Andhra Pradesh High Court – Amravati
Between vs And on 27 February, 2026
HIGH COURT OF ANDHRA PRADESH
****
COMMERCIAL COURT APPEAL No. 21 of 2025
Between:
M/s. JPR Projects, Gajuwaka,
Visakhapatnam rep. through its
Partners Mr. Manthena Vivek Varma and another
.....APPELLANT
AND
Axis Bank, MVP Colony Branch,
Rep.by its Authorized Officer,
and 2 others
.....RESPONDENTS
DATE OF JUDGMENT RESERVED : 11.12.2025
DATE OF JUDGMENT PRONOUNCED : 27.02.2026
DATE OF JUDGMENT UPLOADED : 27.02.2026
SUBMITTED FOR APPROVAL:
THE HON'BLE SRI JUSTICE RAVI NATH TILHARI
&
THE HON'BLE SRI JUSTICE MAHESWARA RAO KUNCHEAM
1. Whether Reporters of Local newspapers may Yes/No
be allowed to see the Judgments?
2. Whether the copies of judgment may be Yes/No
marked to Law Reporters/Journals
3. Whether Your Lordships wish to see the fair Yes/No
copy of the Judgment?
_______________________
RAVI NATH TILHARI, J
____________________________
MAHESWARA RAO KUNCHEAM, J
RNT, J & MRK, J
2 COMCA No.21 of 2025
* THE HON'BLE SRI JUSTICE RAVI NATH TILHARI
&
THE HON'BLE SRI JUSTICE MAHESWARA RAO KUNCHEAM
+ COMMERCIAL COURT APPEAL No. 21 of 2025
% 27.02.2026
Between:
M/s. JPR Projects, Gajuwaka,
Visakhapatnam rep. through its
Partners Mr. Manthena Vivek Varma and another
.....APPELLANT
AND
Axis Bank, MVP Colony Branch,
Rep.by its Authorized Officer,
and 2 others
.....RESPONDENTS
! Counsel for the Appellant : Sri Patanjali Pamidighantram
Counsel for the Respondents : Sri V. V. N. Narasimham
< Gist :
> Head Note:
? Cases Referred:
1. 2016 SCC OnLine Cal 6251
2. 2004 SCC OnLine All 175
3. (2017) 8 SCC 603
4. 2024 SCC OnLine SC 2632
5. (1999) 2 SCC 479
6. 2017 SCC OnLine Hyd 469
7. ILR 2017 Kar 3016
RNT, J & MRK, J
3 COMCA No.21 of 2025
THE HON'BLE SRI JUSTICE RAVI NATH TILHARI
&
THE HON'BL SRI JUSTICE MAHESWARA RAO KUNCHEAM
COMMERCIAL COURT APPEAL No. 21 of 2025
JUDGMENT:
(per Hon’ble Sri Justice Ravi Nath Tilhari)
Heard Sri Patanjali Pamidighantam, learned counsel for the appellant and
Sri V. V.N. Narasimham, learned counsel for the respondents.
2. The present appeal has been filed under Section 13 (1) of the
Commercial Courts Act, 2015 (in short ‘Act 2015’) read with Section 37 (1) (c)
of the Arbitration and Conciliation Act, 1996 (in short ‘Act 1996’), challenging
the Judgment/ Order, dated 31.07.2025 passed in CAOP No.49 of 2024 (in
short ‘CAOP’), by the Special Judge For Trial and Disposal of Commercial
Disputes, Visakhapatnam (in short ‘Special Judge’).
3. The appellants are the petitioners in CAOP No.49 of 2024. It filed the
application under Section 9 of the Act 1996 seeking injunction restraining the
respondents and those acting on their instructions from continuing the freeze
on current account No.915020032315999 with Axis Bank, M.V.P.Colony Branch,
Visakhapatnam, belonging to the petitioner firm and to direct the
respondent/Axis Bank to restore the operational access to the petitioner by de-
freezing the said current bank account.
4. The learned Special Judge, by the impugned Order dated 31.07.2025,
allowed the application, partly, with costs and freezing of the bank account with
the Axis Bank was revoked only for the limited purpose of paying taxes and
statutory dues to the Central Government, the State Government and the local
RNT, J & MRK, J
4 COMCA No.21 of 2025
bodies. The learned Special Judge, however, directed that no payment shall be
made to the partners of the firm in their individual capacity, vendors, third
parties. It also provided that the bank account shall be operated as per terms
of Clause 14 of the reconstituted partnership deed dated 10.02.2024 and that
the said order shall remain in force for not more than 90 days from the date of
the order. The learned Special Judge further provided that on the Arbitral
Tribunal being constituted, the further continuation, modification or variation of
the order shall be dealt by the Arbitral Tribunal on the application filed by either
party.
