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by Admin
16 February 2026 1:47 PM
“An Arbitral Award cannot be set aside merely because reasons are not elaborate — reasons must be discernible, not judicially ornamental”: Bombay High Court (Commercial Division) delivered a significant judgment in Sanjeev Malhotra v. SBI Global Factors Ltd. & Anr., Commercial Arbitration Petition No. 778 of 2024, dismissing a challenge under Section 34 of the Arbitration and Conciliation Act, 1996, to an arbitral award of over ₹43 crores against a borrower and guarantor. The Court, through Justice Sandeep V. Marne, reaffirmed the limited grounds available for setting aside an award under Section 34 and clarified that neither delay in pronouncement nor dissatisfaction with the reasoning constitutes a valid basis for annulment unless the award is perversely vitiated or contrary to public policy.
The award, delivered by retired Supreme Court Judge Justice S.P. Kurdukar on April 4, 2024, had directed Sanjeev Malhotra and his company Rayalseema Commodities Ltd. (under liquidation) to jointly and severally repay ₹28.16 crores under a domestic factoring facility and ₹15.29 crores under a reverse factoring facility to SBI Global Factors Ltd., with interest @18% p.a. from April 1, 2011.
“Challenge to arbitral award is not an appeal — Court cannot reappreciate facts merely because the reasoning appears ‘casual’ or ‘cavalier’ to the losing party”
The judgment arose out of Sanjeev Malhotra’s petition under Section 34 of the Arbitration Act challenging the award on four primary grounds:
Failure by the Arbitrator to record a finding that SBI Global had proved its debt;
Inordinate and unexplained delay in pronouncement of the award;
Casual dismissal of the petitioner’s claim of discharge due to novation or variation of guarantee terms;
Non-adjudication of interim applications, including pleas of forgery and re-hearing.
The Court systematically rejected each ground and upheld the arbitral award in its entirety.
“The phrase ‘almost admitted’ cannot be read in isolation or to the exclusion of surrounding pleadings — Admission of debt and guarantee is clearly recorded”
On the first ground — the allegation that the arbitrator had wrongfully “dispensed” with the lender’s burden of proof — the Court held that the petitioner’s claim arose from a “skewed and myopic” reading of the award. Justice Marne noted that the borrower company, Rayalseema Commodities Ltd., had admitted the sanction of facilities, execution of the guarantee, and liability to repay in its Statement of Defence.
The arbitrator had observed that Rayalseema had “almost admitted the claim” — a phrase that Malhotra’s counsel interpreted as indicating lack of full admission. Rejecting this line of argument, the Court clarified:
“The findings in the award need to be read as a whole and a party cannot be permitted to pluck out a word in the award for the purpose of suggesting perversity in the overall findings.”
Justice Marne held that there was no patent illegality, and that the award was based on evidence including sanction letters, factoring agreements, ledger statements, and admission in pleadings and affidavit. The Court concluded that the arbitrator had rightfully accepted the debt and liability to be established.
“Delay in pronouncing award is not by itself a ground under Section 34 — There must be demonstrable prejudice or impact on the integrity of findings”
Addressing the second ground — delay in rendering the award — the Court undertook a detailed analysis of Lancor Holdings Ltd. v. Prem Kumar Menon, 2025 SCC OnLine SC 2319. In that case, the Supreme Court clarified that mere passage of time does not vitiate an award unless the delay is unexplained and materially affects the findings.
Justice Marne recorded that hearings had concluded in late 2019, but delays occurred due to the COVID-19 pandemic and repeated applications filed by the petitioner. The final written submissions were filed in 2022, and the award was made in April 2024.
“Once the requirements of prejudice and adverse impact are not established, mere delay cannot render an award invalid.”
The Court also noted that the petitioner had himself contributed to the delay by filing eight interim applications, including pleas for amendment, forensic examination, rehearing, and jurisdictional objections — most of which were either rejected or found baseless.
The Court further clarified that reliance on Anil Rai v. State of Bihar — a case about judicial delay in criminal matters — was misplaced in arbitral proceedings, which are governed by party autonomy and statutory remedies such as Section 14.
“A guarantee covering ‘increased limits’ cannot be avoided merely because the director-litigant later disowns his own signature”
On the third ground — novation or variation of contract — the Court found the petitioner’s defence of discharge from guarantee to be wholly without merit. The arbitral tribunal had recorded clear findings that Malhotra, as director of the borrower company, had personally signed the applications for enhanced credit limits. The Court held: “Once it is proved that Petitioner in his capacity as a Director of Rayalseema has signed applications for enhancement of credit limits, he cannot be permitted to raise the objection of material change in the terms of guarantee.”
More critically, the Deed of Guarantee itself was found to be unconditional, irrevocable, and explicitly extended to “the entire outstanding amount (i.e. the amounts initially sanctioned as well as increased limits).” It also declared that the guarantor’s liability was coextensive, continuing, and independent of disputes with the borrower.
Rejecting the argument of casual dismissal, the Court reiterated that adequacy of reasoning is not a ground under Section 34 unless the award is unintelligible or perverse. As long as reasons are discernible, even if brief, the award cannot be set aside.
“Applications filed after admitting the guarantee and participating in proceedings were a clear afterthought — tribunal was not bound to rehear or delay the award indefinitely”
The most forceful rejection came on the fourth ground — the claim that the arbitral tribunal failed to decide interim applications, including one based on an alleged forgery of the Deed of Guarantee. The Court noted that the petitioner had admitted the guarantee in his Statement of Defence and Affidavit of Evidence, and even attempted to amend his pleadings only six years later, which was rejected in 2018.
Despite this, the petitioner continued to file applications to send the guarantee for forensic examination and relied on a private report from “Truth Labs” to argue forgery. The tribunal had rejected these applications in the final award, stating that the defence was afterthought, contradictory, and based on documents obtained outside the arbitral process, without compliance with Section 26.
The Court found no breach of natural justice, holding that the arbitrator had either expressly or implicitly dealt with all applications, and that a party cannot indefinitely delay arbitration by filing successive, untenable applications.
“This challenge was yet another attempt by the Petitioner to delay and evade repayment of admitted dues”
In scathing closing remarks, the Court observed that the Section 34 petition itself was a strategy to frustrate enforcement and prolong litigation. Justice Marne recorded:
“Filing of the present Petition is nothing but one more attempt on the part of the Petitioner to avoid the liability to repay outstanding amount under the credit facilities.”
Noting that the arbitrator had already imposed interest and costs, the Court declined to impose additional litigation costs.
This judgment reinforces the extremely narrow scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996. It also sends a strong signal that challenges premised on procedural nit-picking, vague accusations of forgery, and creative readings of isolated phrases like “almost admitted” will not survive judicial scrutiny.
Where a party has actively participated in arbitration, admitted material facts, and delayed proceedings through baseless applications, the court will not indulge attempts to escape liability under the guise of judicial review.
Date of Decision: December 23, 2025
