General Contempt Jurisdiction Cannot Be Invoked Directly For Breach Of Arbitral Interim Orders: Delhi High Court

The Delhi High Court on 5 February held that parties cannot bypass the arbitral process by approaching the High Court directly for alleged violation of an interim order passed by an arbitral tribunal. Any contempt proceedings must follow the procedural framework under the Arbitration and Conciliation Act, 1996.

Justice Saurabh Banerjee dismissed a contempt petition filed by Renaissance Buildcon Company Pvt Ltd and its directors, while noting that the respondents, Tarjinder Kumar Bansal and other former directors and associated persons, were accused of breaching the arbitral tribunal's interim orders.

The Bench held:

“Since the interim order dated 18.07.2015 was passed by the learned Sole Arbitrator under Section 17(1) of the A&C Act in the course of the arbitral proceedings, the petitioners cannot approach this Court by way of the present petition for any contempt thereof. The appropriate remedy under Section 27(5) of the A&C Act would lie before the learned Sole Arbitrator, who upon satisfaction, may make a reference for contempt before this Court.”

The dispute arose from loan arrangements between Renaissance Buildcon Company and BDR Builders & Developers Pvt Ltd, under which Renaissance Buildcon mortgaged land through agreements and mortgage deeds executed in 2009. When disputes emerged, the lender initiated arbitration proceedings.

During the arbitration, the sole arbitrator passed three interim orders dated 27 October 2014, 12 December 2014, and 18 July 2015. The 18 July 2015 order specifically restrained the parties from creating third-party rights or transferring the mortgaged land forming part of the dispute.

Renaissance Buildcon later alleged that, despite the restraining order, its former directors violated the arbitral directions by executing sale deeds in November 2020 over five acres of land, relying on a forged board resolution.

Alleging contempt of the three arbitral orders, the company approached the Delhi High Court under Section 10 of the Contempt of Courts Act, 1971.

Senior Advocate Ashish Mohan, appearing for Renaissance Buildcon, contended that the 2015 amendment to the Arbitration Act, strengthened the procedural mechanism for enforcement of arbitral directions.

Counsel appearing for Tarjinder Kumar Bansal and others opposed the plea, submitting that any alleged breach must first be examined by the arbitral tribunal, which may then refer the matter to the Court under Section 27(5) if contempt is established. They also noted that the arbitrator had already addressed the issue by directing the deposit of a Rs. 54-lakh bank guarantee relating to the sale transactions.

Justice Banerjee examined the statutory framework governing interim measures and contempt in arbitration proceedings. He clarified that the 2015 amendment introducing Section 17(2) was intended to strengthen the enforceability of arbitral interim orders but did not alter the procedure for contempt during arbitration proceedings. He held:

“Section 17(2) is thus pertaining to enforceability of an interim order, which is distinguishable from the aspect of contempt.”

The Court further noted that, in line with the 2015 amendment, judicial precedents interpreting it, and the UNCITRAL Model Law framework, contempt under Section 27(5) requires the arbitral tribunal to first determine whether its orders have been breached before the matter reaches the Court.

Justice Banerjee cautioned that permitting parties to approach the High Court directly would undermine the statutory arbitration framework, observing: “When the provisions in the special Act are categoric and well-defined, the petitioners cannot be allowed to circumvent the same.”

Holding that the proper remedy lay before the arbitral tribunal, the Court dismissed the contempt petition, leaving the parties to bear their own costs.

Appearances for petitioners (Renaissance Buildcon Company Pvt Ltd & Ors.): Advocates Ashish Mohan, Thakur Ankit Singh, Anjit Dwivedi.

Appearances for respondents (Tarjinder Kumar Bansal & Ors.): Advocates Samar Bansal, Ashutosh Gupta, Gaurav Rana, Diksha Goswami, Medhanshu Tripathi, Tushar Tokas, Hemant Saini, Arvinder Kaur, Aditi Singh, Manas Rai.