Section 9 interim protection is unwarranted where mortgage security exists and SARFAESI proceedings remain pending before the DRT.

The Appellant, a non-banking financial company, extended two mortgage loan facilities to the Respondents under agreements dated 1 September 2023, aggregating to ₹2,86,36,838. Both agreements contained arbitration clauses.

The Respondents mortgaged property bearing House No. 543, Shivalik Enclave Extension 5, Village Sante Majra, District SAS Nagar, Mohali, Punjab, by deposit of title deeds as security for the facilities.

Following repayment defaults, the loan accounts were classified as non-performing assets, and the Appellant initiated recovery proceedings under the SARFAESI Act by issuing notices under Sections 13(2) and 13(4).

The Respondents challenged the SARFAESI measures before the Debts Recovery Tribunal (DRT), where proceedings remained pending after the Appellant reinitiated the statutory process.

By 13 April 2026, the outstanding liability had increased to ₹3,03,71,992, apart from further interest.

The Appellant apprehended that the mortgaged property might be insufficient to satisfy the entire liability and that the Respondents might alienate other assets, including vehicles and bank accounts.

Pending commencement of arbitration, the Appellant sought interim protection under Section 9 of the Arbitration and Conciliation Act, 1996, including restraint against alienation of the Respondents’ assets and disclosure of their assets and bank accounts.

The learned Single Judge dismissed the petition, holding that the claim was already secured by the mortgage. The Appellant challenged that order under Section 37(1)(b) of the A&C Act.

Whether the existence of a mortgage securing the loan liability precluded the grant of further interim protection under Section 9 of the A&C Act in respect of the Respondents’ other assets and the mortgaged property?

Whether the Appellant had demonstrated circumstances warranting an order under Section 9(1)(ii)(b) of the A&C Act for securing the amount in dispute, notwithstanding the pending SARFAESI/DRT proceedings?

Whether parallel proceedings before the Court under Section 9 and before the DRT for securing the same outstanding amount were appropriate?

The Court applied Section 9 of the Arbitration and Conciliation Act, 1996, particularly Section 9(1)(ii)(b), which empowers the Court to grant interim measures for securing the amount in dispute in arbitration, subject to the facts and circumstances of the case and the nature of protection sought.

The appeal was maintainable under Section 37(1)(b) of the A&C Act, read with Section 13 of the Commercial Courts Act, 2015.

The Court also considered the statutory recovery framework under Sections 13(2) and 13(4) of the SARFAESI Act and the jurisdiction of the DRT over challenges to measures taken under that Act.

It further applied the principle that a subsequent transfer of mortgaged property does not defeat the mortgagee’s rights, since such transfer remains subject to the existing mortgage and the mortgagee retains priority over subsequently created third-party rights.

The Court held that the mortgaged property already secured the liability forming the subject matter of the proposed arbitration, and the Appellant had initiated SARFAESI proceedings to enforce that security.

Consequently, any apprehension regarding creation of third-party rights in the mortgaged property was insufficient because such rights would remain subject to the mortgage and would not prejudice the mortgagee’s priority.

Although Section 9(1)(ii)(b) permits an order securing the amount in dispute, the Appellant relied primarily on the mere possibility that the mortgaged property might prove inadequate, without producing further material demonstrating an immediate necessity for restraining all the Respondents’ assets.

The Court also noted that arbitration had not yet been invoked, while proceedings concerning the SARFAESI measures were pending before the DRT.

The Appellant could therefore seek appropriate protection and disclosure before the DRT, and permitting parallel proceedings to secure the same debt was considered inappropriate.

The limited particulars of the alleged assets—two vehicles and three bank accounts—were also insufficient to justify the broad restraint sought.

The appeal and the pending application were accordingly dismissed, and the order of the learned Single Judge dismissing the Section 9 petition was affirmed.