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2023 (9) TMI 1571 - HC - IBCSeeking an order of injunction on the respondent from dealing with or taking any step in creating any interest over 13 flats together with 13 car parking spaces with each flat and an additional 66 car parking spaces and undivided proportionate share of a piece of land - section 9 of The Arbitration and Conciliation Act, 1996 - mortgage - right in rem or not - whether the petitioner is seeking to enforce any mortgage in the present application? - HELD THAT - The application does not disclose any such pleadings or prayers. The words used in the application are to the effect that the petitioner would lose security interest over the assets as the respondent is indebted to several other creditors and is unable to pay its dues. The only prayer is for a restraint on the respondent from dealing with or creating any interest over the 13 flats together with car parking spaces and other car parking spaces as specified in prayer (a) of the application. There is also no evidence on record to show that the petitioner is seeking enforcement of any mortgage. The respondent therefore cannot resist the reliefs on a pre-supposition of the petitioner s claim in the arbitration - The decision of the Bombay High Court in ADITYA BIRLA FINANCE LIMITED VERSUS CARNET ELIAS FERNANDES, MRS. EVERLYN C. FERNANDES 2015 (9) TMI 1765 - BOMBAY HIGH COURT on the other hand assists the petitioner in the facts of the present case. The Bombay High Court reiterated the power of a Court in a section 9 application to grant interim measures even where the property is not the subject matter of the dispute in arbitration. It was further held that interim measures can be granted under section 9 even if the petitioner gives up its claim for enforcement of mortgage properties. It is undisputed that the respondent is indebted to the petitioner for a substantial amount of money in terms of the loan agreement and the supplementary agreement; the former containing an arbitration clause. It is also undisputed that the respondents created a charge on the 13 flats together with 13 car parking spaces bundled with each flat and an additional 66 car parking spaces and undivided proportionate share of the land measuring 3337.34 square meters in the building. The respondent also hypothecated its receivables to the petitioner. Both the document of charge as well as the deed of hypothecation dated 31st March, 2020 are a part of the records. There is sufficient evidence that the petitioner s right on the hypothecated and charged assets which is also the collateral for the loan advanced to the respondent is at risk. The restraining orders on the respondent by the Bombay High Court and other statutory authorities have already been acted upon and there is hence every chance that the petitioner s security may further be put at risk. This Court is of the view that the petitioner is entitled to an order of injunction restraining the respondent from dealing with any further or creating any interest over 13 flats/units together with 13 car parking spaces bundled with each flats/units and an additional 66 car parking spaces and undivided proportionate share of the land measuring 3337.34 square meters in the building to be constructed by the respondent. Application allowed.
Issues:
Application for injunction under section 9 of The Arbitration and Conciliation Act, 1996 regarding security interest in properties due to default in loan repayment. Analysis: The petitioner sought an injunction on the respondent from dealing with 13 flats, car parking spaces, and land due to default in loan repayment. The petitioner, under an Administrator appointed by NCLT, had given a loan to the respondent, who defaulted in repayment. The loan agreement was terminated, and the respondent was indebted for a substantial amount. The petitioner claimed security interest over the properties due to defaults. The respondent argued that enforcement of mortgage should be decided by a Court, not an arbitral tribunal, citing the Booz Allen case. However, the Court noted that the application did not seek enforcement of mortgage but protection of security interest. The respondent's argument that interim relief cannot be granted if final relief is non-arbitrable was rejected. The Court emphasized the power of the Court to grant interim measures, even if the property is not the subject of the arbitration. The Court found that the respondent was in breach of the loan agreement, and the petitioner's rights needed protection. Section 9 of the Arbitration Act provides for interim measures to preserve the subject matter of arbitration. The Court observed that the petitioner's rights on the charged assets were at risk, especially with existing restraining orders. Therefore, the Court granted an injunction restraining the respondent from dealing with the properties and appointed a Receiver to take symbolic possession. The Court emphasized the need for arbitration proceedings to commence within 90 days of the interim measure. In conclusion, the Court allowed the application for injunction, appointing a Receiver to protect the petitioner's rights over the properties. The judgment highlighted the importance of timely arbitration proceedings and the Court's power to grant interim measures for protection. The parties were directed to act in accordance with the provisions of the Arbitration Act.
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