Unsuccessful party can seek post-award interim protection under Section 9, Arbitration Act in rare and compelling circumstances: Delhi HC

Delhi High Court: In a matter concerning the scope of post-award interim protection under Section 9, Arbitration and Conciliation Act, 1996 (Arbitration Act), a Single Judge Bench of Tushar Rao Gedela, J. held that an unsuccessful party to arbitration proceedings can invoke Section 9, Arbitration Act, to seek post-award interim protection in rare and compelling circumstances, particularly where withdrawal of existing protection may cause irreversible prejudice and render pending proceedings challenging the arbitral award under Section 34, Arbitration Act ineffective.

The Court observed that although the threshold for granting interim relief to an unsuccessful party after the arbitral award is considerably higher, such protection may be warranted where the applicant demonstrates a strong prima facie case, irreparable injury and a balance of convenience in its favour.

The Court accordingly restrained NYEQ Technologies Private Limited from selling, alienating, creating third-party rights or creating any encumbrances over 2 properties situated in DLF City, Phase I, Gurugram, pending further proceedings.

Background

Thor Ventures (OPC) Private Limited (petitioner) and NYEQ Technologies Private Limited (respondent) entered into 2 Agreements to Sell (ATS) dated May 4, 2019, concerning 2 properties situated at DLF City, Phase-I, DLF Qutub Enclave, Gurugram, Haryana.

The agreed consideration for each property was ₹5,62,24,000, aggregating to ₹11,24,48,000 for both properties. At the time of execution of the agreements, the petitioner paid an advance of ₹5,00,000 for each property, amounting to ₹10,00,000 in total.

Under Clause 3 of the ATSs, the respondent was required to fulfil certain obligations, including:

1. Completing the boundary and fencing of the properties and erecting name boards.

2. Updating the seller’s mutation in the relevant records.

3. Obtaining the requisite no-dues certificates and clearing house property tax.

4. Obtaining the necessary no-dues certificates and no-objection certificates from the Residents’ Welfare Association, DLF and the maintenance agency.

Pursuant to the respondent’s instructions, the petitioner also paid certain mutation, late construction and maintenance charges to DLF. The mutation was subsequently effected in favour of the respondent in September 2019, and the petitioner received the original endorsement letters and certified zoning plans.

However, according to the petitioner, the respondent failed to fulfil its contractual obligations and did not proceed with the execution of the sale deeds. The respondent also informed the petitioner that the original title documents were with its director in Dubai.

Meanwhile, the petitioner had obtained loan sanction letters dated 7 July 2019, from Pooja Finelease Limited (PFL), a Non-Banking Financial Company (NBFC), towards financing the balance consideration for the properties.

On 8 February 2021, the respondent returned the advance consideration of ₹5,00,000 paid for each property. Apprehending that the respondent might create third-party rights in the properties, the petitioner invoked the arbitration clause under Clause 11 of the ATSs and appointed a sole arbitrator. An interim restraint order was passed on 11 February 2021, restraining dealings with the subject properties.

Subsequently, by an order dated 15 February 2023, the sole arbitrator was replaced by Justice Jayant Nath (Retd.).

Proceedings Before the Arbitral Tribunal

The petitioner filed its Statements of Claim on 9 March 2021, seeking:

1. Specific performance of the ATSs dated 4 May 2019, directing the respondent to execute and register the sale deeds in respect of the 2 properties.

2. Permanent injunction restraining the respondent from interfering with the petitioner’s rights, parting with possession or creating third-party interests in the properties.

3. Litigation costs and other consequential reliefs.

The respondent contested the claims, alleging that the ATSs were forged and sham documents executed by a person who lacked authority to represent the company. It also contended that the purported board resolutions relied upon by the petitioner were fabricated.

The respondent further claimed that it had become aware of the advance payments only in January 2021 and had promptly refunded the amounts on 8 February 2021. According to the respondent, the payments were connected with a separate loan transaction and not any genuine agreement for the sale of the properties.

The Arbitral Tribunal framed issues concerning its jurisdiction, validity of its constitution, authority of the person who executed the ATSs, entitlement to specific performance and permanent injunction, and the petitioner’s readiness and willingness to perform its contractual obligations.

An additional issue concerning readiness and willingness was framed on 8 May 2023.

The interim restraint order dated 11 February 2021 was continued during the arbitral proceedings.

