M/S Aryan Bagga Associates Pvt Ltd & Ors. vs Kamlesh Dudeja
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
st
Date of decision: 31 AUGUST, 2026
IN THE MATTER OF:
# CNR No. DLHC010204592026
+ ARB. A. (COMM.) 36/2026
M/S ARYAN BAGGA ASSOCIATES PVT LTD & ORS.
.....Petitioners
Through: Mr. Amit Sibal, Sr. Advocate
with Mrs. Deepti Kathpalia, Mr.
Aiman, Mr. Ankit Handa, Mr. Darpan
Sachdeva and Mr. Yaman, Advocates
versus
KAMLESH DUDEJA .....Respondent
Through: Mr. Amit Rawal, Sr. Advocate with
Mr. Naveen Sharma, Ms. Rishika,
Mr. Aman Raghav and Mr. Akash,
Advs.
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
1. The present Petition has been filed under Section 37(2)(b) of the
Arbitration and Conciliation Act, 1996 ( herein referred to as the“ Act ”)
against the Impugned Order dated 02.04.2026, (herein referred to as the
“ Impugned Order ”) passed by the Learned Arbitrator under Section 17 of
the Act.
2. Relevant facts leading to the filing of the present Petition are stated as
under:
a. A property bearing no. F-14/13, Block F-14, Model Town,
Delhi- 110019 [“ the Property ”], was purchased by the
directors of the Appellant no.1 company by virtue of a
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registered sale deed dated 31.10.2015. At the aforesaid
Property, the Appellant no. 1 company was incorporated on
29.12.2015.
b. Thereafter, the Appellant no.1 company entered into a Franchise
Agreement dated 25.9.2017 with Ozone Spa Private Limited as
per which the Appellant no.1 was to establish, run and operate
fitness center services and the aforesaid Franchise Agreement
was executed for a total period of 9 years.
c. It is stated that pursuant to the Franchise Agreement, the
Appellant no. 1 undertook various interior work on the second
and third floor for the purpose of setting up the fitness and
wellness centre, for which the Appellant No.1 incurred an
expense of Rs. 3,50,00,000/-
d. Hereafter, the Property was sold by the directors of the
Appellant no.1 to one CNB FINWIZ Private Limited by virtue
of a Sale Deed dated 27.05.2017. It is stated that the Property
was sold to CNB Finwiz Pvt. Ltd. and transferred back to the
directors multiple times; however, the Appellant No.1 retained
continuous physical possession over the Property throughout
the period.
e. Subsequently, Appellant No. 2, one of the directors of the
Appellant no. 1, facilitated and witnessed a registered sale deed
for the purchase of the Property by the Respondent herein i.e.
Mr. Kamlesh Dudeja from CNB Finwiz Pvt. Ltd. For the said
purpose, a registered Lease Deed was executed between the
parties for a period of 3 years, beginning from 01.07.2021 and
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ending on 30.06.2024 at a monthly rent of Rs.1,50,000. Further,
the Appellant herein deposited a security with the Respondent
totalling to a sum of Rs. 3,00,000/-. In addition to this, the
Appellant claims to have invested several crores in civil works,
interior fit-outs, and gym machinery, which it argues was the
reason for the relatively lower rent fixed at Rs.1,50,000/-.
f. It is stated that upon the expiry of the lease period on
30.06.2024, the Appellant remained in possession and a mutual
agreement was reached between the parties to enhance the rent
to Rs. 1,72,500/-, which was paid and unconditionally accepted
by the Respondent. This fact is disputed by the Respondent who
contends that there was no mutual agreement to enhance the
rent to Rs.1,72,500/-.
g. It is stated that the parties reached at a consensus that this new
arrangement would be penned down in a form of a renewed
Lease Deed which was to be duly registered by the parties on
15.01.2025; however, this could not fructify due to the failure
on the part of the Respondent to appear and execute the
renewed Lease Deed.
h. Relying on the repeated representations given by the
Respondent with respect to the execution of the renewed Lease
Deed, the Appellants invested a sum of Rs. 18,56,847/- for the
purchase of equipment and machinery to facilitate its business
operations. However, in lieu of the fact that the Respondent had
failed to execute the renewed Lease Deed, the position of the
Appellants has been irreversibly altered.
