Statutory priority for customs sale proceeds prevails over pledge rights, and Section 9 cannot bind an independent custodian.

Section 9 interim relief under the Arbitration Act cannot be used against a warehouse custodian asserting an independent right in pledged imported goods when that right does not derive from a contracting party. The court also held that, where uncleared imported goods are sold under the Customs Act, the statutory order of application of sale proceeds prevails over contractual pledge rights. Sale expenses, freight and carrier charges, customs duty, and the custodian's charges rank ahead of any balance payable to the pledgee or owner, so the pledgee could not insist on an auction outside that statutory sequence.

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Issues: (i) Whether interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 could be granted against a warehouse custodian asserting an independent right in the goods though it was not a party to the arbitration agreement. (ii) Whether the petitioner, as pledgee of imported goods, had priority over customs dues and the custodian's charges when the goods were to be sold under the Customs Act, 1962.

Issue (i): Whether interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 could be granted against a warehouse custodian asserting an independent right in the goods though it was not a party to the arbitration agreement.

Analysis: Section 9 relief is ordinarily directed against parties to the arbitration agreement, but it may affect a third party only where the third party derives title or interest from a contracting party. Here, the custodian's claim was independent, arising from its own custody of the bonded warehouse goods and not through the debtor. The relief sought was not merely preservative of the subject matter, but aimed at enabling the pledgee to realise money by auctioning goods in the custodian's possession.

Conclusion: Interim relief could not be granted against the custodian on the footing urged by the petitioner.

Issue (ii): Whether the petitioner, as pledgee of imported goods, had priority over customs dues and the custodian's charges when the goods were to be sold under the Customs Act, 1962.

Analysis: Section 48 permits sale of uncleared imported goods with the permission of the proper officer. Section 142A creates a first charge for amounts payable under the Act, and Section 150 prescribes a mandatory order of application of sale proceeds. The statutory sequence places sale expenses first, then freight and other carrier charges, then customs duty, then charges due to the person having custody of the goods, and only thereafter the balance, if any, to the owner. The contractual pledge could not override this statutory waterfall. The petitioner's reliance on general pledge principles did not displace the express customs scheme.

Conclusion: The customs dues and the custodian's charges had priority over the petitioner's claim, and the petitioner could not insist on conducting the auction outside the statutory sequence.

Final Conclusion: The interim relief was refused, the statutory mode of sale under the Customs Act was affirmed, and the sale proceeds were held to be distributable in the order mandated by the Act.

Ratio Decidendi: Where imported goods remain uncleared and are sold under the Customs Act, the statutory order of priority in the sale proceeds prevails over contractual security interests, and Section 9 of the Arbitration and Conciliation Act cannot be used to defeat an independent right of a non-signatory custodian.

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