Findings of the Arbitral Tribunal

By separate awards dated 26 September 2026, the Arbitral Tribunal returned the following findings:

1. The Arbitral Tribunal was validly constituted and had jurisdiction to adjudicate the disputes.

2. The petitioner had established that the ATSs dated 4 May 2019, were validly executed by the respondent’s authorised representative.

3. The petitioner had failed to establish its readiness and willingness to perform the essential terms of the contracts.

4. The loan sanction letter dated 7 July 2019, issued by PFL was a sham document.

5. Consequently, the petitioner was not entitled to specific performance or permanent injunction.

6. The respondent was awarded costs of ₹15,00,000.

Aggrieved by the awards, the petitioner approached the Delhi High Court under Section 9, Arbitration Act, seeking interim protection against the sale, alienation or creation of third-party rights over the properties during the pendency of its challenge to the awards under Section 34, Arbitration Act.

Submissions of Parties

Petitioner’s Submissions

The petitioner contended that the Arbitral Tribunal had upheld the validity of the ATSs but rejected the claim for specific performance solely on the ground that the petitioner had failed to establish readiness and willingness, after treating the loan sanction letter issued by PFL as a sham document.

It argued that the finding was perverse and unsupported by the evidence on record.

The petitioner relied on the testimony of the authorised representative of PFL, who had confirmed that PFL was an RBI-registered NBFC with an asset size of approximately ₹200 crores. The witness had also supported the loan sanction letter and stated that PFL remained willing to disburse the sanctioned amount.

It was further submitted that the loan was intended to be disbursed directly to the respondent through a demand draft simultaneously with the registration of the sale deed, against the delivery of the original title documents.

The petitioner argued that the Arbitral Tribunal had failed to properly appreciate the oral and documentary evidence and had reached the conclusion that the loan sanction letter was sham without adequately questioning its authenticity or genuineness during cross-examination.

It also contended that the respondent had failed to fulfil its obligations under Clause 3 of the ATSs, which were prerequisites to payment of the balance sale consideration.

On the question of interim protection, the petitioner submitted that:

1. It had sought only specific performance and had not claimed damages as an alternative remedy.

2. The 2 properties were the respondent’s only assets.

3. If the properties were alienated during the pendency of the Section 34 proceedings, the challenge to the arbitral awards would become infructuous.

4. The continued protection of the properties was necessary to prevent irreversible prejudice.

Relying on Home Care Retail Marts (P) Ltd. v. Haresh N. Sanghavi, 2026 SCC OnLine SC 670 , the petitioner argued that even an unsuccessful party could invoke Section 9, Arbitration Act after an award, provided the exceptional threshold for interim protection was satisfied.

It also relied on Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1, concerning the Court’s power to modify and sever portions of an arbitral award.

Respondent’s Submissions

The respondent opposed the petition, contending that the petitioner had failed to demonstrate the financial capacity necessary to complete the transactions.

It emphasised that the petitioner had paid only ₹5,00,000 against the consideration of ₹5,62,24,000 for each property, representing less than 1 per cent of the agreed sale consideration.

The respondent further argued that the petitioner had taken no meaningful steps towards execution of the sale deeds for approximately 21 months, following which the advance amounts were refunded.

It maintained that the Arbitral Tribunal had carefully examined the evidence and cross-examination of the witnesses before concluding that the loan sanction letter was suspicious and sham.

According to the respondent, the petitioner had not produced bank statements, balance sheets, financial records or any other documents demonstrating its financial capacity. Nor had it established that PFL possessed the requisite financial capacity to finance the transactions.

The respondent also submitted that readiness and willingness was a matter of fact, and the Arbitral Tribunal’s findings could not be reopened through proceedings under Section 9.

It relied on Delhi Airport Metro Express (P) Ltd. v. DMRC Ltd., (2022) 1 SCC 131, to contend that courts cannot reappreciate evidence or interfere with a plausible view taken by an Arbitral Tribunal.

The respondent further argued that the petitioner had failed to satisfy the 3 essential requirements for interim relief, namely, prima facie case, balance of convenience and irreparable injury.

Analysis

The Court first examined whether an unsuccessful party to arbitration proceedings could seek interim protection under Section 9 after the passing of an arbitral award.

