Delhi HC Bars Borrowers From Creating Third-Party Rights In Property Mortgaged For ₹3.5-Crore Loan Until Section 17 Decision, Capped At 90 Days

In brief

The question

Whether interim protection under Section 9 was warranted to prevent alienation of the mortgaged property pending constitution of the arbitral tribunal.

The court held

The petition was disposed of with a direction that the respondents not create any third-party interest in the specified property until the petitioner’s proposed Section 17 application was decided, subject to the restraint expiring after 90 days from the date of the order if that occurred earlier.

It also directed

The petitioner was directed not to delay and, if necessary, to seek appointment of an arbitrator without further delay.

The court expressed no opinion on the merits, which were left for independent determination by the arbitral tribunal.

01Facts

Axis Finance Limited, a non-banking financial company, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking, among other reliefs, to restrain the respondents from dealing with a Bilaspur property mortgaged to secure a loan of ₹3.5 crore.

p. 1

The loan had been recalled, and the outstanding amount was stated to be ₹3,45,40,330 as of 6 February 2026.

p. 2

The petitioner said it had invoked arbitration and feared the respondents might dispose of assets, including the mortgaged property; the respondents denied any present intention to create third-party interests in the property.

p. 2

The petitioner sought interim protection pending constitution of the arbitral tribunal.

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02Issues

i.Whether interim protection under Section 9 was warranted to prevent alienation of the mortgaged property pending constitution of the arbitral tribunal.

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ii.Whether the restraint should continue until the petitioner’s proposed application under Section 17 was decided, subject to a time limit.

p. 3

03Law Applied

Section 9 of the Arbitration and Conciliation Act, 1996 empowers the court to grant protective and preservative interim measures to safeguard the subject matter of arbitration and preserve the efficacy of the arbitral remedy pending constitution of the tribunal.

p. 3

Section 17 provides for interim measures by the arbitral tribunal; the court’s direction in this case was limited pending the petitioner’s proposed application under that provision.

p. 3

The judgment also refers to Section 151 CPC in describing the petition, but does not set out a distinct rule under that provision.

p. 1

Provisions in the judgment · 3 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 9 Section 17

Code of Civil Procedure, 1908 Section 151

04Reasoning

The court considered that the respondents had mortgaged the property to secure the loan and that its transfer before constitution of the tribunal could prejudice the petitioner and frustrate the arbitral remedy.

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Although the respondents denied any intention to create third-party interests, the court held that the petitioner’s apprehension could not be brushed aside.

p. 3

On a holistic assessment, it found a prima facie arbitral claim and concluded that the balance of convenience favoured preserving the property for a limited period.

p. 3