforceable contract, or was uncertain and incapable of execution.

Findings of the Court

• The Court first held, that the arbitrator lacked authority to resume proceedings after the earlier award dated April 01, 1998 was set aside by the Bombay High Court on September 28, 1998. It clarified that the earlier order did not amount to a remand, and any fresh arbitration required compliance with statutory procedure.
• It was held that Section 21 of the Arbitration and Conciliation Act, 1996 was not complied with, as no fresh notice was served by Harkisandas Tulsidas Pabari and others on Rajendra and Nandkishor Acharya before re-commencing arbitration, a mandatory pre-condition when initiating arbitration proceedings afresh.
• The Court emphasized that Section 43(4) of the Arbitration Act applies only when arbitration is commenced afresh, further reinforcing that the proceedings could not have been resumed by the same arbitrator without proper procedure.
• The Court heavily relied on the Hon'ble Apex Court's directions in Milkfood Ltd. v. GMC Ice Cream (P) Ltd., ¹ but distinguished it, noting that in the present case, the arbitrator resumed proceedings without notice and without mutual consent, violating the basic requirements under Sections 21 and 11.
• It further upheld the Single Judge's conclusion that the Memorandum of Understanding (MoU) dated July 20, 1994, did not constitute a concluded and enforceable contract, as key obligations, like demolition vs. additional floors and tenant consent were left uncertain.
• The Court held that the specific performance granted by the arbitrator was not legally executable, since it was contingent upon tenant cooperation, a third-party factor outside the parties' control, rendering the award impractical and speculative.
• This affirms that the arbitrator had excluded vital contractual terms (especially Clauses 3 and 5 of the MoU) from consideration, which rendered the award perverse and unsustainable under Section 34 of the Arbitration Act.
• The Court reiterated that scope under Section 37 is even narrower than under Section 34, and found that the Single Judge had acted well within jurisdiction, not as an appellate court, but by identifying jurisdictional and legal infirmities in the award.
• Accordingly, the Court dismissed the appeals and refused to interfere with the order setting aside the award.

HSA Viewpoint

The Bombay High Court has firmly reinforced the importance of procedural propriety and jurisdictional rigor in arbitration.

This ruling upholds that an award made without proper reconstitution of the tribunal and non-compliance with Section 21 is legally unsustainable.

Further, the Court's interpretation of the MoU underscores the requirement of clarity and enforceability in contracts sought to be specifically performed.

By ensuring that parties cannot circumvent due process even after remand, the judgment safeguards the integrity of arbitral procedure while staying within the strict confines of Sections 34 and 37 of the Arbitration Act.

In The Supreme Court of India Gajanan Dattatray Gore [Appellant(s)] Vs. State of Maharashtra & Anr. [Respondent(s)]

Background facts

• On August 27, 2023, a Crime No. 652 was registered at Satara Police City Station against Gajanan Dattatray Gore (Appellant) under Sections 406, 408, 420, 467, 468, 471, 504 and 506 read with 34 of Indian Penal Code, 1860, alleging that he had siphoned off Rs. 1,60,00,000 from his employer's legitimate funds, following which he was arrested on August 17, 2023.
• When the trial court denied his bail application, the Appellant approached the Hon'ble Bombay High Court vide Criminal Bail Application No. 445/2024, following which on March 22, 2024, he voluntarily filed an affidavit-cum-undertaking, promising to (a) deposit Rs. 25,00,000 within 5 months (b) not to use the name "I can Institute" (c) not to use institute's logo for personal or business purposes.
• On April 01, 2024, the Hon'ble Bombay High Court granted bail on the compliance of said conditions, (a) Bond of Rs. 25,00,000 and deposit it with trial court (b) monthly reporting to the investigation officer (c) not tampering with the evidence. With due consideration, the Appellant was released on bail, noting that he was under custody for 7 months.
• However, the Appellant failed to deposit the bond of Rs. 25,00,000 with the trial court and subsequently filed an Interim Application No. 3016 on August 06, 2024, seeking relaxation of deposit conditions, which he later withdrew on June 23, 2025.
• Meanwhile, the original complainant also filed an Interim Application No. 4524/2024 seeking cancellation of Appellant's bail due to breach of undertaking. Subsequently, the High Court cancelled Appellant's bail on account of alleged violation of bail condition. The court also directed the Appellant to surrender before the Court of Judicial Magistrate First Class, Satara within 4 weeks.
• Appellant, aggrieved by the order of Hon'ble Bombay High Court, filed a Criminal Appeal No. 3219/2025 before the Hon'ble Supreme Court of India, challenging the cancellation of his bail.

