CDR restructuring can defeat coercive interim relief and delay winding-up, while still protecting secured creditor rights.

Section 9 relief for attachment before judgment or injunction may be refused where an approved CDR scheme is under implementation and the claimant already holds recognised security. The court applied the principles behind Order 38 Rule 5 and Order 39 Rules 1 and 2 CPC, found the debt claim prima facie established, but held that coercive restraint would jeopardise the restructuring and revival process. Limited protective directions were retained to safeguard the claimant's participation and security. In the winding-up petition, deemed inability to pay debts was not treated as automatically requiring admission; the court exercised discretion and declined to admit the petition because the approved CDR package and creditor interests favoured allowing restructuring to proceed.

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Issues: (i) Whether interim protection by way of attachment before judgment or injunction ought to be granted under Section 9 of the Arbitration and Conciliation Act, 1996 in the face of an approved CDR scheme and the petitioner's existing security; (ii) Whether the company petition for winding up should be admitted on the ground of deemed inability to pay debts notwithstanding the CDR scheme and the opposition of secured creditors.

Issue (i): Whether interim protection by way of attachment before judgment or injunction ought to be granted under Section 9 of the Arbitration and Conciliation Act, 1996 in the face of an approved CDR scheme and the petitioner's existing security.

Analysis: Relief under Section 9 was assessed by reference to the principles underlying Order 38 Rule 5 and Order 39 Rules 1 and 2 of the Code of Civil Procedure, 1908, while preserving the efficacy of arbitration. The claim was found to be prima facie established, but the petitioner already held a first pari passu charge over the company's current assets. The proposed CDR arrangement was a restructuring of existing secured debt under RBI supervision, with substantial fresh infusion by secured lenders for revival of the company. In that setting, no material basis was found to restrain disposal of assets or to grant attachment or injunction that would jeopardise the CDR scheme. At the same time, the petitioner's security interest was recognised and directions were considered appropriate to protect its position by keeping it informed and allowing participation in the scheme.

Conclusion: Interim attachment or injunction was refused, but limited protective directions were granted in favour of the petitioner.

Issue (ii): Whether the company petition for winding up should be admitted on the ground of deemed inability to pay debts notwithstanding the CDR scheme and the opposition of secured creditors.

Analysis: Although the debt was not disputed and a deemed inability to pay debts was made out, admission of a winding-up petition was treated as a matter of judicial discretion rather than an automatic consequence. The wishes of creditors, the effect of admission on the viability of the company, and the impact on the approved CDR scheme were considered relevant at the admission stage. The CDR package was already approved and under implementation, involved a very large exposure, and required a chance to revive the company in the interests of all stakeholders. On that basis, the balance favoured allowing the restructuring process to proceed rather than stigmatising the company by admission of winding-up proceedings.

Conclusion: The winding-up petition was not admitted and was dismissed.

Final Conclusion: The judgment preserved the approved restructuring process, declined coercive interim relief that would disrupt the CDR scheme, and refused to set the winding-up machinery in motion, while still protecting the petitioner's participation and security interests to a limited extent.

Ratio Decidendi: In a Section 9 proceeding and in a winding-up petition, the Court may decline coercive relief where an approved CDR scheme is under implementation, the claimant's security is recognised, and the wider balance of convenience and creditor interests favour allowing the restructuring to proceed.

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