Secured creditor money claims in arbitration can proceed without abandoning mortgage security, and Section 9 protection may be granted.

A secured creditor may confine arbitration to a personal money claim without seeking sale of the mortgaged property, and that approach does not convert the claim into an action in rem or forfeit the mortgage security. The creditor may still preserve the security separately under Order XXXIV Rule 14 CPC and invoke Section 9 of the Arbitration and Conciliation Act, 1996 for interim protection to secure the amount in dispute. In granting such relief, the court may apply CPC principles, including those reflected in Order XXXVIII Rule 5, and may direct security or attachment where disclosure is incomplete and there is a risk of asset dissipation. The protective orders were upheld as justified.

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Issues: (i) whether a money claim by a secured creditor, where enforcement of the mortgage is not sought in arbitration, is arbitrable and can be maintained without offending the principle that a mortgage suit for sale is an action in rem; (ii) whether a secured creditor who confines the arbitration to a money claim forfeits the mortgage security or is disentitled to seek interim protection under Section 9 of the Arbitration and Conciliation Act, 1996; (iii) whether the directions to furnish security and, on default, attachment of properties and bank accounts were excessive or unwarranted.

Issue (i): whether a money claim by a secured creditor, where enforcement of the mortgage is not sought in arbitration, is arbitrable and can be maintained without offending the principle that a mortgage suit for sale is an action in rem.

Analysis: A claim for enforcement of a mortgage is not arbitrable because it involves enforcement of a right in rem. However, where the creditor does not seek sale of the mortgaged property in arbitration and instead confines the proceeding to recovery of monies due and outstanding, the claim is a personal money claim and not an action in rem. The right under Order XXXIV Rule 14 of the Code of Civil Procedure, 1908 to institute a separate suit for sale in enforcement of the mortgage remains available after the money claim is pursued.

Conclusion: The money claims were arbitrable and the appeals failed on this ground.

Issue (ii): whether a secured creditor who confines the arbitration to a money claim forfeits the mortgage security or is disentitled to seek interim protection under Section 9 of the Arbitration and Conciliation Act, 1996.

Analysis: Confining arbitration to a money claim does not amount to relinquishment of the mortgage security or abandonment of the creditor's right to proceed separately under Order XXXIV Rule 14 of the Code of Civil Procedure, 1908. Section 9 of the Arbitration and Conciliation Act, 1996 is intended to preserve the efficacy of arbitration and permits interim measures to secure the amount in dispute. The principles underlying the Code of Civil Procedure, including those reflected in Order XXXVIII Rule 5, guide the exercise of that power, but they do not displace the court's discretion to grant effective protection where justice requires it.

Conclusion: The secured creditors were entitled to invoke Section 9 for protective relief.

Issue (iii): whether the directions to furnish security and, on default, attachment of properties and bank accounts were excessive or unwarranted.

Analysis: The debtor failed to make full and candid disclosure of its assets, encumbrances, bank accounts, and related particulars, despite prior directions. The record also showed outstanding liabilities, creditor action, and apprehension that the assets could be dealt with to defeat satisfaction of the claims. In these circumstances, sufficient grounds existed for directing security and, failing compliance, attachment. The scope of the attachment could not be said to be excessive.

Conclusion: The protective orders were justified and not excessive.

Final Conclusion: The appellate challenge to the Section 9 interim measures failed in entirety, and the impugned order was upheld.

Ratio Decidendi: A secured creditor may pursue a money claim in arbitration without abandoning the mortgage security and may seek Section 9 protection to preserve the fruits of the arbitral process; in granting such relief, the court is guided by CPC principles but may mould the interim measure to secure justice and prevent dissipation of assets.

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