The Delhi High Court partly allowed an appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996, filed by Khurana Educational Society (Regd.), challenging an interim order passed by a Sole Arbitrator under Section 17 of the Act.
The appeal arose from an order dated 16 September 2025, whereby the Arbitrator had directed the appellant Society to deposit mesne profits/usage charges at the rate of ₹3,00,000 per month with effect from 15 October 2018, to be secured in an interest-bearing account, along with ancillary directions permitting inspection of the property and restraining creation of third-party rights.
After examining the scope of interim jurisdiction under Section 17 and the limited appellate power under Section 37, the High Court held that the direction requiring the appellant to deposit ₹3,00,000 per month during the pendency of arbitration amounted to the grant of substantive monetary relief, despite serious disputes subsisting between the parties regarding title, validity of lease termination, and entitlement to mesne profits.
The Court was satisfied that such a direction travels beyond the permissible contours of interim jurisdiction, as it effectively presupposes the claimant’s success on core issues that are yet to be adjudicated on evidence. The imposition of recurring financial obligations was found to be particularly impermissible at an interlocutory stage, especially when liability itself was disputed.
Accordingly, the Court held that the impugned order, insofar as it directed payment of mesne profits/usage charges at ₹3,00,000 per month with retrospective effect, warranted interference under Section 37(2)(b) and was set aside to that extent.
However, the Court expressly upheld the ancillary directions issued by the Arbitrator, and permitted periodic inspection of the subject property upon three days’ prior notice, and restrained the appellant from creating any third-party interests in the property.
The Court observed that these directions are purely protective and preservatory in nature, intended only to safeguard the subject matter of arbitration. Such measures neither determine the substantive rights of the parties nor cause prejudice to the appellant and therefore fall squarely within the scope of interim relief under Section 17.
The Court clarified that nothing contained in the judgment shall be construed as an expression of opinion on the merits of the disputes between the parties. All observations were confined strictly to the adjudication of the present appeal, and all rights and contentions were expressly kept open to be urged before the learned Arbitrator.
Accordingly, the appeal was partly allowed, pending applications were disposed of, and no order as to costs was passed.
Appearances:
For the Petitioner: Ms. Diya Kapur, Senior Advocate along with Mr. Mayank Bhargava, Ms. Aarushi Singh, Mr. Parth Khurana, Mr. Rajdeep Saraf, Mr. Aditya Ladha and Mr. Naibedya Dash, Advocates.
For the Respondent: Ms. Shriya Maini, Mr. Rajive Maini, Mr. Neeshu Chandpuriya and Mr. Yash Gupta, Advocates.
