Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(Del) 178

IN THE HIGH COURT OF DELHI AT NEW DELHI
Subramonium Prasad, J
Databit Technologies Pvt. Ltd. – Appellant
Versus
Red Fort Capital Finance Company Private Limited – Respondent
ARB. A. (COMM.) 1/2026

Advocates:
For the Appellants/Petitioners: Ram Avtar Sharma, Mohit Sharma, Dinki Arora, Bhumika, Dhanushree

Appellate courts exercise limited intervention in arbitral interim orders. Interference is restricted to instances of perversity, patent illegality, or jurisdictional error. Discretionary orders by tribunals regarding security, even when collateral exists, remain within their domain unless clearly unreasonable or inconsistent with settled legal principles.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 17 and 37(2)(b) - Interim measures - Appeal - Scope of interference - Appellate court does not act as court of first instance - Re-appreciation of evidence or substitution of discretion is impermissible - Interference is limited to cases of perversity, patent illegality, or jurisdictional infirmity. (Paras 7 and 8)

(B) Arbitration - Interim measures - Grant of Bank Guarantee - Existence of existing collateral security does not bar the grant of interim protection if it does not adequately secure the respondent's interest - Arbitral tribunal possesses the discretionary power to direct the respondent to furnish security for the amount admitted to be disbursed. (Paras 12 and 13)

Facts of the case:
The appeal challenged an arbitral order directing the provision of a bank guarantee for an amount equal to the disbursed loan facility during the pendency of arbitration proceedings. The appellants argued that the liability was already covered by existing collateral security, rendering the interim measure unnecessary.

Findings of Court:
The court found that the tribunal’s decision was based on a prima facie assessment of the contractual relationship, repayment defaults, and the nature of the existing security. The appellate jurisdiction is restricted and should not disturb the tribunal's discretionary exercise of powers unless the reasoning is manifestly illegal or arbitrary.

Issues: Whether the arbitral tribunal correctly exercised its discretion to mandate additional security despite the existence of collateral and whether the appellate court should interfere with such a discretionary order.

Ratio Decidendi: The scope of appellate oversight is confined to correcting jurisdictional errors or manifest illegality. A tribunal’s assessment of the necessity for interim security, particularly when existing security is contentious, rests on a discretionary evaluation of the balance of convenience and prima facie merits, which precludes appellate review unless shown to be perverse.

Result: Appeal dismissed.

Table of Content
1. overview of the dispute and factual trajectory. (Para 1 , 2 , 3)
2. contentions regarding adequacy of existing collateral. (Para 4)
3. assessment of the arbitrator's reasoned discretion. (Para 5 , 6 , 9 , 10 , 11 , 12)
4. scope of section 37 appellate interference. (Para 7 , 8 , 13 , 14)
5. conclusion and dismissal of the appeal. (Para 15 , 16)

JUDGMENT (ORAL)

SUBRAMONIUM PRASAD, J.

I.As. 121-22/2026 (Exemption)

Allowed, subject to all just exceptions.

ARB. A. (COMM.) 1/2026, .A. 120/2026, I.A. 123/2026

1. The present Appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Arbitration Act’) has been filed challenging the Order dated 25.09.2025, passed by the learned Sole Arbitrator in an Application filed by the Respondent herein under Section 17 of the Arbitration Act.

2. By the impugned Order, the learned Sole Arbitrator has directed the Appellants to furnish a bank guarantee of Rs.1,90,98,322/- in favour of the Respondent herein as an interim measure during the pendency of the arbitration proceedings.

3. Shorn of unnecessary details, the facts, in brief, leading to the filing of the present Appeal are as under:

a. It is stated that in the year 2022, the Appellants approached the Respondent herein, which is a registered Non-Banking Financial Company, seeking a financial facility of Rs.2,40,00,000/- for the purpose of purchasing equipment and meeting working capital requirements.

b. On 05.09.2022, a Term Sheet was executed between the parties, pursuant to which the Respondent agreed in principle to extend the facility and initiated steps for creation of security, including mortgage of an immovable property offered as collateral.

c. It is stated that on 19.10.2022, a Facility Agreement was executed between the Respondent and Appellant No.1, wherein the tenure of loan was decided to be 38 months. It is stated that on the same date, an unattested Deed of Hypothecation was executed, whereby certain movable assets of Appellant No.1 were hypothecated in favour of the Respondent. It is stated that Appellant Nos. 2 and 3, along with another guarantor, executed personal guarantees securing the loan.

d. It is stated that although the sanctioned loan amount was Rs.2,40,00,000/-, the Respondent disbursed only a sum of Rs.1,90,98,322/-, to the Appellant No.1 after deducting amounts towards fees, reserves, stamp duty, legal charges, and other expenses. However, interest was calculated by the Respondent on the entire sanctioned amount, i.e. Rs.2,40,00,000/-.

e. It is stated that during the subsistence of the loan, disputes arose between the parties with regard to repayment obligations, calculation of interest, and other charges. According to the Appellants, a total amount of Rs.45,38,663/- was paid towards EMIs, interest, and other charges, and certain EMIs were deducted in advance at the time of disbursement.

f. It is stated that on 20.06.2024, the Respondent herein issued a Notice under Section 21 of the Arbitration Act invoking the arbitration clause contained in the Facility Agreement. The Appellants replied to the said notice on 11.07.2024, disputing the claims raised by the Respondent.

g. It is stated that on 03.10.2024, the Respondent issued a demand notice under Section 13(2) of the SARFAESI Act, 2002 , claiming an outstanding amount of Rs.3,78,41,088/- as on 01.10.2024 and referring to the mortgaged immovable property forming part of the security. The Appellants responded to the said notice, disputing the demand and expressing willingness to explore an amicable resolution.

h. Thereafter, on 24.03.2025, the Respondent initiated arbitration proceedings before the Delhi International Arbitration Centre by filing a claim petition under Section 23 of the Arbitration and Conciliation Act, 1996. It is stated that on the same date, the Respondent also filed an application under Section 17 of the Act, seeking interim measures, including a direction to the Appellants to secu

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2026 Supreme(Online)(Del) 178

IN THE HIGH COURT OF DELHI AT NEW DELHISubramonium Prasad, JDatabit Technologies Pvt. Ltd. – AppellantVersusRed Fort Capital Finance Company Private Limited – RespondentARB. A. (COMM.) 1/2026

IN THE HIGH COURT OF DELHI AT NEW DELHI
Subramonium Prasad, J
Databit Technologies Pvt. Ltd. – Appellant
Versus
Red Fort Capital Finance Company Private Limited – Respondent
ARB. A. (COMM.) 1/2026