Interim protection under Section 9 may preserve shares held under a repudiated settlement pending arbitration.

The Petitioner, engaged in dealing in listed and unlisted equity shares, had entered into transactions with the Respondent concerning shares of the Metropolitan Stock Exchange of India and the National Stock Exchange.

Following delivery disputes, the parties executed a Settlement-cum-Share Transfer Agreement dated 11 February 2026, under which the Petitioner claimed to have transferred cash and securities worth approximately ₹2.99 crore, including shares of Evergreen Recyclekaro (India) Ltd. and Zedengines India Ltd.

The parties subsequently executed a Share Transfer and Settlement Agreement dated 11 September 2026. Under that agreement, the Petitioner transferred 50,00,000 listed shares of Kalind Ltd. to the Respondent, described as the “transferee/selling agent,” for sale through the BSE and application of the net sale proceeds towards the recorded dues.

The agreement allegedly required an orderly sale at or above the agreed reference price, furnishing of sale statements, and re-transfer of specified securities.

On 14 September 2026, the Respondent allegedly repudiated the settlement, denied that any full and final settlement had been concluded, and nevertheless continued to hold the Kalind shares.

Apprehending that the Respondent might sell or otherwise deal with the shares contrary to the contractual mechanism, dissipate the proceeds, and render the proposed arbitration ineffective, the Petitioner filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996.

1. Whether interim protection under Section 9 of the Arbitration and Conciliation Act, 1996 was warranted to restrain the Respondent from dealing with or disposing of the 50,00,000 Kalind shares except in accordance with the Share Transfer and Settlement Agreement dated 11 September 2026.

2. Whether the Respondent, having received and retained the Kalind shares as a “transferee/selling agent,” could deal with or appropriate those shares and their sale proceeds contrary to the contractual restrictions pending arbitration.

3. What directions should govern the continuation of the interim protection and the initiation and constitution of the arbitral tribunal.

The Court applied Section 9 of the Arbitration and Conciliation Act, 1996, which empowers the court to grant interim measures before or during arbitral proceedings to preserve the subject matter of the dispute and protect the efficacy of the eventual arbitral relief.

The Court also applied the principle that interim protection may be granted where the applicant establishes a prima facie case and demonstrates a credible risk that the subject matter may be dealt with in a manner that frustrates or prejudices the arbitration.

Upon constitution of the arbitral tribunal, the Section 9 proceedings may be treated as an application under Section 17 and placed before the tribunal for reconsideration.

No judicial precedent was expressly cited.

The Court found a prima facie case because the Respondent had received and continued to hold the 50,00,000 Kalind shares pursuant to an agreement that restricted the purpose, manner, and extent of their sale and appropriation.

The Respondent’s alleged repudiation of the very agreement under which it obtained the shares, while retaining possession of them, created a real apprehension that the shares could be sold contrary to the agreed mechanism or that the proceeds could be dissipated.

Since the shares were freely transferable listed securities and a sale to third parties could irreversibly alter the subject matter of the dispute, interim protection was considered necessary to preserve the effectiveness of the proposed arbitration.

The Court therefore restrained dealings with the shares except in accordance with the contractual mechanism and directed preservation of all records relating to them.

The Court did not finally determine the parties’ contractual rights or the merits of the dispute.

The Petitioner was directed to initiate arbitral proceedings and take steps for constitution of the arbitral tribunal within three weeks.

The interim arrangement was to remain subject to consideration by the arbitral tribunal after its constitution, with liberty to the tribunal to continue, modify, vary, or vacate it.

The Court clarified that the interim protection would continue only for the three-week period granted for initiation of arbitration and would automatically stand vacated thereafter unless otherwise continued by the appropriate forum.

The petition and pending applications were disposed of, with all rights and contentions left open.