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i. The Respondent later averred that due to her advanced age, she
was not inclined to extend the period under the Lease Deed and
intended to sell the Property to relocate permanently to London
with her children. Hence, instead of completing the renewal, the
Respondent issued a legal notice on 24.02.2025, seeking
eviction and claiming the Appellants had become an
unauthorised occupant as of 01.07.2024.
j. On 19.01.2025 and 21.01.2025, the Respondent’s family
members, along with some others, trespassed on the Property,
misbehaved with security personnel, and attempted to forcibly
lock the premises which culminated in a police complaint.
k. Subsequently, on 24.02.2026, the Respondent issued a Legal
Notice demanding that the Appellants vacate the premises
within seven days and pay occupation charges at a market rate
of Rs.8,50,000 per month. On 28.02.2026, an addendum to the
legal notice was issued, officially invoking the arbitration
clause under the Lease Deed.
l. Following the invocation of the arbitration clause, the
Respondent filed a petition under Section 11(6) of the Act in
this Court and vide Order dated 08.07.2025, the High Court
allowed the petition and directed the Coordinator of the Delhi
International Arbitration Centre (DIAC) to appoint a Sole
Arbitrator, and as a result, Mr.Sanjay Dewan was appointed as
the Sole Arbitrator.
m. On 01.09.2025, prior to the constitution of the Arbitral Tribunal,
the Respondent filed a petition under Section 9 of the Act being
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OMP(I)(COMM) 357/2025 seeking urgent interim protection
against the Appellants, including an injunction against
subletting and directions for the payment of occupation charges.
Subsequently, upon the constitution of the Arbitral Tribunal,
this Court on 04.11.2025, directed that the Section 9 petition be
treated as an application under Section 17 to be decided by the
Learned Arbitrator.
n. On 02.06.2026, the Learned Arbitrator passed the Impugned
Order directing the Appellant to pay Rs. 3,50,000 per month for
the period from 01.07.2024 to 31.01.2026, Rs. 4,00,000 per
month from 01.02.2026 till the disposal of the case and
payment of differential arrears for the past period, totalling
approximately Rs.33,72,500.
3. Hence, the present Petition has been filed by the Appellant herein
seeking the setting aside of the Impugned Order dated 02.04.2026.
4. It is the case of the Appellants that the direction to pay enhanced
monthly charges of Rs. 3,50,000 and Rs. 4,00,000 per month, along with
retrospective differential amounts totalling approximately Rs.33,72,500/-
effectively grants final monetary relief under the guise of an interim
measure. It is submitted that the Learned Arbitrator has prematurely
adjudicated the principal dispute, which could only have been determined
through a full-fledged trial after the parties have led evidence. It is
contended that the Impugned Order travels beyond the preservative and
protective intent of Section 17 of the Act, and instead imposes a substantive
and recurring financial burden upon the Appellant herein without giving the
Appellant an opportunity to prove its case.
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5. It is submitted by the Learned Senior Counsel for the Appellant that
the Impugned Order operates like an attachment before judgment without
satisfying the necessary conditions, i.e., subsistence of a risk of asset
alienation or intent to frustrate the enforcement of a future award. It is
argued that the Learned Arbitrator failed to satisfy the essential parameters
of prima facie case, balance of convenience, and irreparable harm. In
addition, the Learned Arbitrator has failed to take into account that the
Appellant had a salubrious business and consistently made timely rent
payments even after the expiry of the Lease period, negating any claim of
urgency or imminent threat to the Respondent.
6. On the aspect of quantification, it is submitted that there is no cogent
material for the Learned Arbitrator to arrive at the figures of Rs. 3,50,000
and Rs. 4,00,000 per month. It is submitted by the Learned Senior Counsel
for the Appellants that the Learned Arbitrator’s reliance on an independent
Lease Deed for the first floor of the same building was incorrect, on the
ground that the same was an unrelated transaction for a different space with
different frontage and access, and the same was looked into mechanically
without trial or any expert assessment. In fact, the quantum of use and
occupational charges/ mesne profits is seriously disputed between the parties
and requires evidence to be led first for reaching to a confirmative figure.
7. On the aspect of possession and renewal, a core submission made by
the Learned Senior Counsel for the Appellant is that the Respondent
unconditionally accepted the enhanced rent of Rs.1,72,500 for several
months after the initial Lease Deed expired. It is argued that this conduct
created a tenancy by holding over under Section 116 of the Transfer of
Property Act,1882, meaning their possession was juridical and lawful, and
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not unauthorised. The Respondent should be estopped from denying the
renewal because it induced the Appellant to alter its position by making
large-scale capital investments and paying Rs.42,600 in stamp duty for the
new deed based on the Respondent’s assurances. He further submits that in
any event, the Sole Arbitrator could not have directed for payment of the
amounts to the Respondent as it amounts to grant of final relief at the
interim stage, which is not permissible as the final determination of amount
will require parties to lead evidence and prove their case.
8. Reliance has been placed on the judgement of the Apex Court in
Evergreen Land Mark (P) Ltd. v. John Tinson& Co. (P) Ltd., (2022) 7 SCC
757, to further the argument that where the dispute between the parties
concerns rental amounts, no final determination of the same can be done
under Section 17 of the Act.
9. It is further submitted by the learned Senior Counsel for the
Appellants that the judgements relied on by the Respondents are
distinguishable on facts of admitted liability, whereas liability in the present
case is explicitly disputed between the parties.
10. Per Contra , Learned Senior Counsel for the Respondent has placed
reliance on certain clauses of the Lease Deed, primarily Clauses 21 and 29.
