The Bombay High Court, in a landmark judgment, has held that a third party to an arbitration proceeding has the right to maintain an appeal if they are affected by an order passed by the arbitrator.
To briefly delve into the facts, the Court heard a batch of petitions filed under Section 37 of the Arbitration & Conciliation Act, wherein the petitioners prayed for leave to appeal against the order passed by a sole arbitrator in an arbitration proceeding between Excel Metal Processors and Shakti International. The petitioners contended that the order was causing prejudice to their interest, as they had imported certain steel coils, and possessed the documents of title regarding the said coils. However, pursuant to an order passed by the arbitrator in an arbitration proceeding between Excel Metal Processors, in whose warehouse the coils were stored, and Shakti International, the coils had been attached, and were therefore not returned to the petitioners.
The Bombay High Court held that since it was an admitted fact as per all documents on record as well as parties involved that the coils belonged to the petitioners, and considering that the petitioners had sufficiently demonstrated before the Court their right, title and interest in the coils, the impugned order passed by the arbitrator granting injunction against handing over possession thereof to any third party, deserves to be set aside. Therefore, the court held that as the petitioner’s interests were being prejudiced, they were entitled to an appeal, and thus appeal under Section 37 was maintainable.