Interim protection in section 9 arbitration must be limited to charged assets; bank-account restraint was vacated, investment protection remained.

In a section 9 proceeding under the Arbitration and Conciliation Act, 1996, interim protection must remain confined to what is necessary to secure the charged assets on a prima facie basis. The court found the bank-account freeze unjustified on the material then available because existing SARFAESI protection over the secured assets was sufficient and the restraint would interfere with ordinary business; the bank-account injunction was vacated. At the same time, the court sustained protection over disclosed and future investments covered by hypothecation, restraining disposal, transfer, or redemption of those assets and directing periodic financial disclosure. The interim order was therefore modified rather than wholly sustained or set aside.

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Issues: (i) Whether the interim restraint on operation of the respondent's bank account should be continued, varied, or vacated in proceedings under section 9 of the Arbitration and Conciliation Act, 1996; (ii) Whether a continuing injunction should be imposed on the respondent's disclosed and future investments and allied disclosure obligations should be directed.

Issue (i): Whether the interim restraint on operation of the respondent's bank account should be continued, varied, or vacated in proceedings under section 9 of the Arbitration and Conciliation Act, 1996.

Analysis: The disputed facility was prima facie admitted in the respondent's books, but the Court found that the additional restraint on the bank account was not justified on the material then available. The existing protection under the SARFAESI regime over the secured assets was considered sufficient, and the Court held that continuation of the bank-account freeze would interfere with the respondent's ordinary business. The Court also took note of the broader insolvency and resolution context and the control exercised through the resolution framework.

Conclusion: The bank-account injunction was vacated.

Issue (ii): Whether a continuing injunction should be imposed on the respondent's disclosed and future investments and allied disclosure obligations should be directed.

Analysis: The Court found that the hypothecation covered present and future investments and that the petitioner was entitled to protection of the charged assets. At the same time, the Court declined to go into a fresh valuation exercise or expand the protection beyond the securities created by the parties. Since the respondent's disclosures showed investments that remained within the charged field, the Court considered it appropriate to preserve protection against disposal, transfer, or redemption of such investments and to require periodic disclosure of financial information.

Conclusion: The injunction over disclosed and future investments, together with disclosure directions, was sustained.

Final Conclusion: The interim order was modified rather than wholly sustained or wholly set aside. Protection was retained over the charged investments, but the special restraint on the bank account was withdrawn, and the applications were disposed of accordingly.

Ratio Decidendi: In a section 9 proceeding, interim protection must be confined to what is necessary to secure the charged assets on a prima facie basis, and a broader restraint that unduly hampers ordinary business will be vacated where the existing security framework affords adequate protection.

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