Section 9 interim relief against third parties rejected where auction proceeds were already covered by prior judicial orders.

Section 9 interim relief may, in appropriate cases, operate against a third party, but only as an exceptional measure to aid arbitration and protect the dispute property. The Delhi HC held that this relief was not justified where the auction-sale proceeds were already subject to prior judicial orders and pending claims, including an earlier recalled order that had left the parties' rights open. A fresh direction to freeze or redirect the same funds would conflict with the existing order and undermine its legal effect. The request for interim protection against the third party was therefore rejected and the petition dismissed.

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Issues: Whether interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 could be granted directing a third party in custody of auction-sale proceeds to secure or deposit the amount for the petitioner, especially when the same funds were already the subject of prior judicial orders and pending claims in other proceedings.

Analysis: Section 9 is not confined to directions only against parties to the arbitration agreement and, in appropriate cases, interim measures may operate against third parties. The power, however, is exceptional and must be exercised only to aid arbitration and protect the subject matter of the dispute. Although the petitioner relied on the respondent's assurances and on the fact that the amount had been retained by the auctioning creditor, the Court found that the fund was already entangled in pending proceedings, including an earlier order that had been recalled and had allowed SEBI to pursue its claim, with the rights of all parties left open. A fresh direction from this Court to freeze or redirect the same amount would conflict with the existing order and effectively undo its legal effect. In these circumstances, the money could not be treated as lying with the third party in a manner that justified the relief sought.

Conclusion: The request for interim protection against the third party was rejected, and the petition was dismissed.

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