After ₹240-Crore Settlement Default, Bombay HC Orders Companies To Disclose Assets, Restrains Deals That Could Frustrate ₹278-Crore Claim

The parties settled disputes arising from an earlier business arrangement through Consent Terms dated 22 February 2026, followed by a consent arbitral award dated 16 March 2026.

Respondent Nos. 1 and 2 agreed to pay ₹240 crore by the stipulated date; the Consent Terms provided for an enhanced amount and recourse to Master General Powers of Attorney (MGPAs) and scheduled properties in the event of default.

Payment was not made by the extended deadline of 6 September 2026, and the Petitioners sought disclosure of assets and interim restraints under Section 9 of the Arbitration and Conciliation Act, 1996.

An earlier Section 9 petition by the Respondents, relying in part on alleged delay in clearing encumbrances over Chennai lands, had been dismissed on 7 September 2026.

1. Whether the Petitioners had established a sufficient basis for interim measures under Section 9, including asset disclosure and restraints, following non-payment by the extended deadline.

2. Whether the disputed enhanced settlement amount and default provisions could be relied on to justify interim protection without finally determining their enforceability under Section 74 of the Indian Contract Act, 1872.

3. Whether protective relief could extend to the scheduled properties and identifiable proceeds connected with Respondent Nos. 3 and 4, without imposing personal liability on them or prejudicing third-party rights.

4. Whether the dispute remained amenable to Section 9 relief after the earlier arbitration had concluded and a fresh arbitration under the Consent Terms was contemplated.

Section 9 of the Arbitration and Conciliation Act, 1996 empowers the Court to grant appropriate interim measures to preserve the subject matter and effectiveness of arbitration, based on the circumstances and evidence; a monetary claim alone does not justify an injunction against all assets.

Essar House Private Limited v. Arcelor Mittal Nippon Steel India Limited, (2022) 20 SCC 178, confirms that Section 9 is not governed rigidly by every technical requirement of Order XXXVIII Rule 5 of the Code of Civil Procedure, though relief must be justified and carefully tailored.

Under Section 74 of the Indian Contract Act, 1872, a stipulated sum is not automatically recoverable in full upon breach; the court must consider reasonable compensation, and the question depends on the agreement and circumstances. Fateh Chand v. Balkishan Das, ONGC Ltd. v. Saw Pipes Ltd. and Kailash Nath Associates v. Delhi Development Authority were applied to identify that principle.

Contractual terms must be read together and not rewritten by adding conditions the parties did not agree to, as stated in Nabha Power Ltd. v. Punjab State Power Corporation Ltd., (2018) 11 SCC 508.

A consent judgment is intended to conclude litigation and creates an estoppel by judgment, as explained in Byram Pestonji Gariwala v. Union Bank of India, (1992) 1 SCC 31.

Section 9 may extend to a third party where necessary to protect the arbitral subject matter, but cannot be used to impose on that person liability not arising under the award or to interfere unjustifiably with independent third-party rights.

The Court found that the Settlement Amount remained unpaid by the extended deadline and that financing efforts and alleged delays concerning the Chennai encumbrances did not themselves extend the agreed payment period; the earlier judgment rejecting that explanation had not been stayed.

The Consent Terms provided a prima facie security mechanism triggered by default, but default did not itself transfer ownership of the scheduled properties: the parties’ agreed procedures, valuations, adjustments and registration requirements remained applicable.

The objection under Section 74 raised issues for the competent forum and was not finally decided; interim protection would preserve assets without awarding ₹278 crore or determining the recoverable amount.

Given the default, the agreed security arrangement and evidence of ongoing property transactions, disclosure and a tailored restraint were justified.

Respondent Nos. 3 and 4 could not be made personally liable for the settlement merely as confirming parties, but limited protection could apply to identified properties and traceable proceeds, subject to existing third-party rights and the order in Respondent No. 4’s pending civil suit.

Respondent Nos. 1 and 2 were directed to disclose their assets and encumbrances, including bank accounts and investments, and to furnish income-tax returns for the preceding three financial years within seven days.

They were restrained, pending commencement and conclusion of arbitration, from dealing with their movable or immovable assets in a manner that may defeat or frustrate the Petitioners’ claim, except with prior leave of the Court or competent arbitral forum.

The order preserved the Petitioners’ ability to exercise rights available under the Consent Terms and MGPAs in accordance with law, without deciding final liability or the enforceability of the enhanced amount.

Respondent No. 4 was directed to maintain status quo over identified, unsold scheduled Mysore lands, subject to existing purchaser and allottee rights and orders in O.S. No. 440 of 2026; Respondent Nos. 3 and 4 were directed to disclose relevant sale or transfer proceeds, and identifiable proceeds still available were to be deposited in Court.

Respondent No. 3 was also directed to maintain status quo over the identified, unsold 29 acres and 1 guntha, subject to existing rights and orders.

All remaining issues were left open, and the request to stay the judgment was rejected.