Acceptance of debt servicing post-recall notice waives termination and precludes Section 9 interim relief.

The Petitioner provided a Rupee Term Loan of Rs. 273.48 crores to the Respondent (a Joint Venture between Shristi Infrastructure and Asansol Durgapur Development Authority/ADDA) under an agreement dated April 2, 2019

The loan was to be secured by a mortgage on land, contingent upon the Respondent obtaining a No Objection Certificate (NOC) from ADDA within 60 days of receipt

The Petitioner alleged several "incidents of default," including the Respondent's failure to obtain the NOC, unauthorized changes in the JV's constitution, and financial instability

Consequently, the Petitioner issued a loan recall notice on December 11, 2024, claiming dues exceeding Rs. 461.11 crores

The Respondent countered that they had consistently paid interest installments as per the schedule—even after the recall notice—and that the failure to create a mortgage was due to ADDA’s non-compliance, which was currently subject to legal proceedings

The Petitioner sought interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, specifically the creation of an Escrow Account for all project receivables

1. Whether the Petitioner is entitled to interim protection under Section 9, such as the attachment of receivables or creation of an escrow account, in the absence of a repayment default

2. Whether the failure to create a mortgage constitutes a willful breach of contract when the condition is dependent on a third party (ADDA)

3. Whether the Petitioner’s acceptance of interest payments after the loan recall notice constitutes a waiver of the alleged termination

The court primarily applied Section 9 of the Arbitration and Conciliation Act, 1996, regarding interim measures

It relied on the principles of Order XXXVIII Rule 5 of the Code of Civil Procedure (CPC), as elucidated in Sanghi Industrial Limited v. Ravin Cables Ltd., which requires specific allegations of attempts to defeat a future award to justify securing the amount in dispute

The court further applied the doctrine of "election" and "affirmation of contract" from STOCZNIA GDANSKA SA v. Latvian Shipping Company [para 21] and Ganga Retreat and Towers Ltd. v. State of Rajasthan [para 22], establishing that a party cannot treat a contract as terminated while continuing to accept performance.

Finally, it invoked the equitable principle "delay defeats equity" as discussed in Future Corporate Resources Pvt. Ltd. v. Edelweiss Special Opportunities Fund

The court found that the Respondent had regularly serviced the loan interest from 2019 through 2025 without default

Crucially, the Petitioner accepted multiple installments after issuing the loan recall notice in December 2024, which the court viewed as an affirmation of the contract, estopping the Petitioner from claiming immediate termination based on prior alleged defaults

Regarding the mortgage, the court noted the default was not "willful" as the Respondent had pursued arbitration against ADDA to obtain the necessary NOC

The court distinguished this case from previous precedents (AP COM 110/163) where actual interest defaults had occurred

It reasoned that appointing Special Officers to manage an Escrow Account would be an "extra-contractual" penal action that would unnecessarily interfere with the Respondent's regular business and the ongoing housing project

The court concluded that the Petitioner failed to demonstrate a prima facie case of imminent dissipation of assets that would frustrate a future arbitral award

The court held that since the principal repayment does not commence until 2029 and interest is being paid, the Petitioner’s apprehensions were speculative

The court disposed of the application with a direction that the Respondent must inform the Petitioner of any future sales or leases of units and disclose the quantum of money received therefrom

The Petitioner remains at liberty to seek further interim orders before the yet-to-be-constituted Arbitral Tribunal