Interim relief over secured assets can protect bank dues while preserving surplus proceeds for arbitration or civil suit.

A court may grant interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 in relation to a secured asset even when the bank is not a party to the arbitration agreement, if the arrangement protects the secured creditor's realised dues and leaves the inter se dispute over the surplus for arbitration or civil proceedings. Where the property value exceeds the admitted bank claim and no party is prejudiced, the secured asset may be sold, the bank's dues and sale expenses satisfied from the proceeds, and the surplus preserved in short-term deposits pending adjudication of the family dispute.

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Issues: (i) Whether the bank's status as a non-party to the arbitration agreement barred the grant of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 in relation to a secured asset; (ii) Whether directions could be issued for sale of the secured property, appropriation of the bank's admitted claim, and preservation of the surplus pending arbitration or a possible suit.

Issue (i): Whether the bank's status as a non-party to the arbitration agreement barred the grant of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 in relation to a secured asset.

Analysis: The dispute arose from a family arrangement in which the secured property had been offered to the bank for credit facilities, while the inter se claims to the surplus sale proceeds were said to be referable to arbitration. A notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 had been issued, though no measure under Section 13(4) had yet been taken. The mere fact that the bank was not a party to the arbitration agreement did not, by itself, prevent the Court from fashioning an effective interim arrangement where the bank expressed no prejudice in participating for the limited purpose of realising its secured dues and where the remaining controversy lay between the family members.

Conclusion: The bar found in the impugned order was not accepted, and the interim arrangement under Section 9 was held maintainable against the backdrop of the secured asset and the bank's limited role.

Issue (ii): Whether directions could be issued for sale of the secured property, appropriation of the bank's admitted claim, and preservation of the surplus pending arbitration or a possible suit.

Analysis: The Court proceeded on the admitted position that the property's value substantially exceeded the bank's claim. Since no party would be benefited by keeping the property unsold, a practical solution was adopted: the bank was directed to take immediate steps for sale, recover its claim and sale expenses from the proceeds, and place the surplus in the hands of the designated special officers. The surplus was ordered to be preserved through short-term fixed deposits to abide by the arbitral reference or, if arbitration did not proceed, by a suit to be filed within the stipulated time. The arrangement protected the bank's dues while safeguarding the parties' competing claims to the balance.

Conclusion: The impugned order was set aside and the sale-and-deposit mechanism was restored with directions for preservation of the surplus sale proceeds.

Final Conclusion: The interim order was restructured to secure the bank's dues from the property sale while preserving the balance proceeds for determination of the parties' private dispute in arbitration or, failing that, in civil proceedings.

Ratio Decidendi: A court may craft interim relief concerning a secured asset and its sale proceeds even where the secured creditor is not a party to the arbitration agreement, so long as the arrangement does not prejudice the creditor's realised dues and preserves the surplus for adjudication of the underlying private dispute.

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