Interim Monetary Relief On Disputed Claims In Arbitration Must Be Granted Sparingly: Delhi High Court

Interim monetary relief on disputed claims cannot be granted as a matter of course during arbitration proceedings and must be reserved for exceptional cases meeting a higher threshold, the Delhi High Court has held.

It set aside an arbitral tribunal's direction requiring India International Convention and Exhibition Centre Limited (IICECL) to release about ₹227 crore to Larsen & Toubro Limited (L&T).

Justice Harish Vaidyanathan Shankar observed that although arbitral tribunals have wide powers to grant interim protection, those powers cannot be routinely used to direct payment of contested monetary claims.

"Section 17(1)(ii)(e) of the A&C Act is undoubtedly couched in broad language and may, in certain respects, confer powers wider than those traditionally exercised under Order XXXIX of the CPC. However, the width of the provision cannot justify its routine invocation for directing payment of disputed monetary claims. Such power must be exercised sparingly and only upon strict satisfaction of the requirements governing interim relief.", the court held

The dispute arose from a 2018 engineering, procurement, and construction contract under which IICECL, a special purpose vehicle set up under the Union government, engaged L&T to execute Phase I of the India International Convention and Expo Centre project at Dwarka, New Delhi.

During execution, disputes emerged over the scope of work, withholding of payments, goods and services tax claims, force majeure costs, and alleged negative variations. Conciliation failed, leading to arbitration.

L&T raised claims exceeding ₹3,000 crore, while IICECL filed counterclaims of nearly ₹1,056 crore. A fresh dispute later arose over stage payments SP-68, SP-69 and SP-70. L&T maintained that certified payments could not be withheld. IICECL argued that it was contractually entitled to adjust and withhold amounts against alleged negative variations.

After the project's independent engineer recommended "NIL" payment on one stage payment because of the alleged negative variations, L&T approached the arbitral tribunal seeking release of certified dues and an order restraining IICECL from withholding payments.

The majority of the tribunal partly allowed the application and directed IICECL to release about ₹227 crore towards stage payments SP-69 and SP-70. One member of the tribunal dissented.

Before the high court, IICECL argued that the tribunal had effectively granted substantive monetary relief on claims that remained disputed and had done so before evidence was recorded. It contended that such relief could not be granted through an interim order.

L&T argued that the certified amounts had already become payable under the contract and could not be withheld merely because IICECL had raised unadjudicated counterclaims.

The high court rejected the argument that interim monetary relief can never be granted during arbitration. It held that tribunals may, in appropriate cases, grant such relief. However, the power is fundamentally protective and cannot be exercised as though it were a final adjudication of disputed monetary claims.

Justice Shankar observed, " the expression "just and convenient" appearing in Section 17(1)(ii)(e) of the A&C Act cannot be construed in isolation, divorced from the statutory context in which it occurs. The said expression derives its colour from the preceding words "interim measure of protection", and therefore, the width of the power remains intrinsically linked to preservation and protection pending adjudication"

The court noted that the majority tribunal had sought to ensure uninterrupted execution of the nationally important project while addressing the financial prejudice claimed by L&T.

However, it held that directing release of a substantial sum on seriously disputed claims amounted to granting substantive monetary relief rather than preserving the subject matter of the arbitration.

The court observed, "the learned Majority Arbitral Tribunal chooses to grant substantial monetary relief instead of merely preserving or protecting the subject matter of the arbitration, the order must satisfy a correspondingly higher threshold of scrutiny."

Holding that the tribunal had exceeded the permissible scope of interim protection, the high court allowed IICECL's appeal and set aside the direction requiring it to release about ₹227 crore to L&T.

For Petitioner (India International Convention and Exhibition Centre Limited): Additional Solicitor General N. Venkatraman, and Advocates K.R. Sasiprabhu, Debesh Panda, Vinayak Maini, Tushar Bhardwaj and Vidhatri Deoli.

For Respondent (Larsen & Toubro Limited): Senior Advocates Abhishek Manu Singhvi, Akhil Sibal, Kunal Tandon and Advocates Avishkar Singhvi, Anuradha Mukherjee, Ajay Sawhney, Kapil Arora, Manmeet Singh, Palak Nagar, Aviral Singhal, Kartik Sharma, Priyansha, Sugandh Shahi and Divya Prabha Singh.