It is the case of the Respondent that as per Clause 21 of the Lease Deed, the
Appellant was responsible for vacating and handing over peaceful
possession of the Property, failing which the Respondent was entitled to
liquidated damages equivalent to double the prevailing rent payable on daily
basis from the date of handing over of the Property. Further reliance is
placed on Clause 29 of the Lease Deed, as per which the lease deed executed
in 2021 was the only/entire agreement between the parties which could not
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be modified or changed except by a written amendment agreed between the
parties. In the absence of a written agreement, the possession of the Property
by the Appellant beyond 30.06.2024 is illegal and since the Appellant has
refused to hand over possession after the Lease Deed has expired, the
Respondent herein is entitled to use and occupational charges/ mesne profit
for the unauthorized use of the premises. It is submitted by the Learned
Senior counsel for the Respondent that the Appellants in the Statement of
Defence has admitted that upon termination, it was obligated to return the
Property back in its original condition to the Respondent, and since the
Appellants have failed to do so, the Respondent is entitled to enhanced use
and occupational charges/Mesne profits post the termination of the Lease
Deed.
11. It is further submitted by the learned Senior Counsel for Respondent
that the Appellants were in illegal possession of the Property is established
by the fact that even after the expiry of the Lease Deed, it had on its own
whims and fancies, continued to pay an increased rent with the intention to
retain possession over the Property. However, the said arrangement was
never really in place due the fact that no new Lease Deed has been executed
in writing in terms of Clause 29 of the Lease Deed.
12. Reliance has been placed on a judgement of this Court in Supertrack
Hotels Pvt. Ltd. v. Friends Motels Pvt. Ltd., 2017 SCC OnLine Del 11662
to contend that the power of the Arbitral Tribunal under Section 17 is akin to
the powers of a Court under Section 9 of the Act. It is submitted by the
Learned Senior Counsel for the Respondent that, like a Court, the Tribunal
may direct the Respondent to deposit such amount on account of arrears up
to the date of the order and thereafter continue to deposit in each succeeding
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month the rent claimed in consonance with the principles of Order XV-A of
the CPC.
13. Heard the Learned Senior Counsels for the parties and perused the
material on record.
14. Under Section 37(1) of the Act, an appeal can lie against an order
setting aside or refusing to set aside an arbitral award under Section 34, as
also against orders granting or refusing to grant any interim measure under
Section 9 of the Act. Section 37(2) provides for an appeal from an order of
an Arbitral Tribunal accepting a jurisdictional plea under sub section (2) or
sub section (3) of Section 16(2). Section 37(2)(b) expressly provides for an
appeal against an order of the Arbitral Tribunal granting or refusing to grant
an interim measure under Section 17 of the Act. However, the mere
availability of an appellate remedy does not confer upon the Court an
unrestricted power of re-appreciation of the order passed by the Arbitral
Tribunal. The legislative scheme of the Act is founded upon minimal judicial
intervention, party autonomy and respect for the arbitral process.
Consequently, jurisdiction of the Courts under Section 37 of the Act is
supervisory in nature and remains confined within its narrow limits. The
restraints applicable under Section 34 of the Act equally apply to an
interlocutory order under Section 37(2)(b) of the Act. Indeed, such restraint
operates with an even greater force at the interim stage, since interference
with an interim order may frustrate the arbitral proceedings.
15. The reason for such heightened restraint lies in the very nature of an
order passed under Section 17 of the Act. The views expressed by an
Arbitral Tribunal while considering an application for interim relief are
interlocutory in character and do not constitute a final expression of opinion
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upon the merits of the dispute. Such views remain subject to modification or
review at the stage of the final award. Section 17 of the Act is intended to
operate as a protective measure, the aim being to preserve the sanctity and
efficacy of the arbitral process and to ensure that the parties are on an
equitable footing pending final adjudication. The interlocutory character of
such an order must, therefore, necessarily be kept in mind while exercising
jurisdiction under Section 37(2)(b).
16. A Co-ordinate Bench of this Court in Lava International Ltd. v.
Mintellectuals LLP, 2024 SCC OnLine Del 6908 while discussing the
objective of an interim order has observed as under:-
“18 . Dealing particularly with Essar House, the
Court came to the following conclusion:
“…Thus, the underlying principle that the interim
orders for securing a claimant in an arbitral
proceeding can be made only in cases where the
court is prima facie satisfied that but for securing
the claimant, it would be unable to reap the
benefits of a favourable award, was satisfied in
that case.”
19. The Division Bench thus proceeded on the
basis that the underlying substantial principle
applicable to such cases, was that a claimant can
be secured if the Court is prima facie satisfied that
it would otherwise be unable to reap the benefits
of a favourable award. This is the ratio of Essar
House, as explained in Skypower. This condition
was found to be established on the facts of Essar
House. However, the judgment of the learned
Single Judge in Skypower was set aside, as no
observations or findings to this effect had been
made. The Division Bench noted that the learned
Single Judge had not rendered a finding that the
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claimant/petitioner would be unable to enforce an
arbitral award that may be made in its favour,
absent an order for securing the amounts in
dispute. ”
17. In the above judgment, the Court has also reiterated that an interim
order passed by an Arbitral Tribunal ought to be interfered with only where
it is perverse or manifestly arbitrary. While the exercise of such power may
be examined for its legality, the Court must remain mindful that the decision
is discretionary and interlocutory in nature.
