### Third-party purchasers may challenge Section 17 interim orders under Section 37 if their rights are adversely affected.

The Petitioners (Owner) and Respondent (Developer) entered into a Joint Development Agreement (JDA) in 2009 for property in Kurla

In 2013, via an Allocation Confirmation Letter, the Developer identified 16 "Subject Flats" as the Owner’s share and 2 "Lien Flats" to be withheld as security for construction costs

The Owner sold the Subject Flats to third-party "Flat Purchasers" (Petitioners in the second petition) via registered agreements

In 2016, the Developer confirmed the upcoming Occupation Certificate and acknowledged the Flat Purchasers' rights

However, disputes arose over construction costs and land de-reservation, leading to an arbitration where a 2017 consent order directed status quo on the Subject Flats

The Arbitral Tribunal, in two Impugned Orders (2019 and 2022), refused to release the Subject Flats to the Owner or Flat Purchasers, citing the inability to quantify the Owner’s liability at an interim stage

The Owner and Flat Purchasers challenged these orders under Section 37 of the Arbitration and Conciliation Act, 1996.

1. Whether third-party Flat Purchasers, who are not signatories to the arbitration agreement, have the locus standi to challenge an interim Section 17 order under Section 37 if their rights are affected

2. Whether the Arbitral Tribunal’s refusal to release the Subject Flats was perverse or patently illegal given the Developer’s prior written waivers and the nature of the claim

The court applied Section 37 and Section 17 of the Arbitration and Conciliation Act, 1996, noting that after the 2015 Amendment, the powers of the Tribunal under Section 17 are at par with the Court's powers under Section 9

It relied on Prabhat Steel Traders Pvt. Ltd. v. Excel Metal Processors Pvt. Ltd., which establishes that a third party whose rights are prejudiced by an interim arbitral order can maintain an appeal under Section 37

The court also applied the principle from Wander Ltd. v. Antox India (P) Ltd. regarding the limited scope of appellate interference in discretionary interlocutory orders unless they are perverse or arbitrary

Furthermore, it observed the principle of ante litem motam, giving higher probative weight to conduct occurring before the dispute

The Court found that while the Flat Purchasers were not parties to the JDA, they were "veritable parties" whose vital interests were impacted by the status quo

On merits, the Court deemed the Tribunal's orders perverse for ignoring "vital and material evidence"

Specifically, the Developer had explicitly restricted its lien to two specific "Lien Flats" in 2013 and actively encouraged the Owner to inform Flat Purchasers of the project's completion in 2016

By allowing the Developer to maintain a "blanket lien" over all 16 Subject Flats for what is essentially a monetary claim for construction costs (quantified at approximately ₹1.75–3.75 crores), the Tribunal created an inequitable result that held legitimate purchasers to ransom

The Court noted that the Developer’s claim could be secured by the balance consideration payable by the purchasers rather than withholding possession of the property itself

It held that third parties can maintain Section 37 appeals if their rights are directly affected by Section 17 orders

The Court directed: (i) Flat Purchasers must deposit balance consideration with the Court Receiver within four weeks; (ii) Developer must deliver keys to the Receiver; (iii) the Receiver shall then place Flat Purchasers in possession as "agents of the Receiver" without royalty; and (iv) the deposited funds shall abide by the final Arbitral Award