on deck batter interference?

[Little Jimmy]

This happened today. Fed game. I'm in the field. R1 on second. Batter squares to bunt. She misses with no apparent bat contact. Ball bounces off the backstop over to the on deck batter who bends down, picks it up, and tosses it to the catcher. R1 takes a few steps to possibly try for third but stops maybe twenty feet off second when on deck batter handles the ball. Plate ump calls dead ball and keeps R1 at second because, he says, everyone must have thought it was a foul ball, even though it wasn't. All participants bought it and we moved on.

After the game we discussed the play and neither of us was sure if his ruling could be considered right (even though he sold it). And I've been looking for some type of interference situation involving the on deck batter and so far I'm dry. Can anyone site a Fed rule dealing with the on deck batter handling a live ball?