18. It cannot be overlooked that considerations governing Section
37(2)(b) are fundamentally similar to those applicable under Section 34 of
the Act. Interference is warranted only where the order suffers from patent
illegality or perversity. The Court is not entitled to interfere merely because
another view is possible or because the Arbitral Tribunal might have
exercised the discretion differently.
19. Further, this Court in World Window Infrastructure Private Limited v.
Central Warehousing Corporation, (2021) 3 HCC Del 731 observed as
under:
“67. Views expressed by arbitrators while
deciding applications under Section 17 are
interlocutory views. They are not final expressions
of opinion on the merits of the case between the
parties. They are always subject to modification or
review at the stage of final award. They do not,
therefore, in most cases, irreparably prejudice
either party to the arbitration. Section 17 like
Section 9 is intended to be a protective measure, to
preserve the sanctity of the arbitral process. The
pre-eminent consideration, which should weigh
with the arbitrator while examining a Section 17
application, is the necessity to preserve the
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arbitral process and ensure that the parties before
it are placed on an equitable scale. The
interlocutory nature of the order passed under
Section 17, therefore, must necessarily inform the
court seized with an appeal against such a
decision, under Section 37. Additionally, the
considerations which apply to Section 34 would
also apply to Section 37(ii)(b).”
20. The present Appeal before this Court concerns with an order passed
by the Learned Arbitrator under Section 17 of the Act, granting an interim
measure in favour of the Respondent. Section 17 of the A&C Act, for the
sake of reference, is reproduced as under: -
“17. [Interim measures ordered by arbitral
tribunal. [Substituted by Act No. 3 of 2016 dated
31.12.2015.]
(1) A party may, during the arbitral proceedings
[], apply to the arbitral tribunal- *
(i) for the appointment of a guardian for a minor
or person of unsound mind for the purposes of
arbitral proceedings; or
(ii) for an interim measure of protection in
respect of any of the following matters, namely:-
(a) the preservation, interim custody or sale of
any goods which are the subject-matter of the
arbitration agreement;
(b) securing the amount in dispute in the
arbitration;
(c) the detention, preservation or inspection of
any property or thing which is the subject-matter
of the dispute in arbitration, or as to which any
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question may arise therein and authorising for
any of the aforesaid purposes any person to enter
upon any land or building in the possession of
any party, or authorising any samples to be
taken, or any observation to be made, or
experiment to be tried, which may be necessary
or expedient for the purpose of obtaining full
information or evidence;
(d) interim injunction or the appointment of a
receiver;
(e) such other interim measure of protection as
may appear to the arbitral tribunal to be just and
convenient, and the arbitral tribunal shall have
the same power for making orders, as the court
has for the purpose of, and in relation to, any
proceedings before it.
(2) Subject to any orders passed in an appeal
under section 37, any order issued by the arbitral
tribunal under this section shall be deemed to be
an order of the Court for all purposes and shall be
enforceable under the Code of Civil Procedure,
1908, in the same manner as if it were an order of
the Court.]
17. Interim measures ordered by arbitral tribunal.-
(1) Unless otherwise agreed by the parties, the
arbitral tribunal may, at the request of a party,
order a party to take any interim measure of
protection as the arbitral tribunal may consider
necessary in respect of the subject-matter of the
dispute.
(2) The arbitral tribunal may require a party to
provide appropriate security in connection with a
measure ordered under sub-section (1).”
(emphasis supplied)
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21. Material on record indicates that the Respondent had approached the
Arbitral Tribunal under Section 17 of the Act with the following prayers: -
“a. Pass an ex-parte ad-interim injunction
restraining Respondent, agents, etc. from
subletting or parting with the possession or
creating a third party right;
b. appoint a local commissioner to visit the suit
premises and prepare a detailed report along with
photographs and videography to ascertain the
actual status and current structural condition of
the suit property;
c. direct the Respondents to pay use and
occupation charges as per prevailing market
rental value i.e. Rs. 8,50,000/- Per month, from
01.07.2024 till the handing over of physical
possession of the property to the petitioner;
d. Direct the Respondents to permit the
Petitioner's bankers or their representatives,
including from Aditya Birla Finance Limited and
Cholamandalam Finance Limited to their banker,
to visit and verify the suit property for valuation,
technical, and verification purposes for the
purpose of processing the Petitioner's loan
application;
e. Direct the Respondents to permit the Petitioner
to inspect the suit property regularly as the
rightful owner and former lessor.”
22. It is apposite, at this stage, to refer to the reasoning adopted by the
Learned Arbitrator in granting the relief namely, for the past period i.e.
