Section 9 arbitration petition maintainable despite prior appointment of arbitrator where tribunal becomes non-functional: Bombay high court

Bombay High Court Rules: Section 9 Arbitration Petitions Maintainable Even if Tribunal Becomes Non-Functional Before Arbitrator Appointment.

Case Title: Seetaram Shiva Shetty v. Sudhir Vasu Shetty and Ors.

Case Number: Comm. Arbitration Petition (L) No. 24746 of 2026

Citation: (2026) ibclaw.in 4738 HC

Coram: Justice Amit Borkar

The Bombay High Court has held that a petition under Section 9 of the Arbitration and Conciliation Act, 1996 remains maintainable even after an Arbitral Tribunal has been constituted, where the Tribunal subsequently becomes non-functional and the remedy under Section 17 ceases to be efficacious.

Justice Amit Borkar was dealing with a petition filed by a partner of Vrintham Estates LLP, who alleged that the other partner had gradually excluded him from the management of a jointly developed villa property in Chikkamagaluru, Karnataka, diverted booking revenues to a personal bank account, and set up a rival company to run the property. The petitioner had earlier obtained ad-interim relief under Section 9, following which the Court appointed a Sole Arbitrator and converted the petition into an application under Section 17. The Arbitrator subsequently expressed his inability to continue with the arbitration, prompting the petitioner to approach the Court afresh under Section 9.

Maintainability Under Section 9(3)

The respondents opposed the petition on the ground that, once an Arbitrator had been appointed, the only remedy available to the petitioner was under Section 17, in view of Section 9(3) of the Act. Relying on the Supreme Court's decision in Arcelormittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., the Court noted that once an Arbitral Tribunal is constituted, the Court would ordinarily not entertain applications for interim relief unless there existed an impediment in approaching the Tribunal, or the relief sought could not be expeditiously obtained from it. The Court held that the Arbitrator's communication expressing inability to continue constituted such an impediment, leaving no functioning forum before which the petitioner could seek relief under Section 17.

The Court also relied on the Delhi High Court's ruling in Energo Engineering Projects Ltd. v. TRF Ltd., which held that even temporary non-functionality of an Arbitral Tribunal entitles a party to seek urgent interim relief under Section 9. The objection raised under Section 9(3) was accordingly rejected and the petition was held maintainable.

Non-Signatories To The Arbitration Clause

On the question of non-signatories, the Court examined the doctrine of veritable parties as explained by the Supreme Court in KKH Finvest Pvt. Ltd. v. Ashiesh Shukla, which permits a non-signatory to be treated as a party to an arbitration agreement where the person's conduct and participation demonstrate involvement in the underlying transaction. The Court held that mere involvement in the affairs of the property or business was not, by itself, sufficient to conclude that the non-signatory respondents had agreed to be bound by the arbitration clause, and that this question would require examination on evidence in the arbitral proceedings.

Interim Reliefs Granted

On merits, the Court noted that booking amounts for the property were being routed to the personal bank account of one of the respondents, and that a homestay licence in her individual name had been obtained shortly after the arbitration notice was issued. While declining to record any final finding on siphoning of funds, the Court found that the material disclosed a genuine issue warranting interim protection.

The Court declined to grant reliefs that would amount to handing over exclusive management or control of the property to the petitioner, holding that such reliefs were final in nature and could not be granted at the interim stage. Instead, it directed that the respondents may continue the day-to-day operations of the property, but restrained them from creating third-party rights over the property, diverting booking revenues to any new account, or taking unilateral decisions materially affecting the dispute. The respondents were directed to maintain complete accounts of all receipts and expenditure and furnish monthly particulars to the petitioner, who was also permitted access to ordinary business records.

The arrangement was directed to operate only until a newly constituted Arbitral Tribunal passes appropriate orders under Section 17, with the Tribunal being at liberty to decide the interim application uninfluenced by the prima facie observations made by the Court. The petition was accordingly partly allowed, with no order as to costs.