Bombay High Court Allows Commercial Suit and Interim Application in Asset Reconstruction Dispute — Upholds Validity of Assignment of Debt and Security Interest. Court holds that an Asset Reconstruction Company (ARC) is entitled to enforce security interest under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) after valid assignment of debt.

High Court: Bombay High Court Bench: BOMBAY In Favour of Prosecution

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2026-05-18 20:45:34

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Case Note & Summary

The Applicant, Phoenix ARC Private Limited, an Asset Reconstruction Company registered with the RBI, filed a Commercial Suit (COMSS No. 124 of 2025) along with an Interim Application (IAL No. 20363 of 2025) against Future Brands Limited and Future Entertainment Private Limited. The Applicant claimed that it had acquired the debt and security interest from the original lender, and the Respondents had defaulted in repayment. The Applicant sought recovery of the outstanding amount and interim relief by way of attachment before judgment. The court examined the validity of the assignment and the maintainability of the suit. The court held that the assignment was valid under the SARFAESI Act and the suit was maintainable as a commercial dispute. The court also found that the Applicant had made out a prima facie case for attachment before judgment and granted interim relief. The court directed the Respondents to furnish security or face attachment of their assets.

Headnote

A) Asset Reconstruction - Assignment of Debt - Validity of Assignment - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - The court examined the validity of assignment of debt from the original lender to the ARC. Held that the assignment was valid and the ARC steps into the shoes of the lender. (Paras 1-10)

B) Commercial Suit - Maintainability - Commercial Courts Act, 2015 - The court considered whether the suit was maintainable as a commercial suit. Held that the dispute arises out of a commercial transaction and is maintainable. (Paras 11-15)

C) Interim Relief - Attachment Before Judgment - Order 38 Rule 5 CPC - The court considered the application for interim relief. Held that the Applicant has made out a prima facie case for attachment before judgment. (Paras 16-25)

Issue of Consideration

Whether the assignment of debt and security interest in favour of the Applicant/Plaintiff (Phoenix ARC Private Limited) is valid and enforceable, and whether the Applicant is entitled to recover the outstanding dues from the Respondents.

Final Decision

The court allowed the interim application and directed the Respondents to furnish security within a specified period, failing which attachment would be ordered. The suit was also held maintainable.

Law Points

Assignment of debt
Security interest enforcement
Asset Reconstruction Company
Validity of assignment
Commercial suit maintainability

Case Details

2026:BHC-OS:9375

Commercial Suit No. 124 of 2025 with Interim Application (L) No. 20363 of 2025

2026-04-15

Gauri Godse J

2026:BHC-OS:9375

Mr. Shyam Kapadia a/w. Mr. Ranjit Shetty a/w. Mr. Rahul Dev a/w. Ms. Monika Vyas i/b. Argus Partners for the Applicant/Plaintiff; Mr. Ashish Kamat, Senior Counsel a/w. Mr. Harsh Moorjani, Ms. Petrushka Dasgupta, Ms. Krishna Baruah and Mr. Altamash Qureshi i/b. Link Legal for Defendants.

Phoenix ARC Private Limited

Future Brands Limited and Future Entertainment Private Limited

Nature of Litigation

Commercial suit for recovery of debt and enforcement of security interest by an Asset Reconstruction Company.

Remedy Sought

The Applicant sought recovery of outstanding dues and interim relief by way of attachment before judgment.

Filing Reason

Default in repayment of debt assigned to the Applicant.

Issues

Whether the assignment of debt and security interest in favour of the Applicant is valid and enforceable. Whether the Applicant is entitled to interim relief by way of attachment before judgment.

Submissions/Arguments

The Applicant argued that the assignment was valid under the SARFAESI Act and the Respondents had defaulted. The Respondents argued that the assignment was not valid and the suit was not maintainable.

Ratio Decidendi

An Asset Reconstruction Company, after valid assignment of debt, steps into the shoes of the original lender and is entitled to enforce the security interest under the SARFAESI Act. The court also held that a commercial suit for recovery is maintainable and interim relief can be granted if a prima facie case is made out.

Judgment Excerpts

The assignment of debt in favour of the Applicant is valid and the Applicant is entitled to enforce the security interest. The Applicant has made out a prima facie case for attachment before judgment.

Procedural History

The Applicant filed a Commercial Suit (COMSS No. 124 of 2025) along with an Interim Application (IAL No. 20363 of 2025) before the High Court of Judicature at Bombay. The court heard the matter and passed the order on 15 April 2026.

Acts & Sections

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002:
Commercial Courts Act, 2015:
Code of Civil Procedure, 1908: Order 38 Rule 5