Section 37 of Arbitration Act Cannot Be Invoked Against Procedural Impleadment Orders: Bombay HC

The Bombay High Court has held that an arbitral tribunal’s decision permitting impleadment of a party, particularly where such impleadment is in the nature of a procedural safeguard and not a substantive interim measure under Section 17 of the Arbitration and Conciliation Act, 1996, does not warrant interference under Section 37, even if the tribunal purported to exercise powers under Section 17 while granting such relief.

The Court emphasized that the scope of appellate jurisdiction under Section 37 is limited and cannot be expanded merely because the tribunal referenced a provision that otherwise permits appeals.

A Single Judge Bench of Justice Somasekhar Sundaresan, while dismissing the petition, held that even assuming the appeal to be maintainable on the basis that the arbitral tribunal purported to act under Section 17, the challenge was devoid of merit.

The Court upheld the tribunal’s order allowing impleadment of trustees in an arbitration concerning disputes over control and management of a limited liability partnership, noting that such impleadment was justified to preserve the rights of parties and ensure effective adjudication of the dispute.

The dispute arose between partners of Vidhi Research and Development LLP, with disagreements centering around control, management, and the effect of a trust created by one of the partners, Raju V. Shah. Raju had declared that the beneficial interest in his 20% shareholding in the LLP would vest in a trust for the benefit of his son, while he continued to remain the legal owner.

Years later, the opposing side, led by Mayank J. Shah, contended that this arrangement effectively resulted in cessation of Raju’s partnership, thereby disentitling him from participating in the arbitration proceedings.

Faced with this contention, Raju sought impleadment of the trustees of the trust as co-claimants before the arbitral tribunal, invoking Section 17 of the Act. The tribunal allowed the application, noting that such impleadment was necessary to adjudicate the dispute comprehensively and in accordance with principles of natural justice.

It clarified that the issue of whether Raju had ceased to be a partner remained open and would be decided at a later stage based on evidence.

Challenging this order, the petitioners argued that impleadment is not an interim measure under Section 17 and therefore not appealable under Section 37.

However, they also contended that since the tribunal had purported to exercise powers under Section 17, an appeal would lie.

The Court examined this contention in light of settled principles of appellate jurisdiction and noted that the right to appeal is a creature of statute and must be strictly construed.

The Court observed that an order permitting joinder or impleadment is fundamentally procedural in nature and does not fall within the category of interim measures contemplated under Section 17.

It further held that merely labeling an application under Section 17 or invoking that provision cannot convert a procedural direction into an appealable order. At the same time, the Court proceeded to consider the merits of the challenge, assuming arguendo that the appeal was maintainable.

On merits, the Court found that the tribunal’s approach was both pragmatic and legally sound. It noted that under the Limited Liability Partnership Act, only individuals or body corporates can be partners, and that Raju continued to remain the legal owner of his share in the LLP despite creation of the trust.

The distinction between legal and beneficial ownership was emphasized, with the Court observing that the creation of a trust does not necessarily divest the settlor of legal title.

Importantly, the Court held that the so-called impleadment was not truly the addition of a third party, but rather the inclusion of the same individual in an additional representative capacity as trustee. This, according to the Court, was a cautious measure adopted by the tribunal to address the petitioners’ own contention that Raju had ceased to be a partner.

The tribunal’s decision ensured that all necessary parties were before it, thereby facilitating a complete and effective adjudication of the issues.

The Court also took note of the delay in challenging the tribunal’s order, observing that the petition had not been diligently pursued and was served after a considerable lapse of time, during which arbitral proceedings had progressed. This delay, coupled with the interlocutory nature of the challenge, weighed against granting any relief.

Ultimately, the Court concluded that no perversity or error of law had been demonstrated in the tribunal’s order, and that interference under Section 37 was unwarranted.

It left all substantive issues, including the question of whether Raju had ceased to be a partner, to be decided by the arbitral tribunal at the appropriate stage.

The Court also indicated that the conduct of the petitioners may warrant imposition of costs, but left that determination to the arbitral tribunal at the time of final adjudication.

Case Title: Mayank J. Shah & Ors. v. Raju V. Shah & Ors.

Bench: Justice Somasekhar Sundaresan

Date of Judgment: 10.04.2026