Delhi High Court Declines 'Eleventh Hour' Auditor Appointment In Hamdard Tax Row, Allows Arbitration

On 29 September, the Delhi High Court refused to appoint an independent statutory auditor in a dispute concerning the renewal of Hamdard Laboratories India's tax-exempt registration and instead permitted Hammad Ahmed to seek appropriate directions from the arbitral tribunal.

Justice Tushar Rao Gedela found that the objections to Form 10AB were intertwined with a property segregation dispute already pending before the arbitral tribunal, and stated that appointing an independent auditor at the “eleventh hour” could “prove disastrous for both the parties”. The Bench observed:

“Since filling up and filing of Form 10AB and the objections raised by the DH are intrinsically intertwined with the segregation of properties, some of which, are admittedly subject matter of arbitration, it appears to this Court, and having due regard to the fact that there is no urgency, the prayers sought in the present application are referable to arbitration.”

Form 10AB is the prescribed form for seeking renewal of HLI's tax-exempt registration, which is required to be renewed every five years.

The dispute arose from a Deed of Family Settlement dated 22 October 2019, which was subsequently incorporated into a consent decree passed by the Delhi High Court on 13 December 2019. The settlement divided the management of HLI's businesses between the two sides of the family.

Abdul Majeed's side, through Hamdard Laboratories (Trust), was to manage the medicines and pharmaceutical business, while Hammad Ahmed's side, through Hamdard Foods India, was to handle the food products business.

Disputes over implementation of the family settlement reached the Delhi High Court, which in September 2022 referred them to arbitration and appointed Justice Badar Durrez Ahmed, former Chief Justice of the Jammu & Kashmir High Court, as the sole arbitrator.

During the arbitration proceedings, HLI filed Form 10AB on 30 September 2025 to renew its tax-exempt registration. Hammad Ahmed's side alleged that the form contained discrepancies concerning properties segregated under the family settlement and had been filed without their participation.

The Income Tax authorities subsequently directed HLI to correct the form. They rejected it on 30 March 2026 with liberty to refile, following which the Income Tax Appellate Tribunal dismissed a challenge to the rejection on 20 July 2026. HLI filed another Form 10AB on 31 March 2026, which again attracted objections concerning its properties.

Hammad Ahmed then approached the Delhi High Court, also alleging that Ellahi Goyal & Co. had been unilaterally appointed as HLI's statutory auditor. He sought the appointment of an independent auditor to examine HLI's financial records and submit a corrected Form 10AB.

Senior Advocate Akhil Sibal, appearing for Hammad Ahmed, argued that the unilateral filing of Form 10AB and appointment of the auditor endangered HLI's tax-exempt status.

Senior Advocate Sanjeev Sindhwani, appearing for Abdul Majeed and another, argued that the dispute concerned properties covered by the family settlement and was already pending before the arbitrator.

The Court found that the property dispute was “central to the entire gamut”. While Hammad Ahmed's side claimed that the properties had already been segregated, Abdul Majeed's side disputed whether the segregation had been completed through the requisite documentation.

It held that the objections to Form 10AB could not be separated from the underlying property dispute pending before the arbitral tribunal. Therefore, the Bench declined to separately decide the Form 10AB controversy or appoint an independent statutory auditor.

Accordingly, the High Court disposed of the application and permitted Hammad Ahmed to seek appropriate directions from the arbitral tribunal. It clarified that any such application would be considered independently on its merits.

Appearances for Hammad Ahmed: Senior Advocate Akhil Sibal with Advocates Ankur Mahindro, Aslam Khan, Rohan Taneja, Mohit Dagar, Ankush Satija, Ridhie Bajaj, Creesha Shastri, Raghav Kalra, Deepak Chauhan, Jhaniak Setia and Akshit Sharma.

Appearances for Abdul Majeed and another: Senior Advocate Sanjeev Sindhwani with Advocates Shalini Kapoor, Simran Mehta, Divyanshi Saxena and Udit B.