Interim security in arbitration requires prima facie liability; deposit of an admitted amount may stand, but outright payment and unsupported security cannot.

Section 17 of the Arbitration and Conciliation Act permits an arbitral tribunal to secure an amount in dispute on the basis of a sustainable prima facie finding of liability or admission, and the provision is not confined by the literal text of Order XXXVIII Rule 5 CPC. A tribunal may therefore direct deposit of an admitted amount, but it cannot order outright payment to the claimant as interim relief. Applying that principle, the direction to secure the admitted amount was upheld only as a court deposit pending the award, while the separate bank guarantee directed for the residual gold value was set aside because liability for that sum had not been prima facie established on the record.

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Issues: (i) Whether an arbitral tribunal exercising power under Section 17(1)(ii)(b) of the Arbitration and Conciliation Act, 1996 can direct security or deposit for an admitted amount without strictly satisfying the text of Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908; (ii) Whether the direction to furnish a bank guarantee for the value of residual gold remaining after termination of the agreement could be sustained on the material before the tribunal.

Issue (i): Whether an arbitral tribunal exercising power under Section 17(1)(ii)(b) of the Arbitration and Conciliation Act, 1996 can direct security or deposit for an admitted amount without strictly satisfying the text of Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908.

Analysis: The power under Section 17 to secure the amount in dispute is co-extensive with the court's power, but it is not controlled by the literal language of Order XXXVIII Rule 5. The guiding principles underlying that provision remain relevant, yet the decisive consideration is whether the tribunal has made a sustainable prima facie finding that the amount is payable or admitted. On the record, the tribunal's finding that the post-7 January 2019 amount was prima facie admitted and supported by business records was not shown to be perverse or illegal. However, an outright direction to pay the amount to the claimant exceeded interim jurisdiction.

Conclusion: The direction concerning Rs. 2,61,22,319/- was substantially upheld, but only as a deposit with the Registrar General to abide by the arbitral outcome, not as payment to the claimant. The challenge succeeded only to that limited extent.

Issue (ii): Whether the direction to furnish a bank guarantee for the value of residual gold remaining after termination of the agreement could be sustained on the material before the tribunal.

Analysis: The agreement required continued post-termination services for a transition period, but the tribunal did not record a prima facie finding that Augmont was liable to reimburse One97 for the entire value of the residual gold. The tribunal proceeded mainly on the footing that Augmont remained a custodian and that One97 was making customer payments, but that did not establish liability for the full secured amount. In the absence of a sufficient finding linking the residual gold value to an admitted or prima facie payable liability, the security direction could not stand.

Conclusion: The bank guarantee direction for Rs. 3,30,57,992/- was set aside and the challenge succeeded on this issue.

Final Conclusion: The appeal was allowed in part. The interim order was modified by substituting deposit of the admitted amount with a court deposit, while the security directed for the residual gold value was annulled.

Ratio Decidendi: In Section 17 proceedings, an arbitral tribunal may secure an amount in dispute on the basis of a sustainable prima facie finding of liability or admission, but it cannot grant an outright monetary payment as interim relief or secure a liability not prima facie established on the record.

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