Farmers in Central India practice a unique rain water management system ('Haveli') based on impounding rain water in the fields during three months monsoon season (June-September) and draining out in October. Winter crops, mainly grain legumes are then grown that utilize the soil moisture conserved in the soil profile. We monitored the soil physico-chemical and fertility properties, C and N mineralization, microbial populations and biomass and soil enzymes in the 0-30 cm soil layer at ten sites over three years at four stages viz., prior to submergence in summer (PS), during water-logging (WL), after drainage (AD) and after legume cropping (AC). Anaerobic conditions during water-logging (for 11 weeks) led to extensive losses of soil carbon amounting to 1900 mg C kg -1 soil but no significant change in soil N. Post-drainage and decomposition of weeds (for 6 weeks), there was an increase in soil C of 3700 mg C kg -1 and soil N of 74.1 mg N kg -1 soil. Overall in 17 weeks, there was a net increase of 1800 mg C kg -1 (+30.5%) and 87.5 mg N kg -1 (+20.1%) amounting to soil C and N accretion rate of 15.1 mg C kg -1 soil day -1 and 0.74 mg N kg -1 soil day -1. Microbial biomass decreased by 19.7% during 11 weeks of water logging and improved by 54% in the 6 weeks aerobic phase; an overall increment of 23.5% (31 mg microbial C kg -1) in 17 weeks. Prolonged water-logging induced severe stress on microbial processes. However, post-drainage, there was significant improvement in microbial populations, nitrogen mineralization, soil enzymes and soil fertility. There were strong relationships between soil enzymes and microbial carbon; and, nitrogen mineralization and soil carbon. Results unequivocally demonstrated the benefits of rain-water conservation in Vertisols for carbon sequestration and nitrogen accretion and improvement of soil biological quality.