Delhi High Court on Arbitration Fee Defaults: Procedural Closures Not Appealable Under Section 37(2)(b)

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 24.08.2026

Delhi High Court on Arbitration Fee Defaults: Procedural Closures Not Appealable Under Section 37(2)(b)

The recent judgment by the Delhi High Court in the case of ORBIT IN-TE-RIO v. American Epay Services Pvt. Ltd. provides important insights into the procedural aspects of arbitration, especially regarding the consequences of non-payment of arbitral fees and the maintainability of appeals under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996.

Background of the Dispute

1. Fit-Out Agreement and Dispute
   • ORBIT IN-TE-RIO (Appellant) entered into a Fit-Out agreement with American Epay Services Pvt. Ltd. (Respondent) on 28.11.2023 for supply and installation of fit-outs at the Respondent’s premises.
   • Disputes arose over performance, modifications, and additional works, leading to termination ofthe agreement by the Respondent on 15.02.2024.
   • The Respondent claimed approximately ₹15 crores in damages, while the Appellant countered that substantial work was completed and their fit-outs remained in use without payment.
2. Arbitration Proceedings
   • Arbitration was invoked, and a Sole Arbitrator was appointed.
   • Both parties filed claims and counterclaims, with the Appellant seeking interim protection and deposit of rent arrears under Section 17 of the Act.
   • The Tribunal directed the Appellant to deposit its share of arbitral fees before hearing its applications and counterclaim.
   • The Appellant deposited only part of the required fees, leading the Tribunal to close its right to pursue Section 17 applications and the counterclaim.

Key Legal Issues Addressed

1. Nature of the Tribunal’s Order

• The Tribunal’s order closing the Appellant’s right to pursue applications and counterclaim was based solely on non-payment of arbitral fees.
• The High Court held that this order was procedural and not an adjudication on the merits of the Section 17 applications.
• The order did not grant or refuse interim measures but merely regulated the conduct of proceedings.

2. Maintainability of Appeal under Section 37(2)(b)

• Section 37(2)(b) allows appeals only against orders granting or refusing interim measures under Section 17.
• Since the Tribunal’s order was procedural and did not decide the substantive entitlement to interim relief, the appeal was held not maintainable.

3. Appropriate Remedy for Procedural Orders

• The Court emphasized that the proper course for the Appellant was to seek recall or restoration of the order before the Tribunal itself, not to file an appeal.
• The Supreme Court’s judgments in Harshbir Singh Pannu v. Jaswinder Singh and ONGC v. Afcons Gunanusa JV were cited, clarifying that procedural defaults (like non-payment of fees) should be addressed internally by the Tribunal through recall applications.

4. Impact on Substantive Rights

• The closure of applications due to fee default does not determine substantive rights or claims.
• The Appellant remains a party to the arbitration and can participate in the proceedings, except for the closed applications and counterclaim unless the procedural default is remedied.

Practical Implications for Arbitration Parties

1. Compliance with Fee Directions
   • Parties must comply with arbitral fee deposit directions to avoid procedural closure of claims or applications.
2. Procedural vs. Substantive Orders
   • Understanding the distinction is crucial: procedural orders regulate the process, while substantive orders decide rights or entitlements.
3. Remedies for Procedural Defaults
   • The first remedy for procedural closures is to seek recall before the Tribunal, not immediate judicial intervention.
4. Limits of Appellate Jurisdiction
   • Not all orders are appealable; only those that grant or refuse substantive relief under Section 17 can be challenged under Section 37(2)(b).

Conclusion

The Delhi High Court’s judgment reinforces the principle that procedural orders, even if they affect valuable rights, do not automatically become appealable unless they decide substantive issues. Parties in arbitration must be vigilant about procedural requirements, especially fee deposits, and should seek remedies within the arbitral process before approaching courts.

This decision provides clarity on the boundaries of appellate jurisdiction and the importance of distinguishing between procedural and substantive orders in arbitration.

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Source: Delhi High Court

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