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Shri Krishan Baldev Bansal vs. Balbir Singh Tyagi & Ors.

First Appeal from Order (Commercial) · 2026:DHC:8629-DBDecided 5 Oct 2026New Delhi Bench
FAO(COMM) 64/2026CNR: DLHC010079682026
Justice Anil Kshetarpal · Justice Bharat Parashar

Background

A sole arbitrator passed an award on 23 December 2023 in a dispute between partners of a firm. The appellant had paid a bank liability of the partnership firm and sought reimbursement, and he had also stood as a guarantor for the firm's cash-credit facility. The District Judge, in OMP (COMM.) No. 25/2024, set aside the award on 28 November 2025, on the grounds that the arbitrator had decided only that claim despite a statement recorded on 11 December 2023, and that the claim was outside the arbitration agreement because the appellant was also a guarantor.

Decision Breakdown

The High Court held that the principal grounds on which the District Judge set aside the award could not be sustained. It found that the arbitrator's adjudication of the bank-payment claim was not an adjudication of a dispute wholly outside the arbitration, merely because the appellant had also given a guarantee to the bank, and that the appellant was himself a partner in the firm, with the partnership deed containing an arbitration clause relating to the dispute. The Court also found that the District Judge's view that the arbitrator had to decide other reliefs did not match the proceedings recorded on 11 December 2023. The appeal was allowed, the District Judge's order was set aside, and the arbitral award of 23 December 2023 was restored.

Lesson Learnt

Being a guarantor does not automatically take a claim outside an arbitration agreement if the claim arises from the parties' partnership relationship. A party's own recorded statements before the arbitrator can determine what the award covers.

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