Interim Protection Granted to Preserve Records Pending Arbitration Despite Denial of Pre-Award Deposit Relief

The Petitioner, Bhutan Ventures Ferro Alloys Pvt. Ltd., entered into three Engineering, Procurement, and Construction (EPC) contracts with the Respondent for the setup of a 2 × 33 MVA Ferro Silicon Plant in Bhutan.

The Petitioner released an aggregate advance of ₹38.61 crores.

The Petitioner alleged that the Respondent failed to perform contractual obligations—specifically making no supplies and executing minimal civil works—despite receiving the funds.

Suspecting misappropriation of funds, the Petitioner terminated the contracts and invoked arbitration.

While a Section 11 petition is pending before the Hon’ble Supreme Court, the Petitioner filed the present petition under Section 9 of the Act seeking interim measures, including mandatory deposits and disclosure of financial records.

The Respondent failed to appear despite being served via publication and email.

1. Whether the Petitioner is entitled to interim measures under Section 9 of the Arbitration and Conciliation Act, 1996, for the preservation of records and security of funds pending the constitution of an Arbitral Tribunal.

2. Whether the court should direct the Respondent to deposit the advance amounts at this interim stage when such claims overlap with the final relief sought in arbitration.

The court primarily applied Section 9 of the Arbitration and Conciliation Act, 1996, which empowers the Court to grant interim measures of protection for the preservation of assets or evidence that may be the subject matter of the dispute before or during arbitral proceedings.

The court also exercised its power to proceed ex parte under the Code of Civil Procedure principles after satisfying itself that the Respondent had been duly served through substituted service and electronic mail.

The Court examined the material on record and found a prima facie case that substantial contractual advances were released but not satisfactorily accounted for by the Respondent.

Since the Respondent failed to join the proceedings or file a reply despite service, the Court found an apprehension of prejudice to the Petitioner’s claims.

The Court reasoned that limited interim protection was "warranted for preserving the efficacy of the arbitral proceeding" regarding the documentation and financial records.

The Court distinguished between "preservation" and "adjudication"; it declined the prayer for the deposit of ₹32.21 crores and ₹4.26 crores at the Section 9 stage because these reliefs "substantially overlap" with the monetary claims to be decided by the Arbitral Tribunal.

The Court directed the Respondent to preserve all books of accounts, invoices, bank statements, and sub-contract agreements, and prohibited their destruction or alteration pending the arbitral proceedings.

The petition was disposed of with liberty granted to the Petitioner to seek further reliefs, including security for the amount in dispute, before the Arbitral Tribunal under Section 17 of the Act.