01.07.2024 to 31.01.2026, the rate was fixed at Rs.3,50,000/- per month, for
the Ongoing Period i.e. 01.02.2026 onwards, the rate was increased to
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Rs.4,00,000/- per month until the disposal of the arbitral proceedings and
directions to pay balance differential of Rs.1,77,500/- per month for the 19
months where Appellants only paid Rs.1,72,500/-. The Learned Arbitrator
was of the opinion that in the absence of any renewal agreement executed
between the parties there was no right on the part of the Appellant to
continue possession and, therefore, the continued occupation of the premises
by the Appellant post expiry of the lease prima facie renders him liable to
compensate the Respondent by way of user and occupation charges. Though
the Learned Arbitrator had observed that the quantum of such charges can be
decided only after leading evidence including material relating to
comparable properties, location advantages, nature of use, and prevailing
market conditions. Yet, the learned Arbitrator took note of the relevant terms
of the independent Lease Deed dated 29.06.2021 in respect of the first floor
of the same property wherein the rent has been structured with periodic
escalation, reaching Rs. 3,30,625/- per month for the current period of
01.02.2026 to 31.01.2029. The Arbitral Tribunal was of the opinion that the
powers under Section 17 of the Act is akin to those of a Court under Section
9 to grant efficacious interim measures and where there is a strong prima
facie case and the balance of convenience lies in favour of granting interim
relief, such relief ought not to be declined on technical considerations. The
Arbitral Tribunal was of the opinion that if a strong prima facie case is made
out and the balance of convenience is in favour of interim relief being
granted, the Court exercising power under Section 9 of the Arbitration Act
should not withhold relief on the mere technicality of absence of averments .
The Tribunal, therefore, directed that the Appellant should pay user and
occupation charges @ Rs. 3,50,000/- per month w.e.f. 01.07.2024 till
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31.01.2026 and @ Rs. 4,00,000/- per month from 01.02.2026 till the
disposal of the arbitral proceedings subject to adjustment of the money
already paid.
23. The dispute between the parties primarily concerns with issues as to
when did the terms of the Lease Deed come to an end, right of the Petitioner
to operate from the Property in absence of any formal document showing
extension of lease, unilateral payment of increased rent and the acceptance
of the same by the Respondent and whether such acceptance of rent by the
Respondent, if so, would have entitled the Petitioner to be in tenant by
holding over.
24. The Learned Arbitrator, in the present case, without going into all
these questions has directed the Appellant to pay a sum of Rs. 3,50,000 per
month for the period from 01.07.2024 to 31.01.2026, Rs. 4,00,000 per
month from 01.02.2026 until the disposal of the case and payment of
differential arrears for the past period, totalling approximately Rs.33,72,500.
25. Section 17 of the Act itself provides that interim measure can be
granted for protection of the subject matter of the arbitration. The manner of
protection is given Section 17(1)(ii). Section 17(1)(ii)(a) gives power to the
Tribunal to pass orders of preservation, interim custody or sale of any goods
which are the subject-matter of the arbitration agreement. Section
17(1)(ii)(b) gives power to the Tribunal to secure the amount in dispute in
the arbitration. Section 17(1)(ii)(c) gives power to the Tribunal to pass
interim measure relating to the detention, preservation or inspection of the
subject-matter of the dispute in arbitration. Section 17(1)(ii)(d) gives power
to the Tribunal to pass interim injunction or the appointment of a receiver.
Section 17(1)(ii)(e) gives power to the Tribunal to pass any other interim
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measure of protection as may appear to the arbitral tribunal to be just and
convenient. A reading of Section 17 of the Arbitration Act makes it very
clear that the purport of Section 17 is primarily to protect and preserve the
subject-matter of arbitration. Section 17 cannot be enlarged to mean that it
gives powers to the Tribunal beyond the scope of protection.
26. In the opinion of this Court, fixing rent for use and occupation over
and above the agreed rent goes beyond the scope of Section 17 of the Act, as
it cannot be said that it is for the purpose of protecting the Property. Merely
because the period is over and the rent has not been fixed again, could not,
ipso facto , have led to a conclusion that the Appellants are in unauthorized
use of the Property.
27. In the opinion of this Court, the Arbitral Tribunal does not have the
power to direct payment of even a single rupee to any party as an interim
measure under Section 17 of the Act as it does not come within the
definition of preservation or protection of the subject matter of the
arbitration agreement. Even clause (e) under Section 17(1)(ii) which gives
power to the Tribunal to pass any other interim measure of protection as
may appear to the arbitral tribunal to be just and convenient cannot apply to
the present case as enhancement of rent cannot be said to be a measure for
either preservation or protection of the subject matter of arbitration. Till it is
not finally decided as to whether the termination was proper or not, and
whether the Appellants were entitled to continue to remain in the premises,
there cannot be an adjudication of the amount to be paid over and above the
mutually agreed rent as an interim measure. There must be a determination
that the Appellants herein is an illegal occupants and, without ascertaining
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and coming to this definitive conclusion, an Arbitral Tribunal cannot pass an
order enhancing the rent as an interim relief.