A. Facts:
I. Petitioner/Appellants’ case:
5. The brief facts of the case are that, M/s.JPR Projects, a partnership
firm was constituted in the year 2015 and is involved in construction related
activities. The petitioners and the respondents 2 and 3 are its partners. Late
Sri Janga Punna Reddy, the husband of the 2nd respondent and father of the 3rd
respondent was the Managing Partner. The petitioner’s case is that Sri Janga
Punna Reddy and the 2nd respondent withdrew a sum of Rs.1,59,28,200/- in
excess of the amounts withdrawn by the partners until 2022. Late Janga Punna
Reddy withdrew an additional amount of Rs.92,00,000/- and further funds
amounting to Rs.1,22,00,000/- along with the 2nd respondent without proper
documentation. Late Janga Punna Reddy suffered from ill-health resulting in
unsuccessful attempts at comprehensive settlement of accounts. Sufficient
funds had been diverted for purchase of fixed assets in his name and in the
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5 COMCA No.21 of 2025
name of 2nd respondent as a result of which the liquid capital required for
ongoing projects was depleted. In order to maintain operational continuity, a
Memorandum of Understanding was executed on 31.10.2023 whereunder late
Sri Janga Punna Reddy and his wife the 2nd respondent agreed to retire from
the firm and the petitioners were to continue the firm’s operations. Sri Janga
Punna Reddy expired on 13.12.2023 and the respondents 2 and 3 made fresh
demands and raised disputes. The firm was under liabilities to third parties to a
tune of Rs.1,45,27,439/-.
6. The petitioner’s bank account was frozen on 18.12.2023. A fresh
Memorandum of Understanding was signed under which the respondents were
to receive Rs.1,30,00,000/- along with other movable assets in exchange for
revoking the freeze on the bank account. The partnership was again
reconstituted on 10.02.2024 after the said Memorandum of Understanding was
executed and the petitioners were conferred with the exclusive authority in
respect of finances of the firm and the bank accounts. The role of the
respondents No.2 and 3 was confined only to specific percentage of shares
without any remuneration or rights of management. The petitioner firm owed
approximately Rs.6,20,00,000/- as on March, 2023 excluding the statutory dues,
such as GST, TDS, PF and ESI. The petitioners had spent about
Rs.1,45,27,439/- of their personal funds towards discharging liability of the firm
to its sub-contractors and suppliers. The firm’s current account, which was
initially frozen in December, 2023 was revoked in January/February, 2024.
RNT, J & MRK, J
6 COMCA No.21 of 2025
7. However, the 1st respondent, the Axis Bank again resorted to freezing
of the account on 24.05.2024 basing on unilateral instructions from the 2nd and
3rd respondents, as a result of which the firm’s financial activities were
adversely affected. The appellants/petitioners’ further case is that in May, 2024
they withdrew a sum of Rs.1,55,00,000/- from the firm’s account. Their
request to the bank to revoke the freeze imposed on the account even after
furnishing copies of reconstituted partnership deed and other supporting
documents did not yield any result, and an amount of Rs.2,51,64,791.58 ps was
lying in the firm’s bank account and its financial operations were adversely
affected. The partners also furnished particulars of the payments made on
behalf of the firm from their personal resources and the petitioners also
furnished the particulars of the sums and amounts required to meet statutory
as well as vendor obligations.
8. The appellants/petitioners filed application under Section 9 of the Act
1996, also submitting that if the statutory dues were not paid promptly, the
same would attract penal consequences and the ongoing projects of the firm
were to be jeopardized and the livelihood of its employees would be in danger
on account of the freezing of bank account. They stated that the petitioners
had prima facie case as well as balance of convenience in their favour and
unless the freezing of the bank account was lifted, they will suffer irreparable
loss. The petitioners also stated that they intend to institute the arbitration
proceedings and sought for the reliefs stated in the petition under Section 9 of
the Act 1996, prior to the commencement of the arbitration proceedings.
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7 COMCA No.21 of 2025
II. Respondents’ case:
9. The 1st respondent bank did not file any counter and it was set ex
parte on 21.01.2025.
10. The 2nd respondent filed counter, denying the petition averments.
The 3rd respondent filed a Memo adopting the counter of the 2nd respondent.
11. The stand of the respondents No.2 and 3 in their counter was that
late Sri Janga Punna Reddy was diagnosed with Pancreatic Cancer and had
withdrawn Rs.80,000/- from its capital account during 2023-24 with the consent
of the petitioners in order to meet his medical expenditure. The 2nd respondent
also withdrew Rs.30,00,000/- from her capital account for further requirements
with the consent of the petitioners. According to the respondents No.2 and 3,
late Sri Janga Punna Reddy deposited Rs.53,00,000/- back into the capital
account prior to his death. They had withdrawn some further amount which
was said to be towards meeting the medical expenditure with the consent of
the partners of the petitioner firm. It was the further case of the respondents
No.2 and 3 that the petitioners suppressed the fact that they had also
withdrawn Rs.74,50,000/- from their capital account.
12. With respect to the Memorandum of Understanding, their stand was
that, that was not a valid document as their signatures were obtained when
they were not in a proper state of mind, as late Janga Punna Reddy was
suffering from chronic pancreatitis and was treated as an inpatient in different
hospitals during the period from 19.06.2023 to 18.07.2023 and after the
surgery, he was also treated as an inpatient from 28.10.2023 to 03.11.2023 in
RNT, J & MRK, J
8 COMCA No.21 of 2025
another hospital at Visakhapatnam. During that period, the petitioners brought
a readymade Memorandum of Understanding on 31.10.2023 to the hospital and
on the refusal of the respondents, they were met with threats and consequently
as a result of threats and coercion they signed the Memorandum of
Understanding and also allowed the petitioners to obtain finger prints of late
Janga Punna Reddy on the Memorandum of Understanding. The further case
of the respondents 2 and 3 is that two cheques each for Rs.65,00,000/- were
issued by the petitioners and another cheque for a sum of Rs.95,22,999/- was
issued in lieu of the value of the movable assets as per the terms of the
Memorandum of Understanding, but the petitioners issued ‘stop payment’
instructions in respect of those cheques and so the petitioners themselves did
not act upon the terms of the Memorandum of Understanding, and as such, the
respondents No.2 and 3 cannot be said to have retired from the business of the
firm. They also stated that the reconstituted partnership deed dated
10.02.2024 was not valid and the Memorandum of Understanding dated
10.02.2024 was also not valid. Those were obtained by fraud played on the
respondents while denying that the petitioners infused their own personal funds
to a tune of Rs.1,45,27,439/- into the firm.
