Interim security deposit cannot be retained indefinitely absent arbitration; deposit continued only until arbitration is initiated, with electricity protection maintained.

A 14-day delay in filing the appeal was condoned because the delay fell within the condonable period and the explanation was found reasonable. On the substantive issue, a deposit made as interim security in insolvency proceedings was not permitted to be retained indefinitely for a possible future arbitration dispute absent initiation of arbitration. By consent, the deposit was continued only until either party initiates arbitration, and protection against disconnection of electricity was maintained meanwhile. The impugned direction was therefore modified to align the security arrangement with the arbitral mechanism.

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Issues: (i) condonation of 14 days' delay in filing the appeal; (ii) continuation of the Rs. 1 crore deposit as security pending initiation of arbitration and restraint against disconnection of electricity.

Issue (i): condonation of 14 days' delay in filing the appeal.

Analysis: The delay was found to be within the condonable period, and the explanation for the delay was treated as reasonable and justified. The delay application was therefore allowed.

Conclusion: The delay in filing the appeal stood condoned in favour of the appellant.

Issue (ii): continuation of the Rs. 1 crore deposit as security pending initiation of arbitration and restraint against disconnection of electricity.

Analysis: The amount had been deposited as a security pursuant to the earlier interim order. After the final disposal of the underlying miscellaneous application, the Tribunal indicated that retention of the amount beyond the insolvency proceedings could not be justified in the absence of arbitration having been initiated, and that the question of security during arbitration had to be governed independently by the arbitration framework. On the parties reaching consensus, the amount was directed to continue as security only until either side initiates arbitration, and no coercive step for disconnection of electricity was to be taken in the meantime.

Conclusion: The impugned direction was modified, the deposit was continued only till initiation of arbitration, and protection against disconnection was maintained; the result was partly in favour of the appellant.

Final Conclusion: The appeal was disposed of on agreed terms with the delay condoned, the deposit kept as a limited security until arbitration is initiated, and interim protection against disconnection maintained.

Ratio Decidendi: A deposit made as interim security in insolvency proceedings cannot be retained indefinitely for a future arbitration dispute absent initiation of arbitration, and any such retention must be governed by the agreed arbitral mechanism or by a specific judicial direction within jurisdiction.

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