Pharma Partner Fails To Restore Post-Notice Account Disclosures, As Delhi HC Says Interim Plea Sought Only An Injunction

The parties disputed their interests in the partnership firm M/s Alwin DMD Pharmaceuticals, including whether the petitioner had retired from or been expelled from the firm.

In arbitration, the petitioner sought interim relief under Section 17 of the Arbitration and Conciliation Act, 1996, principally to restrain respondents 1 and 2 from using the firm’s name and goodwill.

The Sole Arbitrator declined that relief at the interim stage but directed the respondents to disclose business transactions and supporting records from 14 November 2017 onwards, with monthly updates during the arbitration.

On the respondents’ appeal under Section 37(2)(b), the Commercial Court upheld disclosure up to 5 April 2019 but set aside the direction for the period from 6 April 2019 onwards, finding it beyond the interim relief sought.

The petitioner challenged that appellate order under Article 227 of the Constitution.

Section 37(3) of the Arbitration Act bars a second appeal from an order passed in an appeal under Section 37, but does not make a petition under Article 227 an appeal or render it unmaintainable.

Under Deep Industries Ltd. v. Oil and Natural Gas Corporation Ltd., (2020) 15 SCC 706, the High Court may exercise Article 227 jurisdiction over an order in a Section 37 appeal, but must do so with extreme circumspection, limiting interference to exceptional cases, including orders patently lacking inherent jurisdiction.

Section 5 of the Arbitration Act and the principles in Dinesh Gupta v. Anand Gupta, 2020 SCC OnLine Del 2099, require restraint in reviewing an arbitral tribunal’s discretionary interim measures; however, the Section 37 court may examine whether the tribunal’s direction falls within the relief sought.

The Court rejected the maintainability objection because Article 227 supervisory jurisdiction is distinct from a second appeal, and Deep Industries recognises that such petitions may be entertained, while sharply limiting the circumstances for interference.

On the merits, the Section 17 application sought restraint against use of the firm’s name and goodwill, not disclosure of transactions during the arbitration.

The Commercial Court had preserved the disclosure direction for the period up to 5 April 2019 and set aside only its continuation thereafter, reasoning that the extended direction exceeded the interim relief sought and that the petitioner’s partnership status remained disputed.

That was a plausible view within the appellate court’s jurisdiction; the High Court could not interfere merely because another view might have been possible.

It dismissed the petition and the pending application(s), leaving the parties’ substantive claims and contentions open for determination in the arbitration or before an appropriate forum.