13. The 2nd and 3rd respondents further submitted that the initial freezing
of the account of the firm was in December 2023 by the bank which was on
account of death of Janga Punna Reddy who was the managing partner of the
firm. That was revoked by the bank itself. The petitioners unilaterally
transferred Rs.1,55,00,000/- to their personal accounts and after the said fact
RNT, J & MRK, J
9 COMCA No.21 of 2025
came to the knowledge of the respondents, they instructed the bank to freeze
the account on 24.05.2024 in order to prevent further unlawful transactions. It
was their further case that the 2nd petitioner is the managing partner of
M/s.V.V.Constructions (another company) and fabricated the document
showing that the firm is due a sum of Rs.55,05,230/- to M/s.V.V.Constructions
only to divert the funds of the firm to such other firm/company. They pleaded
that the petitioners had no case for grant of interim measure under Section 9 of
the Act 1996.
B. Judgment of the learned Special Judge:
14. The learned Special Judge framed the following points for
determination:
“1. Whether the freezing of bank account No.915020032315999 with
Axis Bank, M.V.P.Colony Branch, Visakhapatnam belonging to the partnership
firm can be revoked?
2. To what relief?”
15. On point No.1, the learned Special Judge recorded the finding, that it
would be in the interests of both the parties that the freezing of bank account
be revoked for a limited period of 90 days pending initiation of arbitration
proceedings contemplated under clause 18 of the reconstituted partnership firm
and the bank account be operated for the limited purpose of paying taxes and
other statutory liabilities payable to the Central Government, the State
Government and the local bodies by the partnership firm. It further held that
the bank account of the partnership firm with the 1st respondent bank shall be
RNT, J & MRK, J
10 COMCA No.21 of 2025
operated as per Clause 14 of the reconstituted partnership deed dated
10.02.2024 only for the mentioned purposes and no payment shall be made to
the partners or vendors or third parties from the said account.
16. On point No.2, the learned Special Judge passed the following Order:
“57. In the result, this application is allowed without costs and freezing
of bank account No.915020032315999 with respondent No.1/Axis Bank,
M.V.P.Colony Branch, Visakhapatnam is revoked only for the limited purpose
of paying taxes and statutory dues to Central Government, State Government
and local bodies. No payment shall be made to the partners of the firm in their
individual capacity, vendors, third parties. The bank account shall be operated
as per the terms of Clause 14 of the reconstituted partnership deed dated
10.02.2024. This order shall remain in force for not more than 90 days from the
date of order. On the Learned Arbitral Tribunal being constituted, the further
continuation, modification or variation of this Order shall be dealt by Learned
Arbitral Tribunal on application filed by either party.”
C. Submissions of the learned counsels:
I. For the appellants:
17. Learned counsel for the appellants submitted that the learned Special
Judge should have allowed the application in toto, in view of the
observations/findings of the learned Special Judge as in para-52 in the Order
that “the petitioners have shown that the freezing of the bank account was
done without consulting them”. He further submitted that the respondents
No.2 and 3 had no right to instruct the 1st respondent bank to freeze firm’s
account on 24.05.2024 affecting the finances of the firm. They had no legal
right to do so in terms of Memorandum of Understanding dated 10.02.2024.
RNT, J & MRK, J
11 COMCA No.21 of 2025
18. Learned counsel for the appellants further submitted that the learned
Special Judge failed to see that the action of the respondents No.2 and 3 to
acquire assets in their personal name with the capital of the firm was contrary
to Sections 9 and 12 of the Partnership Act.
19. Learned counsel for the appellants submitted that respondents No.2
and 3 without following the procedure, according to Memorandum of
Understanding dated 31.10.2023 arbitrarily initiated the action of freezing the
account of the petitioners. He submitted that the learned Special Judge ought
to have allowed the application under Section 9 of the Act 1996 in toto to
complete defreeze the bank account of the firm and not only for the limited
purposes. The action of freezing the bank account is beyond the contractual
and statutory rights and the said action of the bank cannot be sustained. So,
the impugned Order is unsustainable in the eyes of law.
20. Learned counsel for the appellants further submitted that the
appellants have initiated the arbitration proceedings by issuing notice under
Section 21 of the Act 1996, dated 07.11.2025 sent to the respondents No.2 and
3, proposing to appoint a sole arbitrator to adjudicate the dispute that arose
between the parties. Copy of the legal notice dated 07.11.2025 along with the
copy of postal receipt has been filed along with memo dated 26.11.2025.
21. Learned counsel for the appellants placed reliance on the following
judgments in support of his contentions:
1) Smt. Shanti Dey @ Santi Dey v. Sri Suvodeep Saha1
1
2016 SCC OnLine Cal 6251
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12 COMCA No.21 of 2025
3) Navnirman Development Consultants (I) Pvt. Ltd.3
4) Punjab State Civil Supplies Corporation Limited v. M/s.
