An arbitral tribunal cannot grant interim security contrary to the parties’ express contractual bargain.

The parties’ Joint Development Agreement (JDA) provided for a refundable security deposit and, under Clause 4.4, two flats as security for its refund.

Although the JDA contemplated a deposit of ₹105 crore, the Respondent deposited ₹78.64 crore; the Petitioners later refunded ₹34.15 crore, leaving ₹44.49 crore in dispute.

The Respondent sought interim protection under Section 17 of the Arbitration and Conciliation Act, 1996. The Tribunal permitted the Petitioners to sell three flats, subject to securing ₹71.51 crore—including ₹27.02 crore in interest—in a fixed deposit. The Petitioners challenged that order under Section 37(2)(b).

1. Whether the Tribunal’s direction to secure the Respondent’s claim through the sale of three flats and a fixed deposit was contrary to Clause 4.4 of the JDA, which provided for two flats as security

2. Whether interim security could be ordered without a prima facie determination that the contractual milestones for repayment had been achieved, and whether interest could be secured despite the absence of a contractual provision for interest on repayment

3. Whether the Tribunal’s treatment of the disputed MOU and related evidence, including its observations on the MOU’s suspicious nature, warranted interference under Section 37(2)(b)

Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 permits an appeal from an order of an arbitral tribunal under Section 17; interference with the tribunal’s discretionary interim order is limited, but may be warranted where the decision is arbitrary, perverse or capricious.

An arbitral tribunal must act within the parties’ contractual terms and cannot rewrite their bargain or impose a liability not agreed by them, as reflected in MMTC Ltd. v. Vedanta Ltd., Bharat Coking Coal Ltd. v. Annapurna Construction, PSA Sical Terminals Pvt. Ltd. v. V.O. Chidambaram Port Trust and Associated Engineering Co. v. Government of Andhra Pradesh.

A failure to address material contentions may also justify interference, applying NHAI v. Gwalior-Jhansi Express Ltd.

The Tribunal could not rely on principles analogous to Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908, to grant interim relief contrary to the parties’ contract.

The Court declined to disturb the Tribunal’s prima facie assessment that the disputed MOU was suspicious, finding adequate material to support that assessment; it also considered that the related allotment letters and hundies could be left for trial.

However, Clause 4.4 expressly provided for two flats as security, while the Tribunal ordered security through the sale of three flats and a fixed deposit.

The Tribunal had also noted that achievement of the repayment milestones remained to be ascertained, yet ordered security without finding, even prima facie, that those milestones had been achieved. Further, neither the JDA nor the supplementary deed provided for interest on repayment, and Clause 4.2 applied to delayed payment of the deposit by the Respondent, not its refund by the Petitioners.

The 2016 letter did not displace the contractual milestones or create an unconditional repayment obligation. These contractual departures and the failure to address material contentions warranted appellate interference.

The Tribunal’s order was set aside insofar as it permitted the Petitioners to sell three flats at a minimum rate of ₹38,000 per square foot and required a fixed deposit of ₹71.51 crore.

The Petitioners were directed to retain two flats as security in accordance with Clause 4.4 of the JDA.

The Court made no order as to costs.