Issue(s) at hand?

• Whether court should decide bail application on merits and not on the basis of the considerations of financial undertaking?
• Whether imposing extraneous financial deposits as bail conditions violates the principle - "Excessive bail is no bail"?

Findings of the Court

• At the outset, the Hon'ble Supreme Court (herein referred 'the court') established the binding principle, that courts shall not grant bail merely based on undertaking by the accused to deposit bail bond money. The court held that applications have to be scrutinised strictly based on the merits of the case in accordance with the law.
• The Hon'ble court subsequently established, that "Criminal Courts, exercising jurisdiction to grant bail is not expected to act as a recovery agency to realise the dues of the complainant", emphasizing that criminal proceeding should not be used for the purpose of civil recovery.
• The court further deprecated the malicious pattern used by accused persons to file affidavits and undertakings to deposit specific amounts, then conveniently resile from such undertakings, highlighting how courts are being systematically misled.
• Citing Kundan Singh v. The Superintendent of CGST and Central Excise² which deprecates the practice of "approbating and reprobating", where parties benefit from the promises and then deny them. The court emphasized that voluntary undertaking forecloses merit-based consideration of bail application.
• The court acknowledged that "Excessive bail is no bail, and onerous conditions ought not to be imposed", but clarified that the principle cannot be invoked when conditions are voluntarily undertaken.
• The court also observed a growing practice of "Litigants taking the court for a ride" emphasizing that courts must protect their institutional credibility from manipulation and abuse of judicial process.
• The court, while imposing fine to the appellant, ordered him to surrender himself, and thereafter he can approach the court with a fresh bail application which is to be strictly decided as per the merits of the case

HSA Viewpoint

The judgment, in our view, rightly reiterated on the merits of bail application and that the courts must not grant bail merely based on undertaking to deposit bail bonds. Bail must strictly be granted on the merits of the case, not on the strength of voluntary monetary assurance that can be manipulated or withdrawn enforcing the principle of "Equality before law".

The court further reinforced the necessary boundary between criminal and civil nature of proceeding, cautioning against converting a criminal court into a recovery forum for civil claims, thus maintaining the doctrinal purity of legal remedies. The court's growing concern over abuse of legal remedies is valid and this judgement sends a strong message that such abuse will not go unchecked.

In furtherance to that, it also brings much needed caution on 'Voluntary affidavits'. While the judiciary welcomes undertaking to ensure compliance, it cannot be used to abuse the judicial system. The court rightly pointed out that approbation followed by reprobation cannot be a valid defence, especially when it disrupts the administration of justice.

Devi Prasad Mishra [Applicant] Vs. M/s Nayara Energy Limited [Respondent]

Background facts

• A franchisee agreement ("Agreement") was executed on January 18, 2018, between Essar Oil Ltd. and Devi Prasad Mishra ("Applicant") for establishing a petrol pump.
• In accordance with the Agreement, the Applicant invested a sum of Rs. 1,50,00,000/- for the establishment of the petrol pump.
• The Agreement contained a dispute resolution clause for resolving any dispute that may arise in respect of the Agreement through Arbitration.
• After executing the Agreement, Essar Oil Ltd. established a local company, namely, M/s. Nayara Energy Ltd. ("Respondent"), to which it transferred its petrol pump business. Accordingly, the Respondent took over the management and operations of Essar Oil Ltd.
• On August 18, 2023, the Respondent unilaterally terminated the Agreement with the Applicant. The Applicant contended that the termination was against the terms contained in the Agreement.
• Subsequently, the Applicant invoked the dispute resolution clause provided in the Agreement and sent a letter dated September 18, 2023 to the Respondent, whereby it called upon the Respondent to resolve the dispute amicably and further suggested the name of a Former Judge of the Allahabad High Court to be appointed as Sole Arbitrator in case the dispute could not be amicably settled.
• Since the Respondent did not revert to the letter sent by the Applicant invoking arbitration, the Applicant filed the present application for the appointment of a Sole Arbitrator.