Sanman Rice Mills4
II. For the Respondents:
22. Respondents No.2 and 3 have filed counter affidavit in the present
appeal, taking the same stand as was taken before the learned Special Judge.
23. Learned counsel for the respondents 1 & 2 submitted that there is no
illegality in the Order of the learned Special Judge. They have taken the stand
that the reconstituted partnership deed dated 10.02.2024 was executed, as per
the own case of the petitioners in consequence to the fulfilling of the terms and
conditions of Memorandums of Understanding dated 31.03.2023 and dated
10.02.2024, but the petitioners themselves failed to comply with the terms and
conditions thereof and so the reconstituted partnership deed dated 10.02.2024
though not valid, but still would not have any sanctity and it did not confer any
managerial powers on the petitioners and based thereon the petitioners will not
get any right and they cannot operate the firm’s bank account and represent
the firm. There was no prime facie case in favour of the petitioners so as to lift
the freezing of the firm’s bank account. The petitioners already
misappropriated a substantial sum of Rs.1,55,00,000/- for their personal benefit
and consequently, there was no balance of convenience in their favour. The
Order did not call for any interference otherwise the petitioners would divert the
2
2004 SCC OnLine All 175
3
(2017) 8 SCC 603
4
2024 SCC OnLine SC 2632
RNT, J & MRK, J
13 COMCA No.21 of 2025
entire amount and nothing would remain in the account to the great prejudice
of the respondents 1 and 2.
III. Reply by Appellants’ Counsel:
24. In reply, learned counsel for the petitioners submitted that if it is the
case of the respondents No.2 and 3 that the petitioners misappropriated the
funds of the firm by diverting the same to M/s.V.V.Constructions, then the said
respondents ought to have taken recourse to some legal provisions for recovery
of that amount or to such other reliefs, but no steps have been taken by the
respondents and so the said allegations of misappropriation of funds is
unfounded and unsustainable.
D. Points for Determination:
25. The following points arise for our consideration and determination:
1) Whether the impugned Order dated 31.07.2025 passed by
the learned Special Judge, deserves to be interfered?
2) Whether the appellants’ application under Section 9 of the
Arbitration and Conciliation Act 1996 deserves to be
allowed as a whole?”
E. Consideration/Analysis:
26. We have considered the aforesaid submissions of the learned
counsels and perused the material on record.
27. Both the points are connected and as taken together.
28. Section 9 of the Arbitration and Conciliation Act, 1996 reads as under:
“Section 9: Interim measures, etc., by Court.
RNT, J & MRK, J
14 COMCA No.21 of 2025(1)A party may, before or during arbitral proceedings or at any time after the
making of the arbitral award but before it is enforced in accordance with section
36, apply to a court–
(i) for the appointment of a guardian for a minor or person of unsound mind
for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following
matters, namely:–
(a) the preservation, interim custody or sale of any goods which are the
subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which
is the subject-matter of the dispute in arbitration, or as to which any question
may arise therein and authorising for any of the aforesaid purposes any person
to enter upon any land or building in the possession of any party, or authorising
any samples to be taken or any observation to be made, or experiment to be
tried, which may be necessary or expedient for the purpose of obtaining full
information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to
be just and convenient, and the Court shall have the same power for making
orders as it has for the purpose of, and in relation to, any proceedings before it.
(2) Where, before the commencement of the arbitral proceedings, a Court
passes an order for any interim measure of protection under sub-section (1), the
arbitral proceedings shall be commenced within a period of ninety days from
the date of such order or within such further time as the Court may determine.
(3) Once the arbitral tribunal has been constituted, the Court shall not
entertain an application under sub-section (1), unless the Court finds that
circumstances exist which may not render the remedy provided under section
17 efficacious.
29. It is evident from Section 9 of the Act 1996 that a party may, before
or during arbitral proceedings or at any time after the making of the arbitral
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15 COMCA No.21 of 2025
award, but before it is enforced in accordance with section 36, apply to a Court,
inter alia, for grant of the interim measure as mentioned therein in clauses (ii)
(a) to (e). Sub-section 2 also provides that before the commencement of the
arbitral proceedings where a Court passes the Order for any interim measure of
protection under sub-section (1), the arbitral proceedings shall be commenced
within a period of 90 days from the date of such order or within such further
time as the Court may determine. So, under sub-section (2) the arbitral
proceedings shall be commenced within a period of 90 days from the date of
order of interim measure of protection or within such further time as the Court
may determine.
30. Learned counsel for the appellants placing reliance on Modern
Metal Industries (supra) judgment contended that the firm’s bank account
should have been permitted to be operated for business purposes as well
otherwise a grave situation would arise for continuance of the firm business.
Learned counsel for the appellant submitted that the learned Special Judge has
taken into consideration the aforesaid judgment of the Allahabad High Court
and referring the same, it also recorded in para-51 of the impugned judgment
that before operation of the bank account can be stopped the following
conditions must be fulfilled referring to para-68 of the judgment in Modern
Metal Industries (supra) which reads as under:
“68. Thus the law is well-settled that before the majority can take a decision
binding on the minority certain conditions have to be fulfilled which are as
follows:
(1) The minority must be consulted.