28. In the opinion of this Court, the entire reasoning of the Learned
Arbitrator on balancing equities becomes irrelevant and is beyond the scope
of the powers exercised under Section 17 of the Act. The Impugned Order
records that as long as the Appellant remained in physical possession of the
commercial premises i.e., the Property, the Respondent was being deprived
of the use and economic benefit of her property. Following this reasoning,
the Learned Arbitrator had allowed the interim monetary arrangement,
which it deemed necessary to compensate the Respondent during pendency
of the proceedings. The Learned Arbitrator noted that the parties had already
contemplated financial consequences for staying past the lease term. Clause
21 of the Lease Deed provides for liquidated damages equivalent to double
the prevailing rent if the lessee failed to vacate, which provided a contractual
foundation for directing charges higher than the initial Rs. 1,50,000/- per
month. For the quantification of the amount, the Learned Arbitrator
proceeded on the premise that a contemporaneous lease for the first floor of
the same building served as a valid benchmark. He concluded that since the
disputed premises i.e. the 2nd and 3rd floors included roof and terrace rights,
it held a proportionally higher valuation than the first floor, which was being
rented for approximately Rs.3,30,625/- per month.
29. This Court is of the view that the determination of the amount payable
by the Appellants towards occupation of the premises after the expiry of the
registered Lease Deed cannot, at this stage, be divorced from the underlying
questions as to the legal character of the Appellants continued possession.
The Learned Arbitrator has proceeded on the ground that, immediately upon
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expiry of the Lease Deed on 30.06.2024, the Appellants became
unauthorised occupant and that its continued possession thereafter could not
be treated as a tenancy by holding over. However, this very premise is a
matter of dispute between the parties and cannot be treated as an established
fact without adjudication of the rights and conduct of the parties.
30. The question whether the Appellants possession of the Property after
30.06.2024 was unauthorised, or whether the circumstances disclose a case
of holding over or continuation of the tenancy by consent, necessarily
requires consideration of the conduct of the parties subsequent to the expiry
of the Lease Deed. Such determination may involve examination of the
communications exchanged between the parties, the acceptance or rejection
of rent or other amounts, the conduct of the Respondent in relation to the
continued possession of the Property, and other surrounding circumstances.
31. The mere existence of another lease in the same Property does not, by
itself, establish the market rent of the premises in dispute. A comparable
lease can undoubtedly constitute relevant evidence for determining market
rent, but its evidentiary value would have to be tested by the parties by
leading evidence and not at an interim stage to Section 17 of the Act.
32. This Court is conscious that, while considering an application for
interim relief under Section 17 of the Act, an Arbitral Tribunal is not
required to finally adjudicate the rights of the parties. An interim
arrangement may, in an appropriate case, be made to balance the equities
and prevent one party from deriving an undue benefit during the pendency
of the proceedings. However, such power cannot be exercised by
conclusively deciding disputed questions which constitute the very subject
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matter of the final adjudication, particularly where the monetary liability is
itself is matter of dispute.
33. It is well settled that the grant of interim measures under Section 17 of
the Act is preservative in nature. In fact, even in a suit for eviction, the
Courts under Order XXXIX Rules 1 and 2 of the CPC cannot increase the
rent as an interim measure, and only after an eviction order has been passed,
can it fix an amount that can be paid as an interim measure.
34. In the present case, it is stated by the Learned Senior Counsel for the
Appellants that the Learned Arbitrator has invoked powers akin to Order
XXXVIII Rule 5 of the CPC, in passing the Impugned Order. The principles
governing the grant of relief under Order XXXVIII Rule 5 of the CPC have
been succinctly elaborated by this Court in Indo Spirits v. Pernod Ricard
India (P) Ltd., 2026 SCC OnLine Del 674 and the relevant observations are
reproduced hereunder:
“27. With respect to the invocation of Order XXXVIII
Rule 5 of the CPC, this Court is of the considered
opinion that the jurisdiction to grant relief thereunder
is extraordinary and drastic in nature. Such power is
not to be exercised lightly or as a matter of course. It
can be invoked only upon the applicant establishing,
on the basis of cogent, credible, and proximate
material, a real and imminent apprehension that the
respondents are acting with a deliberate intent to
obstruct or defeat the satisfaction of a prospective
decree or award, by alienating, dissipating, secreting,
or otherwise removing their assets beyond the reach of
the judicial process.
28. In Skypower Solar India (P) Ltd. v. Sterling and
Wilson International FZE17, Division Bench of this
Court has held interim protection akin to Order
XXXVIII Rule 5 of the CPC can be granted only upon a
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prima facie finding of a real and imminent risk of asset
alienation or conduct intended to frustrate enforcement
of a prospective award, and not merely on the existence
of a prima facie case or balance of convenience, which
is extracted as follows:
“47. There is no finding (prima facie or
otherwise) by the learned Single Judge that, if
S&W prevails in the arbitral proceedings, it would
be unable to enforce the arbitral award in its
favour if the amounts as claimed are not secured.