Issue(s) at hand?

• Whether this Hon'ble Court has the jurisdiction to entertain the present Application?

Findings of the Court

• At the outset, the Hon'ble Court held that there is no dispute between the parties regarding the existence of an arbitration clause within the Agreement. The Hon'ble Court also held that it is an undisputed fact that the Applicant had invoked arbitration and the Respondent failed to respond to the same.
• The Hon'ble Court further examined Clauses 21 and 22 of the Agreement and observed that the parties had expressly agreed that the arbitration proceeding will be held in Mumbai, and that the arbitration proceeding would be governed by the laws of the country and would be subject to the exclusive jurisdiction of courts at Mumbai only.
• The Hon'ble court further relied on the judgment in cases of B.G.S.S.G.S Soma JV Vs NHPC Ltd³ and Indus Mobile Distribution Pvt. Ltd. Vs. Datawind Innovations Pvt. Ltd. ⁴ and applied the principles laid down in these cases. Accordingly, the Hon'ble Court held that where an arbitration agreement mentions only one place and there is no contrary indicium, that place must be construed as the seat of arbitration, even if the place is referred to as the "venue."
• The Hon'ble Court further held, that the judgement relied upon by the Applicant in cases of Faith Constructions vs N.W.G.E.L. Church⁵ and Aarka sports Management Pvt. Ltd vs. Kalsi Buildcon Pvt. Ltd.⁶ are not in consonance with the judgement of the Supreme Court of India in the case B.G.S.S.G.S Soma JV Vs NHPC Ltd. (supra).
• The Hon'ble Court concluded that only the courts at Mumbai would have jurisdiction over the present arbitration-related proceedings. Accordingly, the Hon'ble Court held that it lacked the territorial jurisdiction to try the present application and dismissed the present application with liberty to the Applicant to approach the competent court at Mumbai.

HSA Viewpoint

The judgment rendered by the Hon'ble Court reaffirms and clarifies several key principles of arbitration law. Firstly, it holds that when an arbitration clause expressly designates only one location for arbitration proceedings and there is no contradictory indicator, such a venue will be construed as the "seat" of arbitration. Secondly, the Hon'ble Court also emphasized that once a place is chosen as the seat of arbitration, only the courts at that place have the authority to handle matters related to the arbitration. This means other courts, even where part of the dispute may have happened, do not have jurisdiction.

Sonali Power Equipments Pvt. Ltd. Vs. Chairman, Maharashtra State Electricity Board, Mumbai and Ors.

Background facts

• The dispute arose from transactions executed between Sonali Power Equipments Pvt. Ltd. ("Appellant"/ "SPEPL"), a registered Micro or Small Enterprise under the Micro, Small and Medium Enterprises Development Act, 2006 ("MSMED Act"), and the Maharashtra State Electricity Board ("Respondent"/ "MSEB").
• Pursuant to a contractual arrangement, the Appellant/SPEPL supplied electrical equipment to Respondent/MSEB between 1999 and 2001. However, the Respondent/MSEB failed to make full payment, leading to accrual of outstanding dues.
• On October 30, 2014, the Appellant/SPEPL invoked Section 18(1) of the MSMED Act and approached the Micro and Small Enterprises Facilitation Council ("MSEFC"), Mumbai, seeking recovery of outstanding dues along with interest. Section 18(1) of the of the MSMED Act permits a registered supplier to refer disputes concerning delayed payments to the MSEFC. In view thereof, conciliation proceedings were initiated under Section 18(2) of the MSMED Act, to be conducted in accordance with Part III of the Arbitration and Conciliation Act, 1996 ("Arbitration Act"). However, the conciliation proceedings failed, and on February 24, 2015, in accordance with Section 18(3) of the MSMED Act, the matter was referred to arbitration by the MSEFC.
• During the arbitral proceedings which were conducted by the MSEFC, the Respondent/MSEB raised a preliminary objection contending that the Appellant/SPEPL's claim was barred by limitation under the Limitation Act, 1963. The Appellant/SPEPL argued that limitation did not apply to proceedings under Section 18 of the MSMED Act, particularly in conciliation, and that the right to recover dues remained unaffected by the passage of time. On November 9, 2016, the Arbitral Tribunal rendered an award in favour of the Appellant/SPEPL. However, the Respondent/MSEB challenged the award under Section 34 of the Arbitration Act, before the Principal District Judge, Bhandara, who, by judgment dated October 26, 2017, set aside the award on the ground that the claim was time-barred.
• The Appellant/SPEPL challenged the District Court's decision by filing Commercial Appeal Nos. 1 to 9 of 2018 before the High Court of Bombay, Nagpur Bench. By order dated October 20, 2023, the Hon'ble High Court held that the provisions of the Limitation Act, 1963 are applicable to both conciliation under Section 18(2) of the MSMED Act and arbitration under Section 18(3) of the MSMED Act. Accordingly, the Hon'ble High Court upheld the District Court's finding that the claims were time-barred and the arbitral award was unsustainable.
• Aggrieved by the concurrent findings, the Appellant/SPEPL filed Special Leave Petitions (SLP (C) Nos. 6912–6920 of 2024) before the Hon'ble Supreme Court.