(2) The majority must act in good faith
RNT, J & MRK, J
16 COMCA No.21 of 2025(3) The majority must act for the welfare of the firm and not for a purpose
which is detrimental to the welfare of the firm.”
31. In Modern Metal Industries (supra), the application of the
appellants therein under Section 9 of the Arbitration and Conciliation Act, 1996
was rejected. The appeal was allowed by the Division Bench of the Allahabad
High Court and the second appellant therein was protected to operate the firm’s
bank account. The Allahabad High Court opined that the sole bank account of
the firm was the very lifeline of the firm and unless the moneys deposited
therein were allowed to be withdrawn, at least, for business expenditure
purposes, it would be impossible to run and manage the business of the firm
and to keep its contractual commitments with the customers within the
stipulated periods of time. Consequently, considering on the uncontroverted
facts of the case, that a very grave and sudden situation had arisen when the
business of the firm itself was facing imminent danger of being paralyzed, it
was observed and held that an interim injunction under Section 9 of the Act
should be granted for protection of the firm from severe crises and imminent
danger of its business coming to a grinding halt resulting in huge and
irreparable loss.
32. From the aforesaid judgment, in paragraphs 51 and 52 of Modern
Metal Industries (supra), which are also reproduced as under, it becomes
evident that in that case there was a grave and sudden situation for imminent
danger of the firm being paralyzed on the uncontroverted facts of that case.
“51. In our opinion the Court below has failed to appreciate that the sole
bank account of the firm is the very lifeline of the firm and unless the moneys
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17 COMCA No.21 of 2025deposited therein are allowed to be withdrawn, at least, for business expenditure
purposes, it would be impossible to run and manage the business of the firm
and to keep its contractual commitments with the customers within the
stipulated periods of time.
52. On the uncontroverted facts of the case, a very grave and
sudden situation has arisen when the business of the firm itself is facing
imminent danger of being paralysed and, hence we are of the opinion that an
interim injunction under S. 9 of the Act should be granted for protection of the
firm from severe crises and imminent danger of its business coming to a
grinding halt resulting in huge and irreparable loss.”
33. In the present case, the facts are controverted with respect to the
situation of the business of the firm. It cannot be said on uncontroverted facts
that the firm is facing imminent danger as were the uncontroverted facts in
Modern Metal Industries (supra). On such aspect facts are in contraverse in
the present case.
34. Learned counsel for the appellant submitted that the learned Special
Judge thereafter in para-52 of its judgment recorded that the petitioners have
shown that the freezing of the bank account was done without consulting them.
So, the learned Special Judge being satisfied that all the conditions as laid down
in para-68 of the Modern Metal Industries (supra) were not satisfied and as
the freezing was without consulting the petitioners, the firm should have been
permitted to meet its statutory fiscal responsibilities, but in not allowing the
same, except for the limited purposes, even after recording that the petitioners
had prima facie shown that the freezing of bank account was detrimental to the
function of the partnership firm, and passing the Order as stands, the same
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18 COMCA No.21 of 2025
cannot be sustained to the extent of non-grant of the rest of the petitioners’
prayers.
35. We are of the view that what the learned Special Judge recorded
being detrimental to the functioning of the partnership firm was for the
discharge of its statutory duties and statutory fiscal responsibilities. So, the
learned Special Judge allowed the application to that extent and revoking the
order of freezing of the account of the bank only for the limited purpose. But,
so far as to lift the freezing of the bank account for other purposes is concerned,
the facts not being uncontroverted and there being controversy with respect to
the Memorandum of Understandings, the reconstituted partnership deed, the
petitioners themselves not following the conditions and the terms of the
reconstituted partnership deed and Memorandum of Understandings and
consequent thereto, the respondents No.2 & 3 ceasing to be the partners or not,
as also misappropriation of the funds and transfer of funds to other
company/firm of the petitioners, and all those questions which required
adjudication before the Arbitral Tribunal in arbitral proceedings if so raised, the
learned Special Judge kept pending the payments to third parties, and revoked
freezing only for payment of statutory dues to the Central Government, State
Government and local bodies. Consequentially, we do not find any fault in the
Order of the learned Special Judge calling for our interference on the said count.
36. Further, from the admitted facts on record it is evident that within a
period of 90 days the arbitral proceedings were not commenced in terms of
Sub-section (2) of Section 9 of the Act 1996. Notice under Section 21, sent to
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19 COMCA No.21 of 2025
the respondents, copy of which has been filed along with Memo, is dated
07.11.2025 which is after the expiry of the period of 90 days from the date of
the impugned Order. Sub-section (2) of Section 9 of the Act 1996 specifically
provides for the time to commence the arbitral proceedings. The statutory
period is 90 days from the date of the Order of interim measure of protection or
within such further time as the Court may provide. The Order in the present
case is dated 31.07.2025. The Special Judge also provided 90 day from the
date of the Order for commencement of the arbitral proceedings. So, within 90
days from 31.07.2025 the arbitral proceedings must have been commenced.
37. The commencement of the arbitral proceedings is by moving an
application under Section 21 of the Act 1996, which reads as under:
“Section 21: Commencement of arbitral proceedings:- Unless otherwise
agreed by the parties, the arbitral proceedings in respect of a particular dispute
commence on the date on which a request for that dispute to be referred to
arbitration is received by the respondent.”
