Section 9 permits receivership to preserve hypothecated assets, but not routine attachment securing monetary claims.

Tata Capital Limited financed the respondents’ purchase of construction equipment under Loan-cum-Hypothecation Agreements dated 8 November 2024.

The equipment was hypothecated in favour of the petitioner as security for repayment of principal, interest and other charges.

The respondents allegedly defaulted in making monthly instalments and failed to regularise their loan accounts despite reminders and demand notices.

The petitioner recalled the facilities, demanded payment of the outstanding amount, and invoked the arbitration clause.

The petitioner stated that it did not know the present location of the hypothecated equipment and apprehended that the respondents might conceal, transfer or otherwise deal with the secured assets, thereby frustrating recovery and the arbitral proceedings.

Although served, the respondents did not appear or oppose the petitions.

The petitioner therefore sought interim measures under Section 9 of the Arbitration and Conciliation Act, 1996, including disclosure of assets and the equipment’s location, attachment or security for the claim, appointment of a Receiver, restraint against alienation, police assistance, and directions to transport authorities.

Whether the petitioner had established a prima facie contractual right, subsisting arbitral dispute and need for interim protection under Section 9 of the Arbitration and Conciliation Act, 1996.

Whether the Court should direct disclosure of the present location and deployment contracts of the hypothecated construction equipment to preserve the subject matter of arbitration.

Whether the Court should appoint a Receiver to locate and take possession of the hypothecated equipment, with police assistance where necessary.

Whether the respondents should be restrained from selling, transferring, encumbering or parting with possession of the hypothecated equipment.

Whether attachment or freezing of bank accounts, furnishing of a bank guarantee or additional security, and disclosure of receivables and cash flows were justified merely on the basis of the petitioner’s monetary claim.

Whether omnibus directions should be issued to transport authorities throughout the country to blacklist the equipment and disclose its location.

The Court applied Section 9 of the Arbitration and Conciliation Act, 1996, under which interim measures may be granted to preserve the subject matter of arbitration, secure the amount in dispute, or otherwise protect the effectiveness of arbitral proceedings.

The Court relied on Essar House (P) Ltd. v. Arcellor Mittal Nippon Steel (India) Ltd., (2022) 20 SCC 178, for the principles that Section 9 proceedings require a practical and equitable approach, including consideration of a prima facie case, balance of convenience and the possibility of frustration of the arbitral proceedings, although relief must not become a routine means of securing every monetary claim.

It also relied on Sadbhav Engineering Ltd. v. Efftech Infra Engineers, 2024 SCC OnLine Guj 63, for the rule that attachment or security orders require material showing a genuine risk to the arbitral proceedings and cannot be granted merely because a monetary dispute exists.

ICICI Bank Ltd. v. Nidhi Sharma, 2019 SCC OnLine Del 12265, supported prompt preservation and supervised repossession of hypothecated movable assets whose value may depreciate over time.

The Court also applied the contractual remedies in Clauses 18.1, 18.2, 18.3, 18.4 and 18.5, which permitted declaration of outstanding dues, repossession and sale of the secured equipment, and repossession through court or arbitral orders.

The principles underlying Order XXXVIII and Order XL of the Code of Civil Procedure were applied as appropriate guides, though not as rigid procedural limitations on Section 9 jurisdiction.

The Facility Documents, statement of account, demand notices and invocation of arbitration established, prima facie, the contractual relationship, default, hypothecation and existence of an arbitral dispute.

The contractual clauses gave the petitioner a substantial prima facie right to repossess and preserve the equipment, but did not automatically entitle it to every relief sought; each prayer had to be tested against the equitable purpose of Section 9.

Since the equipment constituted the agreed security, and its location was undisclosed while the respondents remained absent, disclosure of its location and deployment contracts was directly connected with preserving the arbitral subject matter and enabling lawful repossession.

The Court therefore considered appointment of a Receiver proportionate and necessary, particularly because movable construction equipment may depreciate or become untraceable if not preserved promptly.

Conversely, the petitioner produced no material showing dissipation of bank balances, diversion of funds, disappearance of the equipment, or insufficiency of the agreed security.

Freezing bank accounts, directing a bank guarantee or compelling additional security would therefore amount to securing the entire monetary claim or imposing double security before adjudication.

Disclosure of all receivables and cash flows was also excessive because the contractual security extended to the equipment, not apparently to its operational receivables.

Likewise, nationwide directions to transport authorities were disproportionate and unsupported by evidence of attempted transfer or registration misuse.

Repossession was consequently placed under the supervision of the Court Receiver rather than being directly authorised in favour of the petitioner.

The respondents were directed, within two weeks of service of the order, to disclose the present location, identification particulars and deployment contracts of the hypothecated construction equipment.

They were restrained, pending arbitration and until further orders, from selling, transferring, alienating, encumbering, creating third-party rights in, or parting with possession of the equipment.

The Court Receiver, High Court, Bombay, was appointed with power to locate, identify and take symbolic or physical possession, seek police assistance, prepare an inventory, photograph or video-record the assets, and preserve them.

The Receiver was not permitted to sell or dispose of the equipment without further orders of the arbitral tribunal or the Court after notice to the respondents.

The prayers for attachment or freezing of bank accounts, a bank guarantee, additional security, disclosure of receivables and cash flows, and nationwide blacklisting or location directions to transport authorities were rejected at that stage.

The findings were declared prima facie and non-binding on the arbitral tribunal, and the petitioner was directed to commence or continue arbitration in accordance with Section 9(2).