Relying on the Supreme Court’s decision in Home Care Retail Marts (P) Ltd. v. Haresh N. Sanghavi, 2026 SCC OnLine SC 670, the Court held that an unsuccessful party is not barred from invoking Section 9 merely because it has lost before the Arbitral Tribunal.

However, the Court emphasised that the threshold for granting interim protection in such circumstances is significantly higher than in pre-award proceedings.

The Supreme Court had recognised that there could be situations where immediate withdrawal of interim protection would cause irreversible prejudice to an unsuccessful party whose challenge to the award remains pending.

The Court noted that post-award protection may be granted in rare and compelling circumstances where it is necessary to prevent irreparable prejudice and preserve the efficacy of proceedings challenging the award.

It reiterated that the grant of interim relief continues to be governed by the established triple test of:

1. existence of a prima facie case;

2. balance of convenience; and

3. likelihood of irreparable harm or injury.

The Court also referred to the Supreme Court’s observation that the rights of an unsuccessful party cannot be curtailed merely on an apprehension of possible misuse of the statutory remedy.

The Court reiterated that an Arbitral Tribunal is ordinarily the master of facts and that courts exercising jurisdiction under Section 34 cannot sit in appeal over arbitral awards or undertake a fresh appreciation of evidence.

Referring to Delhi Airport Metro Express (P) Ltd. v. DMRC Ltd., (2022) 1 SCC 131, the Court observed that patent illegality must go to the root of the matter.

A finding based on no evidence, or one arrived at by ignoring vital evidence, may amount to perversity and constitute patent illegality under Section 34(2-A), Arbitration Act.

The Court also relied on Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, which recognised that a finding based on no evidence or one that ignores vital evidence may be set aside on the ground of patent illegality.

However, the Court clarified that it was not exercising jurisdiction under Section 34 at that stage. Its examination of the arbitral findings was confined to determining whether the petitioner had made out a prima facie case for interim protection under Section 9.

A significant aspect of the judgment concerned the Arbitral Tribunal’s conclusion that the loan sanction letter dated July 7, 2019, issued by PFL was a sham document.

The Arbitral Tribunal had questioned the authenticity and reliability of the letter on several grounds, including:

1. The loan application and sanction letter were both dated 7 July 2019.

2. The letter did not sufficiently specify the rate of interest, repayment mechanism and documents required for disbursement.

3. PFL was primarily engaged in auto loans.

4. The loan sanction was valid only for 6 months.

5. No valuation report or inspection report had been produced.

6. The loan had been sanctioned on the basis of photocopies of title documents and physical inspection.

7. There was insufficient material demonstrating PFL’s capacity to finance the transactions involving 2 properties worth over ₹10 crores.

However, the Court noted that the loan sanction letter contained material particulars, including the sanctioned amount of ₹5.20 crores, the loan tenure of 60 months and the nature of the facility as a loan against property.

The Court also examined the testimony of the authorised representative of PFL.

He had confirmed that PFL was registered with the RBI as an NBFC and had an asset size of approximately ₹200 crores. He also stated that the loan amount would be disbursed directly to the respondent through a demand draft on the date of registration of the sale deed, against simultaneous delivery of the original title documents.

Importantly, the Court observed that the loan sanction letter represented an in-principle approval and was not itself the final loan agreement.

The Court further noted that although authorised representative of PFL was extensively cross-examined, neither the respondent nor the Arbitral Tribunal had specifically questioned the witness about the authenticity, genuineness or veracity of the loan sanction letter.

The Court observed that questions concerning the credibility of a witness and the genuineness of a document must be appropriately put during cross-examination if the party intends to discredit the evidence.

It held that the mere presence of questions surrounding the recitals in a document would not, by itself, establish that the document was sham or fabricated.

Consequently, the Court observed that the Arbitral Tribunal’s conclusion in Para 96 of the award that the loan sanction letter was a sham document appeared to be merely inferential and based on no evidence at all.

The Court also clarified that the petitioner’s readiness and willingness could be demonstrated through its own financial capacity or the financial assistance of a bank, NBFC or another sound financial institution.

The Court also considered the amendments introduced by the Specific Relief (Amendment) Act, 2018, which came into force on 1 October 2018.

It noted that the amended Section 10, Specific Relief Act, 1963, had fundamentally altered the approach towards specific performance.

Under the earlier framework, specific performance was discretionary, and the availability of monetary compensation as an adequate remedy could operate as a ground for refusing such relief.

