Interim asset protection in arbitration: court restrains disposal of assets to preserve claimed dues and subject matter.

Delhi HC considered whether interim protection under Section 9 of the Arbitration and Conciliation Act was needed to secure claimed dues and preserve assets pending arbitration. Taking account of the respondent's financial condition, the petitioner's substantial claims, and competing security interests asserted by the bankers, the Court treated preservation of the subject matter as necessary to prevent dissipation of assets. Interim relief was granted by restraining further disposal of assets and creation of third-party interests, while requiring disclosure of assets. The Court also allowed the respondent to seek modification if asset sales became necessary for restructuring, and preserved the bankers' right to enforce their lawful claims.

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Issues: Whether interim protection under Section 9 of the Arbitration and Conciliation Act, 1996 should be granted to secure the petitioner's claimed dues by restraining the respondent from disposing of assets and creating third-party interests.

Analysis: The petition sought interim measures to secure the petitioner's alleged unpaid dues pending arbitration. The Court noted the respondent's financial condition, the existence of substantial claims asserted by the petitioner, and the competing position of the consortium of bankers, including the lead bank's asserted security interests over the respondent's assets. In that context, the Court found it appropriate to pass interim protection to preserve the subject matter and prevent dissipation of assets. The order also recorded that the respondent could seek modification if asset sales became necessary for restructuring purposes, and that the bankers could pursue their lawful rights.

Conclusion: Interim relief was granted in favour of the petitioner by restraining the respondent from further disposing of assets or creating third-party interests, while directing disclosure of the respondent's assets and permitting the respondent to seek modification if required.

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