Case Note & Summary
The petitioner, IDBI Trusteeship Services Limited, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim reliefs including a direction to the respondents to deposit Rs.43,63,01,49/- in court, an injunction against the mortgaged properties, and appointment of a receiver. The petitioner acted as debenture trustee for debentures issued by the first respondent, Kiri Industries Limited, under a Trust Deed dated 10th August 2011. The petitioner alleged that the respondents had created further charges on the mortgaged properties without consent, thereby impairing the security for the debenture holders. The respondents contended that no default had occurred and that the petitioner had no right to seek such reliefs. The court examined the terms of the Trust Deed and the Information Memorandum, and found that the petitioner had not established any breach of trust or default by the respondents. The court held that the petitioner failed to make out a prima facie case for interim relief, as the security remained intact and no irreparable loss was demonstrated. The balance of convenience was against granting the reliefs. Consequently, the court dismissed the petition with no order as to costs.
Headnote
A) Arbitration - Interim Measures under Section 9 - Prima Facie Case - The court examined whether the debenture trustee had made out a prima facie case for interim relief, including deposit of amount and injunction, in the absence of any default by the respondent company in payment of interest or principal to debenture holders. Held that no prima facie case was made out as the trustee failed to demonstrate any breach of trust or impairment of security. (Paras 1-10) B) Debenture Trustee - Duties and Powers - The court considered the scope of the debenture trustee's powers under the Trust Deed and the Information Memorandum, and held that the trustee cannot seek interim relief merely on apprehension of default without concrete evidence of breach. (Paras 11-20) C) Arbitration - Balance of Convenience and Irreparable Loss - The court held that the balance of convenience was not in favor of granting interim relief as the respondents had not defaulted and the security remained intact, and no irreparable loss was shown. (Paras 21-30)
Issue of Consideration
Whether the petitioner, as debenture trustee, is entitled to interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, including direction to deposit amount, injunction against mortgaged properties, and appointment of receiver, pending arbitration.
Final Decision
The court dismissed the petition with no order as to costs, holding that the petitioner failed to make out a prima facie case for interim relief.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- interim measures
- prima facie case
- balance of convenience
- irreparable loss
- debenture trustee
- trust deed
- security interest
- mortgage
- default
- appointment of receiver