However, the amendment substituted Section 10 and removed the erstwhile Section 14(1)(a), which had excluded specific performance where compensation in money was an adequate relief.

The Court observed that specific performance had consequently become the general rule, subject to the statutory exceptions and requirements under the Act, including Sections 11(2), 14 and 16.

Relying on B. Santoshamma v. D. Sarala, (2020) 19 SCC 80, and the Division Bench decision in Global Music Junction (P) Ltd. v. Shatrughan Kumar, 2023 SCC OnLine Del 5479, the Court noted the legislative shift towards stronger enforcement of contractual obligations.

The Court observed that if the petitioner could establish in the Section 34 proceedings that the finding regarding the loan sanction letter being sham was based on no evidence, and the document was ultimately found to be valid and credible, it could establish the requisite readiness and willingness under Section 16(c), Specific Relief Act.

This possibility was considered relevant while examining whether the petitioner would suffer irreversible prejudice if the properties were alienated before the Section 34 challenge was decided.

The Court then examined whether the facts of the case satisfied the higher threshold laid down in Home Care Retail.

It observed that merely filing a petition under Section 34 or seeking interim protection under Section 9 would not, by itself, constitute a rare and compelling circumstance.

However, the Court identified several factors which, when considered cumulatively, justified interim protection:

1. The petitioner had sought specific performance of the ATSs and had not claimed damages as an alternative relief.

2. The respondent’s only assets were the two properties forming the subject-matter of the dispute, and this position was not disputed.

3. Interim protection had operated throughout the arbitral proceedings and continued until the passing of the awards.

4. The finding that the loan sanction letter was a sham document appeared, prima facie, to be based on no evidence.

5. The amendments to the Specific Relief Act strengthened the statutory framework favouring specific performance, subject to fulfilment of the prescribed requirements.

6. Alienation of the properties could render the pending Section 34 proceedings ineffective and leave the petitioner without an effective remedy, even if its challenge ultimately succeeded.

The Court noted that the petitioner placed no document showing its own financial capacity and rested readiness and willingness wholly on the Loan Sanction Letter and PFL representative’s assertion that PFL was ready and willing to pay the sale consideration. While the onus to prove readiness and willingness lies on the claimant, the onus to show the LSL was a sham lies on the respondent; no question doubting its credibility was put to the PFL representative.The Court observed that the cumulative effect of these circumstances established a compelling case for preserving the properties until the challenge to the arbitral awards could be adjudicated.

It further noted that monetary compensation would not adequately address the prejudice likely to be caused to the petitioner in the circumstances of the case.

Decision

The Court held that the petitioner had, prima facie, established a rare and compelling case warranting post-award interim protection under Section 9, Arbitration Act.

The Court found that the Arbitral Tribunal’s conclusion that the loan sanction letter was a sham document appeared to be based on no evidence, particularly since its authenticity and genuineness had not been specifically challenged during the cross-examination of the authorised representative of PFL.

The Court also held that the cumulative circumstances, including the absence of any alternative claim for damages, the respondent’s limited assets and the possibility of the Section 34 proceedings becoming ineffective, justified preservation of the subject properties.

Accordingly, the Court:

1. Restrained NYEQ Technologies Private Limited from selling or alienating the subject properties.

2. Prohibited the respondent from creating any third-party rights or encumbrances of any nature over the properties.

3. Directed the respondent to file its reply within 3 weeks.

4. Permitted the petitioner to file a rejoinder, if any, within 2 weeks thereafter.

5. Directed that the matters be listed on 2 December 2026.

The restraint was expressly directed to continue until the next date of listing.

[Thor Ventures (OPC) (P) Ltd. v. NYEQ Technologies (P) Ltd., O.M.P.(I) (COMM.) 461/2026 and O.M.P.(I) (COMM.) 462/2026, decided on 28-10-2026]

Advocates who appeared in this case:

For the Petitioner: Mr. Dayan Krishnan, Senior Advocate with Mr.Saurab Seth, Mr. Sukrit Seth, Mr. Thakur Ankit Singh, Ms. Liza Arora, Ms. Neelampreet Kaur, an dMr. Kabir Dev, Advocates.

For the Respondent: Mr. Sahil Sethi, Mr. Kanishk Kumar, Mr. Samriddh Bindal, and Mr. Priyansh Kohli, Advocates.