There is no allegation that Appellants 2 to 6 are
alienating their assets and are acting in a manner
that would frustrate the enforcement of an arbitral
award that may be delivered in favour of S&W.
49. We have carefully examined the impugned
judgment. Whilst, the learned Single Judge has
found that S&W has established a prima facie
case and that the balance of convenience is also
in its favour, there is no finding to the effect that
Appellants 2 to 6 are alienating their assets or
would do so and frustrate S&W's recourse to
enforce the arbitral award if it prevails in the
arbitral proceedings. There is no finding that
absent an order for securing the amounts in
dispute, S&W would be unable to enforce the
arbitral award that may be made in its favour. The
learned Single Judge had accepted that any
change in the shareholding pattern of original
Respondents 2 to 8 would have a bearing on the
arbitration proceedings as well as the execution
of the arbitral award. The observations to the said
effect are contained in para 74 of the impugned
judgment, which reads as under : (Sterling &
Wilson International FZE v. Sunshakti Solar
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Power Projects (P) Ltd., 2020 SCC OnLine Del
2414, SCC OnLine Del 74)
“74. It is clear that under Section 9, the court
has the power to issue interim directions to
non-parties to arbitration agreement. Keeping
in view the judgments referred to above, in my
opinion, petitioner is right in its contention that
if the shareholding pattern of respondents
changes by transferring shares, there is
likelihood of changes in the management,
overall control and the decision-making power.
This would have a significant bearing on the
arbitration proceedings as well as the ultimate
execution of the award. Thus, interim directions
are required to be issued against Respondents 2
to 8. The judgments relied upon by respondents
are distinguishable on the facts of this case and
thus of no avail to them.”
63. The principle for granting orders under Order
38 Rule 5CPC are now well-settled. In Raman
Tech. & Process Engg. Co. v. Solanki Traders,
(2008) 2 SCC 302 : (2008) 1 SCC (Civ) 539, the
Supreme Court had observed that the power
under Order 38 Rule 5 are drastic and
extraordinary powers and are required to be used
sparingly and in accordance with the rule. The
Supreme Court also observed that the purpose of
Order 38 Rule 5 was not to convert an unsecured
debt as a secured one. The object of Order 38
Rule 5 was to prevent any defendant from
defeating the realisation of a decree that may
ultimately be passed in favour of the plaintiff. The
relevant extract of the said decision is set out
below : (SCC p. 304, paras 4 and 5)
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“4. The object of supplemental proceedings
(applications for arrest or attachment before
judgment, grant of temporary injunctions and
appointment of receivers) is to prevent the ends
of justice being defeated. The object of Order
38 Rule 5 CPC in particular, is to prevent any
defendant from defeating the realisation of the
decree that may ultimately be passed in favour
of the plaintiff, either by attempting to dispose
of, or remove from the jurisdiction of the court,
his movables. The Scheme of Order 38 and the
use of the words „to obstruct or delay the
execution of any decree that may be passed
against him‟ in Rule 5 make it clear that before
exercising the power under the said Rule, the
court should be satisfied that there is a
reasonable chance of a decree being passed in
the suit against the defendant. This would mean
that the court should be satisfied that the
plaintiff has a prima facie case. If the
averments in the plaint and the documents
produced in support of it, do not satisfy the
court about the existence of a prima facie case,
the court will not go to the next stage of
examining whether the interest of the plaintiff
should be protected by exercising power under
Order 38 Rule 5CPC. It is well-settled that
merely having a just or valid claim or a prima
facie case, will not entitle the plaintiff to an
order of attachment before judgment, unless he
also establishes that the defendant is attempting
to remove or dispose of his assets with the
intention of defeating the decree that may be
passed. Equally well-settled is the position that
even where the defendant is removing or
disposing his assets, an attachment before
judgment will not be issued, if the plaintiff is
not able to satisfy that he has a prima facie
case.
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5. The power under Order 38 Rule 5CPC is a
drastic and extraordinary power. Such power
should not be exercised mechanically or merely
for the asking. It should be used sparingly and
strictly in accordance with the rule. The
purpose of Order 38 Rule 5 is not to convert an
unsecured debt into a secured debt. Any attempt
by a plaintiff to utilise the provisions of Order
38 Rule 5 as a leverage for coercing the
defendant to settle the suit claim should be
discouraged. Instances are not wanting where
bloated and doubtful claims are realised by
unscrupulous plaintiffs, by obtaining orders of
attachment before judgment and forcing the
defendants for out of court settlements, under
threat of attachment.”