38. In Sundaram Finance Ltd. v. NEPC India Ltd.5 the Hon’ble Apex
Court held that the arbitral proceedings were commenced on the date on whilch
the request to refer the dispute to arbitration is received by the respondent. It
is relevant to reproduce paragraphs 11 and 13 as under:
“11. The reading of Section 21 clearly shows that the arbitral proceedings
commence on the date on which a request for a dispute to be referred to
arbitration is received by the respondent. It is in this context that we have to
examine and interpret the expression “before or during arbitral proceedings”
occurring in Section 9 of the 1996 Act. We may here observe that though
5
(1999) 2 SCC 479
RNT, J & MRK, J
20 COMCA No.21 of 2025
Section 17 gives the Arbitral Tribunal the power to pass orders, the same cannot
be enforced as orders of a court. It is for this reason that Section 9 admittedly
gives the court power to pass interim orders during the arbitration proceedings.
13. Under the 1996 Act, the court can pass interim orders under Section 9.
Arbitral proceedings, as we have seen, commence only when the request to
refer the dispute is received by the respondent as per Section 21 of the Act. The
material words occurring in Section 9 are “before or during the arbitral
proceedings”. This clearly contemplates two stages when the court can pass
interim orders, i.e., during the arbitral proceedings or before the arbitral
proceedings. There is no reason as to why Section 9 of the 1996 Act should not
be literally construed. Meaning has to be given to the word “before” occurring
in the said section. The only interpretation that can be given is that the court can
pass interim orders before the commencement of arbitral proceedings. Any
other interpretation, like the one given by the High Court, will have the effect of
rendering the word “before” in Section 9 as redundant. This is clearly not
permissible. Not only does the language warrants such an interpretation but it
was necessary to have such a provision in the interest of justice. But for such a
provision, no party would have a right to apply for interim measure before
notice under Section 21 is received by the respondent. It is not unknown when
it becomes difficult to serve the respondents. It was, therefore, necessary that
provision was made in the Act which could enable a party to get interim relief
urgently in order to protect its interest. Reading the section as a whole it
appears to us that the court has jurisdiction to entertain an application under
Section 9 either before arbitral proceedings or during arbitral proceedings or
after the making of the arbitral award but before it is enforced in accordance
with Section 36 of the Act.”
39. In Velugubanti Hari Babu v. Parvathini Narasimha Rao6 the
High Court of Hyderabad at Hyderabad, held that the phrase ‘arbitral
proceedings shall be commenced’ in sub-section (2) of Section 9 of the Act shall
6
2017 SCC OnLine Hyd 469
RNT, J & MRK, J
21 COMCA No.21 of 2025
be understood in the light of Section 21 of the Act, and on a true understanding
of the said provision, the arbitral proceedings would commence the moment the
respondent receive the request for the dispute to be referred to arbitration.
40. The request application for appointment of the Arbitrator in this case
under Section 21 of the Act 1996 is dated 07.11.2025, i.e., beyond the
statutory period of 90 days. So, the arbitral proceedings have not been
commenced within the statutory period under Section 9 (2) of the Act 1996.
41. In Smt. Shanti Dey @ Santi Dey (supra), upon which the learned
counsel for the petitioners placed reliance, the appeal was filed before the
Calcutta High Court against the Order passed under Section 9 of the Act 1996
whereby the learned Special Judge refused the prayer for extension of the
interim order on the ground of non-compliance of Section 11 of the 1996 Act.
The learned Special Judge, in the said case, had refused the extension on the
ground that the arbitral proceedings should have been commenced within the
period of 90 days. The Division Bench of the Calcutta High Court observed that
Section 9 (2) was amended. The arbitral proceedings should have been
commenced within a period of 90 days or within such further time as the Court
may determine. The use of the words ” or within such further time as the
Court may determine” makes it patently clear that the time stipulation of 90
days is directory and the Court might extend the time for commencement of
the arbitral proceedings. Moreover, there is no penalty prescribed in 1996 Act
as amended by Arbitration and Conciliation (Amendment) Act of 2015 for
default in commencement of arbitral proceedings within 90 days. In the said
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22 COMCA No.21 of 2025
case, the learned Special Judge had rejected the extension without considering
the question of extending the time. The order was set aside with the direction
to the trial Court to consider the prayer for interim relief afresh and till then the
interim direction was issued to maintain status quo of the schedule property as
also the bank account standing in the name of the partnership firm.
42. The aforesaid judgment is of no help to the appellants.
43. Here, any application seeking extension of time for commencement
of the arbitral proceedings, has not been filed before the learned Special Judge.
44. In the present appeal also there is no application seeking extension
of time for commencement of the arbitral proceedings beyond the statutory
period of 90 days.
45. We are not observing that without any such application as aforesaid,
the arbitral proceedings cannot be commenced. Those can be commenced at
any time. But, in the absence of any such application the question of the Court
‘granting such further time for commencement of the arbitral proceedings
would not arise and so also the question of extension of the interim measure as
granted by the Special Judge, beyond the period of 90 days does not arise.
46. The learned counsel for the petitioners placed reliance in
Navnirman Development Consultants (I) Pvt. Ltd. (supra) to contend
that this Court can extend the time by invoking the powers as under the
provisions of the Code of Civil Procedure. He submitted that an appeal is
continuation of suit. So, the present appellate proceedings under Section 37 of
RNT, J & MRK, J
23 COMCA No.21 of 2025
the Act 1996 are also continuation of the original proceedings under Section 9
of the Act 1996.
