Section 9 interim protection can secure an arbitral claim despite stamp objections when securities risk dilution.

In section 9 arbitration proceedings, insufficient stamping of the underlying agreements did not prevent the court from considering them for interim relief where the defect could be addressed under the stamp law. Applying principles analogous to Order XXXVIII Rule 5 CPC, the court found the claimant needed protection because of outstanding liabilities, failed escrow cover, dishonoured cheques, and heavily encumbered assets. The pledged securities were inadequate, and the proposed corporate debt restructuring risked further dilution of the claimant's security. Interim protective measures were therefore granted, including a bank guarantee and restraint on implementing the restructuring scheme, to secure the arbitral claim and preserve the efficacy of arbitration.

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Issues: (i) whether the arbitration petitions could be entertained on the basis of the underlying agreements notwithstanding the objection that they were insufficiently stamped, and (ii) whether interim protection under section 9 of the Arbitration and Conciliation Act, 1996 should be granted by securing the petitioner's claim and restraining further dilution of the securities.

Issue (i): Whether the petitions could be entertained notwithstanding the stamp duty objection.

Analysis: The agreements were executed outside Maharashtra, and the court treated section 18 of the Maharashtra Stamp Act, 1958 as allowing stamping of instruments received in the State within the prescribed period. The objection was also considered in the light of the principle that, at the interim stage, an instrument is not to be ignored merely because of an insufficiency in stamp duty if the defect can be dealt with in accordance with law. The court distinguished the reliance placed on the stricter stamp-duty objections and held that the documents could be looked at for the purpose of interim relief.

Conclusion: The stamp-duty objection did not bar consideration of the petitions for interim relief.

Issue (ii): Whether interim measures should be granted to secure the petitioner's claim and prevent further prejudice to the securities.

Analysis: The court found, on the material before it, that the respondent had substantial outstanding liabilities, had failed to maintain the agreed escrow cover, had dishonoured cheques, and had assets already heavily encumbered. The pledged shares and current assets were found inadequate to secure the claim, and the proposed corporate debt restructuring was viewed as likely to dilute the petitioner's security. Applying the guiding principles underlying Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 to section 9 relief, the court held that it had power to mould interim relief to secure the arbitral claim and preserve the efficacy of arbitration.

Conclusion: Interim relief was justified, including a direction to furnish a bank guarantee and a restraint against implementing the corporate debt restructuring scheme.

Final Conclusion: The petitions were allowed by granting protective interim measures to secure the petitioner's claim and to prevent further dilution of the existing securities pending arbitration.

Ratio Decidendi: In a section 9 proceeding, the court may grant interim measures to secure the arbitral claim and preserve the efficacy of arbitration, and an objection of insufficient stamp duty does not necessarily prevent consideration of the underlying document for such interim relief where the defect is capable of being addressed in accordance with the applicable stamp law.

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