Tis Hazari Court: In an arbitration appeal filed by Satyam Polyknits (‘Satyam’) under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (‘the Act’) seeking setting aside of order passed by the Arbitrator, Garima Bajaj, whereby Satyam’s application under Section 17(1)(b) of the Act seeking interim directions against Excel Vinyl Coatings Pvt Ltd (‘Excel’) to furnish security in the form of bank guarantee or any other financial instrument equivalent to Rs. 30.22 Lakhs, was rejected, the Single Judge Bench of Ravinder Bedi, J., rejected the appeal, holding that there was no ground for interference. The Court reiterated the guarded and sparing use of the powers under Section 37(2)(b) of the Act in only exceptional circumstances, and especially when the exercise of the Arbitrator’s discretion while passing the Order in question is not seen as arbitrary or perverse in any manner.
Allegedly, Excel had approached Satyam for the supply of certain fabric material, but disputes arose due to outstanding payments.
At the outset, the Court reiterated that the Arbitrator is a Judge of the choice of parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside merely, as a Court could come to a different conclusion on the same facts. It is not open to the Court to sit in appeal over the conclusions of the Arbitrator or to reappraise the evidence or to set aside a finding of fact arrived at by an Arbitrator. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the Order does not call for any interference in the exercise of the power vested in the Courts.
The Court noted that in the present case, the Arbitrator declined to grant the interim relief sought by Excel under Section 17(1)(b) of the Act. The Arbitrator carefully considered the submissions of both parties, deliberated upon and analysed the circumstances considering the material on record, and then observed that the application was largely on alleged apprehensions and conduct of Excel. The Arbitrator duly applied the trinity test, i.e., prima facie case, balance of convenience, and irreparable injury to pass the impugned order.
Furthermore, the Court noted that, as observed by the Arbitrator, Satyam came up with the application only at the belated stage, i.e., during the pendency of proceedings, when the matter was pending for cross-examination. Thus, in such a situation, it could not be said that the Arbitrator exercised her power in a manner that was palpably arbitrary, irrational, or perverse. Moreover, all other manifold contentions canvassed and agitated by parties were left open for trial and yet to be determined in the arbitration proceedings.
The Court further stated that it was undisputable that the exercise of jurisdiction by the Arbitrator, under Section 17 of the Act, was fundamentally discretionary in nature. The Judicial interference with the exercise of discretionary power is limited and circumscribed.
In this regard, the Court referred to Managing Director, Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. (2004) 9 SCC 619, wherein it was held that the jurisdiction of the Court under Section 37(2)(b) of the Act is even more limited than the jurisdiction which is exercised under Section 37(2)(a) or, for that matter, under Section 34. Such discretionary jurisdiction, as exercised by the Arbitrator, merits interference under Section 37(2)(b) only, where such an exercise is palpably arbitrary or unconscionable.
Given the settled legal perspective of guarded and sparing use of the powers under Section 37(2)(b) of the Act in only exceptional circumstances; and especially when the exercise of the Arbitrator’s discretion while passing the Order in question is not seen as arbitrary or perverse in any manner, the Court held that there was no ground to interfere with the Order made by the Arbitrator.
Accordingly, the appeal was dismissed.
[Satyam Polyknits v. Excel Vinyl Coatings Pvt Ltd, Arb. A (COMM) NO. 03/2025, decided on 21-08-2025]
Advocates who appeared in this case :
For the appellant: Pankaj Mehta and Shweta Soni
For the respondent: Rakesh Raushan
Buy Arbitration and Conciliation Act, 1996 HERE
