High Court of Delhi clarifies scope of Section 37 of the Arbitration and Conciliation Act, 19961

Brief Facts

Edelweiss Asset Reconstruction Co. Ltd. (“Appellant”) filed an appeal (“Appeal”) under Section 37 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) before a Single Judge of the High Court of Delhi (“Court”) against an order (“Impugned Order”) passed in an arbitration between M/s GTL Infrastructure Ltd. (“Respondent No. 1”) and M/s GTL Ltd. (“Respondent No. 2”). The Impugned Order, which was passed pursuant to an application filed by Respondent No. 2 under Section 17 of the Arbitration Act, directed Respondent No. 1 to pay INR 2.4 billion to Respondent No. 2, and to deposit INR 2 billion in an escrow account to be maintained by Respondent No. 2. The Appellant was not party to the pending arbitration proceedings between the Respondents in which the Impugned Order was passed but contended that it had a first charge over all the movable assets and bank accounts of Respondent No. 1 including the monies which were directed to be paid to Respondent No. 2 under the Impugned Order by virtue of two agreements, i.e., the Trust and Retention Agreement (“TRA”) and the Master Restructuring Agreement (“MRA”).

Respondent No. 1 filed an appeal against the Impugned Order under Section 37(2) of the Arbitration Act, which appeal was dismissed by order dated 4 March 2020 (“4 March Order”). Respondent No. 2 filed an application for enforcement of the Impugned Order under Section 36 of the Arbitration Act. The Appellant was neither impleaded in the first nor the second proceedings. The Appellant filed a suit before the High Court of Bombay seeking inter alia a permanent injunction restraining Respondent No. 1 from transferring the amount directed to be paid under the Impugned Order, prior to fully discharging the outstanding dues of the Appellant in terms of the TRA and the MRA (“Suit”).

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