47. Learned counsel for the appellant submitted that in Navnirman
Development Consultants (I) Pvt. Ltd. (supra), the High Court observed
that in such a situation as therein, Order 41 Rule 17 CPC got attracted, and
therefore, the High Court should have taken recourse to the powers under
Order 41 Rule 17 CPC for passing appropriate orders and it was not empowered
to dismiss the appeal on merits. In the event of dismissal of the appeal under
Order 41 Rule 17 CPC, the appellants therein should have taken recourse to the
remedy available under Order 41 Rule 19 CPC.
48. Based on the aforesaid observations in Navnirman Development
Consultants (I) Pvt. Ltd. (supra), the learned counsel for the appellant
submitted that the provisions of the Code of Civil Procedure can be made
applicable in an appeal under the Arbitration Act under Section 37 as well. He
submitted that the Hon’ble Apex Court has referred to the provisions of Order
41 Rules 17 and 19 CPC. Consequently, the interim measure under the
impugned order as granted by the learned Special Judge can be extended by
this Court, in the exercise of the appellate powers.
49. In the aforesaid case, the award of the arbitral tribunal was
challenged under Section 34 which was allowed and challenging the same, the
appeal was filed under Section 37 of the Act 1996 before the High Court. The
High Court dismissed the appeal giving liberty to file review petition, and on
dismissal of the review petition the appellants’ approached the Hon’ble Apex
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24 COMCA No.21 of 2025
Court. The appeal was allowed on the ground that the High Court while
dismissing the appeal did not set out even the factual controversy properly
much less in detail nor dealt with any of the grounds nor pleading in appeal in
support of the respective contentions of the parties.
50. Further, in Navnirman Development Consultants (I) Pvt. Ltd.
(supra) the Hon’ble Apex Court recorded that the High Court decided the appeal
in the absence of both parties. In such a situation, the provisions of Order 41
Rule 17 CPC got attracted and therefore, the High Court should have taken
recourse to the powers under Order 41 Rule 17 CPC for passing appropriate
Orders as contemplated in Rule 17, under which the appeal could not be
dismissed on merits. However, the appeal having been dismissed essentially
under Order 41 Rule 17 CPC, it was held that the appellant therein should have
taken recourse to the remedy available under Order 41 Rule 19 CPC by filing
application to the High Court praying therein for readmission of their appeal by
making out sufficient cause for their non-appearance on the date when the
appeal was listed for hearing instead of filing the appeal before the Hon’ble
Apex Court. In the aforesaid judgment, the remedy open to the party against
the dismissal of the appeal on merits, though the dismissal ought to have been
for default, has been mentioned. The said judgment is not on the scope of the
appellate powers for interference on the merits of the matter. If the appeal is
dismissed on merits in the absence of the appellant contrary to Rule 17 of
Order 41 CPC, the remedy would be under Order 41 Rule 19 CPC to approach
the same Court. The said judgment is on that aspect. Further, as per this
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25 COMCA No.21 of 2025
judgment it can be said that Order under Rule 17 and 19 CPC applies to the
appeals filed under Section 37 of the Arbitration and Conciliation Act 1996. The
same is not the case here. The argument that drawing the analogy and taking
clue from the said judgment all other provisions and power of appeal as under
the Code of Civil Procedure shall also apply to the appeals under the Arbitration
and Conciliation Act 1996 cannot be accepted.
51. On the scope of the interference with the judgment in the exercise of
the appellate jurisdiction under Section 37 of the Arbitration and Conciliation
Act, in Punjab State Civil Supplies Corporation Limited (supra) the
Hon’ble Apex Court held that the appellate power under Section 37 of the Act is
not akin to the normal appellate jurisdiction vested in the Civil Courts for the
reason that the scope of interference of the Courts with arbitral proceedings or
award is very limited, confined to the ambit of Section 34 of the Act only (as
that was a case arising from Section 34 proceedings), and even that power
cannot be exercised in a casual and a cavalier manner. The Hon’ble Apex Court,
referring to various pronouncements on the scope of intervention in an appeal
under Section 37 of the Act, restricted it and subjected it to the same grounds,
on which an award can be challenged under Section 34 of the Act. In other
words, powers under Section 37 vested in the Court of Appeal are not beyond
the scope of interference provided under Section 34 of the Act. The Hon’ble
Apex Court finally concluded that the scope of the intervention of the Court in
arbitral matters is virtually prohibited, if not absolutely barred and that
interference is confined only to the extent envisaged under Section 34 of the
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26 COMCA No.21 of 2025
Act. It was further held that the appellate Court has no authority of law to
consider the matter in dispute before the arbitral tribunal on merits so as to find
out as to whether the decision of the arbitral tribunal is right or wrong upon
reappraisal of evidence as if it is sitting in an ordinary Court of Appeal. Its
power is more akin to that of superintendence as is vested in civil courts while
exercising revisionary powers. In the context of the appeal arising out of the
proceedings under Section 34 of the Act 1996 the Hon’ble Apex Court held that
the proceedings under Section 34 of the Act are summary in nature and are not
like a full fledged regular civil suit. Therefore, the scope of the Section 37 of the
Act is much more summary in nature and not like an ordinary civil appeal.
