Court holds that Section 17 of Arbitration and Conciliation Act, 1996 cannot be used to grant substantive monetary relief where disputes remain contested and pending adjudication; emphasizes limited appellate interference under Section 37.
In a significant judgment dated July 1, 2026, the Delhi High Court, presided over by Justice Harish Vaidyanathan Shankar, allowed an appeal filed by India International Convention and Exhibition Centre Limited (IICECL) against a majority decision of an Arbitral Tribunal that had directed interim payment of over Rs. 227 crore in favor of Larsen & Toubro Limited (L&T) under Section 17 of the Arbitration and Conciliation Act, 1996 (A&C Act).
The dispute arose from a large-scale infrastructure project—development of the India International Convention and Exhibition Centre at Dwarka, New Delhi—executed on an EPC lump-sum contract basis. L&T, the contractor, claimed payments certified under stage-wise payment certificates (SP-69 and SP-70), which IICECL withheld citing unresolved disputes over “negative variations” and scope changes leading to contract price adjustments. L&T sought interim relief under Section 17 for release of these payments.
The Arbitral Tribunal’s majority had granted partial interim relief, ordering payment of Rs. 227.18 crore for SP-69 and SP-70, while a dissenting member opposed this. The Tribunal reasoned a prima facie case existed, the balance of convenience favored L&T, and irreparable harm would result from withholding payments.
IICECL challenged this order under Section 37(2)(b) of the A&C Act, contending that the Arbitral Tribunal exceeded its jurisdiction by granting substantive monetary relief at an interim stage where liabilities were disputed and yet to be adjudicated. They argued that Section 17 is intended for preservative and protective interim measures, not for deciding contested claims, and that granting such relief prejudiced their rights and altered the contractual payment mechanism.
The Delhi High Court extensively analyzed the scope of appellate jurisdiction under Section 37, emphasizing its supervisory and corrective nature and cautioning against courts substituting their discretion for that of arbitral tribunals unless there is perversity, arbitrariness, or manifest illegality. The Court noted that Section 17 powers of the arbitral tribunal are analogous to courts’ powers under Section 9 and governed by principles akin to interim injunctions under Order XXXIX of the Civil Procedure Code.
Crucially, the Court held that interim monetary relief under Section 17 can only be granted where liability is admitted or undisputed. Where liability is contested, an arbitral tribunal cannot, under the guise of interim protection, grant relief amounting to substantive adjudication of claims. Applying these principles, the Court found that the Arbitral Tribunal’s order was inconsistent and legally unsustainable. While the Tribunal acknowledged the need for trial of disputes relating to negative variations, it selectively granted interim payment directions for SP-69 and SP-70, which were intrinsically linked to the disputed SP-68 payment certificate.
Further, the Court observed internal inconsistencies in the Tribunal’s reasoning on balance of convenience and irreparable injury: despite the project’s substantial completion and major payments already made, the Tribunal concluded that withholding payments would cause irreparable harm, a finding not supported by the factual matrix. The Court stressed that irreparable harm must be shown as harm not compensable by damages, which was not established here.
Consequently, the Delhi High Court set aside the Arbitral Tribunal’s interim order directing payment of Rs. 227.18 crore. It clarified that this decision does not affect the merits of the underlying arbitration claims or counterclaims, all of which remain to be finally adjudicated by the arbitral tribunal.
This judgment reaffirms the limited and cautious role of arbitral tribunals and courts in granting interim monetary relief under the Arbitration and Conciliation Act, underscoring that such relief must not prejudge contested substantive issues and must satisfy strict thresholds akin to interim injunction principles.
Bottom line:-
Section 17 of the Arbitration and Conciliation Act, 1996 cannot be invoked to grant substantive monetary relief under the guise of interim protection where the underlying disputes remain contested and are yet to be adjudicated.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 17, Section 31(6), Section 37; Civil Procedure Code, 1908 Order XXXIX.