70. The principles underlying the object of
Order 38 Rule 5CPC are, as noticed earlier,
well-settled. Such orders are required to be
issued in case where the court is satisfied that
the party has established a strong prima facie
case and that the respondents are acting in a
manner that would defeat the realisation of the
decree. These principles must be equally
satisfied for securing protective orders under
Section 9 of the A&C Act, which are in the
nature of orders under Order 38 Rule 5CPC.”
(Emphasis supplied)
xxxx xxxx xxxx
33. With respect to the application of the well-settled
„triple test‟ governing the grant of interim injunctions,
it is trite that the exercise of such jurisdiction is
conditioned upon the satisfaction of three foundational
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requirements namely, (i) the existence of a prima facie
case; (ii) the balance of convenience tilting in favour of
the applicant; and (iii) the likelihood of irreparable
injury in the absence of interim protection. These
jurisdictional preconditions cannot be presumed or
invoked as a matter of course. They must be the subject
of a conscious and reasoned judicial determination,
founded upon an objective evaluation of the material
placed on record.
34. The Hon'ble Supreme Court in Bloomberg
Television Production Services India Pvt. Ltd. v. Zee
Entertainment Enterprises Ltd.18 has underscored that
the grant of interim relief must rest upon a careful and
reasoned application of the aforesaid threefold test and
not upon a mechanical or conclusory invocation
thereof. The Court cautioned that a mere reproduction
of submissions or precedents is insufficient; the
adjudicatory authority must expressly analyse how
each limb of the test stands satisfied on the facts of the
case and furnish cogent reasons in support of its
conclusion. Relevant paragraph of the said judgment
has been extracted as under:
“4. The threefold test of establishing : (i) a prima
facie case, (ii) balance of convenience, and (iii)
irreparable loss or harm, for the grant of interim
relief, is well-established in the jurisprudence of
this Court. This test is equally applicable to the
grant of interim injunctions in defamation suits.
However, this threefold test must not be applied
mechanically [DDA v. Skipper Construction Co.
(P) Ltd., (1996) 4 SCC 622, para 38], to the
detriment of the other party and in the case of
injunctions against journalistic pieces, often to
the detriment of the public. While granting interim
relief, the court must provide detailed reasons and
analyse how the threefold test is satisfied. A
cursory reproduction of the submissions and
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precedents before the court is not sufficient. The
court must explain how the test is satisfied and
how the precedents cited apply to the facts of the
case.”
35. To augment, the Hon'ble Supreme Court in Arcelor
Mittal (supra) has reiterated that these foundational
principles are equally applicable in proceedings under
Sections 9 of the A&C Act. By necessary extension, the
same discipline in reasoning must inform the exercise
of power under Section 17 of the A&C Act by an
Arbitral Tribunal.”
35. In the opinion of this Court, the power exercised by the Learned
Arbitrator is even beyond the scope of Order XXXVIII Rule 5 of the CPC as
the present case does not concern a claim for recovery of an admitted debt or
an undisputed sum of money. The very entitlement of the Respondent to the
amount in question remains a matter to be adjudicated by the Learned
Arbitrator. More importantly, even assuming that the Arbitral Tribunal was
justified in exercising a power analogous to that contemplated under Order
XXXVIII Rule 5 of the CPC for securing the amount in dispute, such power
could only extend to securing the disputed amount and not to directing its
payment to the Respondent. Even the Courts under Order XVIII Rule 5 of
the CPC cannot direct the payment of money to one party but can only ask
for the money to be deposited in Court.
36. Further, the Impugned Order does not disclose any circumstances as
per which it can be concluded that if the use and occupation charges/Mesne
profit are not paid at the interim stage, there is a likelihood of the execution
of the final award to be infructuous. Nor is there any imminent or real risk
disclosed in the Impugned Order that raises apprehension that the execution
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of the final award would be rendered nugatory. The only reason given by
the Learned Arbitrator is that if the amount is not granted, the Respondent
would be deprived of the use and economic benefit of the Property whereas
the Appellants would continue with the possession. However, this reasoning
of the Learned Arbitrator is not in consonance with the strict parameters
under Order XXXVIII Rule 5 of the CPC or under Section 17 of the Act.
37. In view of the above, this Court is of the view that the relief granted
by the Learned Arbitrator appears to be final in nature so as to prejudice one
party over the other even before a final award is passed.
38. This Court is consciously refraining from making any observations on
the merits or facts that are disputed between the parties as the determination
of the same particularly lies within the exclusive domain of the Learned
Arbitrator. However, the Impugned Order read in totem leaves an impression
that the relief granted by the Learned Arbitrator under Section 17 of the Act
has traversed beyond the scope of relief that can be granted under the said
provision and the quantification of rent has been done capriciously,
rendering the Impugned Order unsustainable in law.
39. In light of the above, the present Appeal is allowed, and the Impugned
Order dated 02.04.2026 passed by the Learned Arbitrator is set aside.
40. Accordingly, the present Appeal is disposed of, along with pending
applications, if any.
SUBRAMONIUM PRASAD, J
AUGUST 31, 2026
VG
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