52. Consequently, in view of the judgment of the Hon’ble Apex Court in
Punjab State Civil Supplies Corporation Limited (supra), we are of the
view that the scope of Section 37 of the Act arising out of the proceedings
under Section 9 of the Act 1996 is also confined to the scope of Section 9 of the
Act and is not like an ordinary civil appeal under the Code of Civil Procedure.
The interference, if required, with the Order under Section 9 of the Act, can be
only within the scope of Section 9 of the Act and not as exercising the wider
appellate powers under CPC.
53. The Karnataka High Court in M/s. Paton Constructions Private
Ltd., v. M/s. Lorven Projects Ltd.7 held that as per sub-section (2) of
Section 9, because of the use of the expression ‘shall be commenced’,
commencement of the arbitral proceedings within the period stated in Sub-
7
ILR 2017 Kar 3016
RNT, J & MRK, J
27 COMCA No.21 of 2025
section (2) of Section 9 is a requirement for the legal effectiveness of the order
passed for any interim measure under Sub-section (1) of Section 9 of the Act.
Hence, if the arbitral proceedings in respect of the dispute were not
commenced within the period stated in Section 9 (2) of the Act 1996, the order
granting any interim measure under Section 9 (1) of the Act 1996 automatically
stand vacated on the expiry of the said period, though that was not expressly
stated in sub-section, but was clearly implied and any other interpretation of
sub-section (2) would defeat the intention of Parliament in making
commencement of the arbitral proceedings within the period stated in the sub-
section as mandatory.
54. Here, we may therefore mention that in M/s. Paton Constructions
Private Ltd. (supra) the Karnataka High Court further held that if the arbitral
proceedings in respect of the dispute were not initiated within three months
from the date of presentation of the application under Section 9 of the Act, any
interim order granted shall stand vacated without any specific order to that
effect by the Court which passed the order. However, we find that in Rule 9 (4)
of the High Court of Karnataka Arbitration (Proceedings before the Courts)
Rules, 2001, there was specific provision, providing that “in the case of an
application for any interim measure made before initiating arbitral proceedings,
if the arbitral proceedings were not initiated within three months from the date
of presentation of the application under Section 9 of the Act, any interim order
granted shall stand vacated without any specific order being passed by the
Court to that effect”.
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28 COMCA No.21 of 2025
55. We find that there is no such rule as Rule 9 (4) of the Karnataka
Arbitration Rules neither in the Act 1996 nor in the Rules framed thereunder.
56. But still in the present case, the interim measure granted by the
Special Judge came to an end on expiry of 90 days from the date of the Order
of interim measure, in terms of the Order itself.
F. Conclusions:
57. In view of the considerations made hereinabove, our conclusions are
that,
1) Section 9 (1) of the Act 1996 provides for the interim measure before or
during arbitral proceedings or at any time after making of the arbitral
award but before invoking Section 36 of the Act 1996, if the arbitral
proceedings have not been commenced within the statutory period.
2) The interim measure granted by the Special Judge was for a limited period
of 90 days from the date of the Order. The appellant had to initiate the
arbitral proceedings within the period of 90 days as per Section 9 (2) of
the Act 1996 from the date of the Order of interim measure dated
31.07.2025. The arbitral proceedings could also be commenced within
such further time i.e., beyond 90 days as the Special Court might have
determined, but it was not so determined. Consequently, the arbitral
proceedings must have been commenced within the period of 90 days
from the date of the order, which period of 90 days came to end on
29.10.2025.
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29 COMCA No.21 of 2025
3) The application under Section 21 of the Act 1996 for initiation of arbitral
proceedings has been filed by the appellant only on 07.11.2025 by issuing
the notice, beyond the period of 90 days. So, the arbitral proceedings
have not been commenced within the statutory period contemplated under
Section 9 (2) of the Act 1996.
4) The consequences for not commencing the arbitral proceedings, within the
statutory period have not been provided under Section 9 of the Act 1996.
In such a case, the interim measure granted, would be governed by the
terms of the Order granting interim measure, as provided by the Special
Court itself, that is, that it shall operate for the specified period of 90 days.
On expiry of 90 days from the Order, the interim measure came to an end.
5) The appellate powers under Section 37 of the Act 1996, applying the same
principle as in Punjab State Civil Supplied Corporation Limited
(supra), cannot be beyond the scope of Section 9 (1) and (2) of the
Arbitration and Conciliation Act 1996.
6) The appeal no doubt is continuation of the suit, and so in that way it can
be said that, an appeal under Section 37, is the continuation of the
proceedings, under Section 9, as in the present case, but that would not
be for all the purposes. In the exercise of the appellate jurisdiction, this
Court cannot go beyond the powers that can be exercised under Section 9
and shall not have such wide powers as under the Code of Civil Procedure.
The appellate power shall be like the power of superintendence while
exercising revisionary powers.
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30 COMCA No.21 of 2025
7) We do not find any error of such a nature with the impugned Order so as
to invoke the supervisory powers.
8) On Point Nos.1 & 2, we therefore hold that there is no illegality in the
order impugned to the extent the learned Court has granted the protection
to lift freezing of bank account for a limited purpose of discharging the
statutory duties for the specified period nor in rejection of the rest of the
prayers for interim measure.
G. Result:
58. In the result, the appeal is dismissed. No order as to costs.
Pending miscellaneous petitions, if any, shall stand closed in
consequence.
_______________________
RAVI NATH TILHARI, J
______________________________
MAHESWARA RAO KUNCHEAM, J
Date: 27.02.2026
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