Interim arbitration protection under Section 9 can extend to asset security and contractual indemnity before liability crystallises

Section 9 arbitration relief is discussed as being available where jurisdiction exists independently of section 42, and where prior proceedings were not treated as a court application for that purpose. The note also explains that interim protective measures may mirror Order 38 Rule 5 principles to prevent dissipation of assets, including disclosure and securing directions against respondents and limited third parties. It further states that an express contractual indemnity may support interim protection before liability is finally crystallised, if the agreement makes the indemnity immediately operative on the incurring of liability.

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Issues: (i) whether the petition under section 9 of the Arbitration and Conciliation Act, 1996 was maintainable before the Court on the question of jurisdiction; (ii) whether interim protection by way of attachment before judgment and allied directions could be granted against the respondents and third parties to secure the petitioner's claims; (iii) whether the indemnity claim could be pressed at the interim stage despite the absence of crystallised liability.

Issue (i): whether the petition under section 9 of the Arbitration and Conciliation Act, 1996 was maintainable before the Court on the question of jurisdiction.

Analysis: The earlier section 11 application before the Gujarat High Court was not treated as an application before a court within the meaning of section 2(e), and therefore did not attract section 42. The Court also noted that the respondents themselves had approached both the District Judge at Vadodara and this Court under section 9 on the footing that jurisdiction existed. The subsequent withdrawal of those proceedings did not alter the conclusion that this Court had jurisdiction.

Conclusion: The petition was maintainable before this Court and the jurisdictional objection failed.

Issue (ii): whether interim protection by way of attachment before judgment and allied directions could be granted against the respondents and third parties to secure the petitioner's claims.

Analysis: The Court applied the principles underlying Order 38 Rule 5 of the Code of Civil Procedure, 1908 while recognising that section 9 empowers the Court to mould relief to protect the arbitral process. On the record, the respondents had moved substantial assets into companies and trusts controlled by them or their family members after disputes had arisen. The Court held that such conduct prima facie justified protective relief to prevent frustration of any future award. The Court also held that persons who may owe money to the respondents could be impleaded for limited protective directions, even if they were not parties to the arbitration agreement.

Conclusion: Interim protection was warranted, including disclosure of assets and directions securing the petitioner's claim.

Issue (iii): whether the indemnity claim could be pressed at the interim stage despite the absence of crystallised liability.

Analysis: The SPA contained a clause making the promoters' indemnity obligation arise immediately upon the indemnified person incurring liability pursuant to a claim, irrespective of any defence or right of appeal, and the indemnity survival period was also expressly provided. In that contractual setting, the Court held that the petitioner was not required to wait for crystallisation or actual payment before seeking protection. The liabilities reflected in statutory demands and notices were treated as prima facie covered by the indemnity for purposes of interim relief.

Conclusion: The indemnity claim was prima facie maintainable for interim protection.

Final Conclusion: The petitions succeeded substantially. The Court secured the petitioner's claim by asset-disclosure directions, valuation-related directions, and conversion of the escrow amount into an interest-bearing fixed deposit, while declining the respondents' challenge to maintainability.

Ratio Decidendi: For section 9 relief, the Court may apply the principles underlying Order 38 Rule 5 to protect an arbitral claim where there is a prima facie case and conduct indicating possible dissipation of assets, and an express contractual indemnity may be enforced at the interim stage without waiting for final crystallisation of liability when the agreement so provides.

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