Interim Protection In Arbitration Can't Be Granted Merely On Disputed Money Claim: Bombay High Court

The Bombay High Court on 5 October held that a party seeking interim protection under Section 9 of the Arbitration and Conciliation Act, 1996, must demonstrate a real risk that recovery under a future arbitral award may become difficult, as a disputed monetary claim alone does not justify such relief.

Justice Amit Borkar directed Alag Property Constructions Pvt. Ltd. to deposit Rs. 58,97,600 within four weeks in a dispute with flat purchaser Hemlata Ajay Ramani over the refund of money following cancellation of a flat purchase agreement. The Bench held:

“The power under Section 9 cannot be used merely because there is some disputed claim for money. The party asking for protection has to show circumstances because of which such protection is necessary, so that the final arbitral award, if passed in its favour, does not become difficult to enforce. At the same time, the Court is not required to follow one fixed formula in every case. If the material before the Court shows that there is a real need for protection, the Court can consider an appropriate interim measure.”

On 31 March 2021, Ramani booked a flat in Alag Property Constructions' Alag Endeavour Project under an agreement that stipulated possession by 31 December 2025. After the developer failed to deliver possession, the parties executed a registered cancellation deed on 28 March 2026, providing for a refund of Rs. 58.97 lakh.

The developer issued a post-dated cheque towards the refund, which was dishonoured on 1 July 2026 due to insufficient funds. Ramani also relied on other disputes involving the developer and its transfer of redevelopment rights, while the developer disputed its liability to refund the amount.

The Court noted that the developer did not dispute transferring redevelopment rights concerning two housing societies under registered deeds dated 14 July 2026. However, it held that the transfers for lump-sum consideration did not, by themselves, establish an intention to defeat Ramani's claim, as the consideration received could remain available as an asset.

Further, it clarified that the cancellation deed and cheque only prima facie supported Ramani's claim and did not make the disputed amount an admitted debt. It held that the deposit would secure the amount without directing its payment to Ramani or deciding the merits of the dispute. The developer could still contest its liability before the arbitral tribunal.

Finding a prima facie case for interim protection, the Bench directed the developer to deposit Rs. 58,97,600 within four weeks and keep the amount in a fixed deposit with a nationalised bank. It barred the release of the amount to Ramani at this stage.

Accordingly, the High Court granted interim protection by directing the deposit of the disputed amount, leaving the developer's liability to be decided in arbitration.

For Petitioner: Advocates Mutahhar Khan a/w Maulik Tanna, Krupesh Bhosle, Krutika Dongarkar, & Harshal Gandhi

For Respondent: Advocates Bhavik Lalan a/w Sanjay P. Shinde