Arth Micro Finance Private Ltd. And Ors. v. Shivalik Small Finance Bank Ltd.

Non-Reportable 2026 INSC 1014 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No.13015 of 2026 (Arising out of SLP (C) No. 26596 of 2026)

Arth Micro Finance Private Ltd. And Ors. ...Appellant (s) Versus Shivalik Small Finance Bank Ltd. ..Respondent(s)

ORDER Leave granted.

2. Arbitration, though rhymes with it, cannot result

in an arbitrary measure, even in the appointment of an

Arbitral Tribunal.

3. In the present case, disputes arose between the

appellants and the respondent, and definitely, the

agreement between them, had an arbitration clause.

The respondent allegedly appointed an Arbitral

Tribunal, on consent. The notice is seen issued at

Annexure P2 on 02.05.2024. The Arbitral Tribunal

appointed, issued a communication to the appellants

by Annexure P3, which was replied to by Annexure P4 Signature Not Verified

Digitally signed by objecting to the appointment, especially pointing out VISHAL ANAND Date: 2026.09.18 17:57:55 IST

that the appointed Arbitral Tribunal had close links Reason:

with the respondent. Undeterred, the Arbitral Tribunal Page 1 of 5

passed three interim orders under Section 17 of the

Arbitration and Conciliation Act, 1996, by Annexures

P5, P6 and P7, which were appealed before the High

Court under Section 37 of the said Act. The appeal was

dismissed on the ground of limitation, especially

pointing out that there is no application filed to

condone the delay, invoking Section 5 of the Limitation

Act, 1963.

4. We heard Sri K. Parameshwar, learned Senior

Counsel for the appellants and Sri Bishwajit

Bhattacharyya, learned Senior Counsel for the

respondent. Though it was argued that, it is on

consent that the Arbitral Tribunal was appointed, there

is nothing to show the consent having been obtained

from the appellants herein. The orders at Annexures

P5, P6 and P7 respectively directed the freezing of the

bank accounts at IDBI, Bank of Baroda, HDFC and ICICI

linked to the specific PAN number of the appellants;

permitted the respondent’s bank to take over

possession of the movable and immovable properties

of the appellants; and directed transfer of the amounts

deposited by the appellants herein, in the various

Page 2 of 5

banks as mentioned before, to be transferred and

deposited in the respondent’s bank.

5. We have to remind ourselves that this was done

in the wake of the clear objection to the appointment

of the Arbitral Tribunal and the allegation of bias raised

against the said Arbitral Tribunal. The orders passed at

the first instance, are also arbitrary in nature.

6. We, hence, set aside the impugned order of the

High Court finding the very initiation of arbitration to

be non est in law. The interim orders passed by the

Arbitral Tribunal at Annexures P5, P6 and P7 shall

stand set aside. If the interim orders have been given

effect to, then any amount deposited from the account

of the appellants to the account of the respondent

herein, shall be remitted back within a period of one

week from today and the interest due on such

amounts, the very appointment having been found to

be non est in law, shall be one of the issues to be

considered by the Arbitrator whom we intend to

appoint. If the amounts are not remitted back as

directed by us, then it would carry Compound Interest

@18% from the date on which it was debited from the

accounts of the appellants at monthly rests and the Page 3 of 5

same shall be set off as against any claim found in

favour of the respondent in Arbitration. Any

attachment or takeovers of movable or immovable

properties of the appellants shall also be set at naught

and the same restored to the possession of the

appellants.

7. To facilitate resolution of the disputes, we direct

that Ms. Mayuri Raghuwanshi, Advocate (Mob. No.-

97173 44186), be appointed as an Arbitrator. The

Registry of this Court shall intimate the learned

Arbitrator appointed by us. The learned Arbitrator shall

issue notices to the parties in connection with the

arbitral proceedings. The learned Arbitrator is free to

determine her fee in consultation with the parties. We

make it clear that we have expressed no opinion on

the merits of the case, which aspect is left open for the

parties to urge before the learned Arbitrator.

8. The appeal is disposed of with the above

directions.

Page 4 of 5

9. Pending application(s), if any, shall stand

rejected.

.......…….……………………. J. (J. B. PARDIWALA)

....……….……………………. J. (K. VINOD CHANDRAN) NEW DELHI; SEPTEMBER 17, 2026.

Page 5 of 5