Issue(s) at hand?

• Whether the Limitation Act applies to conciliation proceedings under Section 18 of the MSMED Act, and even if not, whether time-barred debts can be referred to conciliation?
• Whether the Limitation Act applies to arbitration proceedings under Section 18 of the MSMED Act, and whether time-barred debts can be referred to arbitration?

Findings of the Court

• The Hon'ble Supreme Court Bench, comprising Justice P.S. Narasimha and Hon'ble Justice Joymalya Bagchi, upon considering the statutory provisions of the MSMED Act, the Arbitration Act, and the Limitation Act, as well as the binding precedents, held that the Limitation Act does not apply to conciliation proceedings under Section 18(2) of the MSMED Act. It was held that even a time-barred claim can be referred to conciliation, as the expiry of the limitation period does not extinguish the underlying right to recover dues, which can still form the basis of a settlement agreement reached through the conciliatory process.
• The Hon'ble Supreme Court further held, that the Limitation Act is applicable to arbitration proceedings under Section 18(3) of the MSMED Act. The Hon'ble Court clarified that the application of the Arbitration Act to such arbitration is guided by Section 18(3) and other provisions of the MSMED Act, which is a special enactment, and not by Section 2(4) of the Arbitration Act, which forms part of a general law. This view is consistent with the decision in Silpi Industries v. Kerala State Road Transport Corporation, (2021) 4 SCC 795. The Court further observed that any extension of the limitation period based on disclosures under Section 22 of the MSMED Act must be examined on the facts and circumstances of each case.
• The Hon'ble Bench partly allowed the appeals arising out of SLP (C) Nos. 6912-6920 of 2024 and set aside the impugned order dated October 20, 2023, passed in Commercial Appeal Nos. 1 to 9 of 2018 by the High Court of Bombay at Nagpur, to the extent it held that the Limitation Act applies to conciliation proceedings under the MSMED Act. The Hon'ble Supreme Court upheld the High Court's finding that the Limitation Act is applicable to arbitration proceedings under the MSMED Act.

HSA Viewpoint

The Hon'ble Supreme Court has correctly recognised that conciliation, as envisaged under Section 18(2) of the MSMED Act, is a non-adjudicatory, voluntary, and noncoercive process, distinguishable from "suits or applications" within the meaning of the Limitation Act, 1963. This aligns with the established understanding of conciliation as an Alternative Dispute Resolution ("ADR") mechanism, designed to facilitate mutual settlement between parties rather than impose a binding determination.

On the question of applicability of limitation to arbitration under Section 18(3), the Hon'ble Supreme Court has correctly applied the ruling in Silpi Industries v. KSRTC, (2021) 4 SCC 795. Arbitration, though statutorily triggered in this context, remains an adjudicatory mechanism where rights and liabilities are determined. Hence, adherence to the Limitation Act ensures finality, fairness, and prevents stale claims from being adjudicated.

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Footnotes

1. (2004) 7 SCC 288

2. 2025(6) TMI 1792

3. (2020) 4 SCC 234

4. (2017) 7 SCC 678

5. 2025 SCC OnLine Delhi 1746

6. 2020 SCC OnLine Delhi 2077

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