Case Note & Summary
The petitioner, L&T Finance Limited, filed an arbitration petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking appointment of Court Receiver, injunction, and disclosure of assets against the respondents, Vardhman Chemtech Ltd and its guarantors. The petitioner had granted a loan of Rs.10 crores to respondent no.1 on 19.11.2010, secured by hypothecation of assets and personal guarantees of respondents 2 to 4. The respondents defaulted on repayment, leading the petitioner to issue a demand cum termination notice on 8.8.2013 for Rs.3,78,01,512/- with interest. The petitioner appointed a sole arbitrator. An ad interim order was passed on 5.9.2013 directing disclosure of assets and restraining alienation. The respondents filed a notice of motion to vacate the order on jurisdictional grounds but did not disclose assets or file an affidavit on merits. The petitioner argued that the whereabouts of hypothecated assets were unknown, the respondents were in financial distress, and without interim relief, any arbitral award would be unexecutable. The respondents contended that the court lacked jurisdiction and that the petition was not maintainable. The court held that the petitioner had a prima facie case, balance of convenience favored the petitioner, and irreparable loss would ensue if relief was denied. The court allowed the petition, appointing the Court Receiver over the properties at Exhibit G serial nos. 1 to 4 and over the hypothecated assets at serial no. 5, with the receiver to take possession and sell the assets if necessary. The ad interim order was confirmed, and the notice of motion was dismissed.
Headnote
A) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Appointment of Receiver - The petitioner, a lender, sought appointment of Court Receiver over hypothecated assets and injunction against alienation by the borrower and guarantors who defaulted on a loan of Rs.10 crores. The Court held that since the respondents failed to disclose assets despite court order and were in financial distress, appointment of receiver was necessary to prevent the award from becoming a paper decree. (Paras 1-7) B) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Prima Facie Case - The Court found that the petitioner had a good prima facie case as the loan agreement and guarantee were admitted, and the respondents had not repaid the amount despite demand. The balance of convenience was in favor of the petitioner, and irreparable loss would be caused if interim relief was not granted. (Paras 5-7)
Issue of Consideration
Whether the petitioner is entitled to appointment of Court Receiver and interim injunction under Section 9 of the Arbitration and Conciliation Act, 1996, to secure the loan amount and hypothecated assets pending arbitration.
Final Decision
The court allowed the petition and appointed the Court Receiver over the properties described at serial nos. 1 to 4 of Exhibit G and over the hypothecated assets at serial no. 5 of Exhibit G. The Court Receiver was directed to take possession of the properties and sell them if necessary. The ad interim order dated 5.9.2013 was confirmed. The Notice of Motion filed by the respondents was dismissed.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- Appointment of Receiver
- Interim Measures
- Secured Creditor
- Hypothecation
- Prima Facie Case
- Balance of Convenience
- Irreparable Loss
