Section 9 permits receivership to preserve hypothecated movable assets, but not routine security for monetary claims.

Tata Capital Limited sanctioned construction-equipment finance to the respondents under Loan-cum-Hypothecation Agreements dated 8 November 2024. The respondents agreed to repay the loans in instalments and created a first and exclusive hypothecation over the financed construction equipment as security.

Following alleged defaults and only part-payments, Tata Capital issued demand and recall notices, demanded the foreclosure amount, and invoked the arbitration clause.

Tata Capital alleged that the whereabouts of the hypothecated equipment were unknown and sought interim protection under Section 9 of the Arbitration and Conciliation Act, 1996, including disclosure of assets and equipment location, restraint against dealing with the equipment, attachment/freezing of bank accounts, security for the claim, appointment of a receiver, police assistance, and directions to transport authorities.

The respondents, though served, did not appear or contest the petitions.

Since the legal and factual issues were common, the Court decided 25 connected petitions by a common judgment, treating Petition No. 8727 of 2026 as the lead matter.

Whether Tata Capital had established a prima facie contractual and arbitral dispute warranting interim protection under Section 9 of the Arbitration and Conciliation Act, 1996.

Whether the Court should direct disclosure of the respondents’ assets, including the present location and deployment contracts of the hypothecated construction equipment.

Whether the respondents’ bank accounts should be attached or frozen, or whether the respondents should be directed to furnish a bank guarantee or other security for Tata Capital’s monetary claim.

Whether a Court Receiver should be appointed to trace and take possession of the hypothecated construction equipment, with police assistance where necessary.

Whether the respondents should be restrained from selling, transferring, encumbering, or creating third-party rights in the hypothecated equipment, and whether omnibus directions should be issued to transport authorities to blacklist or locate the equipment.

The Court applied Section 9 of the Arbitration and Conciliation Act, 1996, which empowers the Court to grant just and convenient interim measures for securing the amount in dispute, preserving the subject matter of arbitration, and preventing frustration of arbitral proceedings.

The power is broad and is not controlled by every technical requirement of the Code of Civil Procedure, but must nevertheless be exercised judicially on the basis of a prima facie case, balance of convenience, necessity, and the likelihood that refusal of relief would frustrate the arbitration.

The Court relied on Essar House (P) Ltd. v. Arcellor Mittal Nippon Steel (India) Ltd., (2022) 20 SCC 178, for the practical and flexible approach under Section 9.

The Court relied on Sadbhav Engineering Ltd. v. Efftech Infra Engineers, 2024 SCC OnLine Guj 63, for the principle that attachment or security for a monetary claim cannot become routine and requires material showing a genuine risk to the arbitral proceedings.

Order XXXVIII Rule 5 CPC supplied the underlying principle against securing a claim merely because a money dispute exists, although its technical requirements do not strictly govern Section 9 proceedings.

Order XL CPC governed the appointment and powers of a receiver.

The Court also relied on ICICI Bank Ltd. v. Nidhi Sharma, 2019 SCC OnLine Del 12265, recognising that hypothecated movable assets may depreciate or become difficult to trace and may require prompt preservation, repossession, and, in an appropriate case, sale subject to safeguards.

The loan agreements, statements of account, demand notices, recall of the facility, and hypothecation documents established, prima facie, the contractual relationship, alleged defaults, subsisting monetary claims, and an arbitrable dispute.

Clauses 18.1, 18.2 and 18.5 expressly permitted declaration of the outstanding amount, repossession and sale of the hypothecated equipment, and repossession through a court or arbitral tribunal.

However, the Court distinguished preservation of the secured equipment from impermissibly securing the entire monetary claim.

The respondents’ failure to disclose the equipment’s whereabouts, coupled with their absence despite service, justified directions requiring disclosure of the equipment’s location and the contracts under which it was deployed, since these measures directly preserved the subject matter of arbitration and caused comparatively little prejudice.

Conversely, no material showed dissipation of bank balances, diversion of funds, disappearance or inadequacy of the hypothecated equipment, or an intention to defeat a future award.

Accordingly, attachment/freezing of bank accounts, a bank guarantee, and additional security would amount to premature or double security for an unadjudicated money claim.

Because construction equipment is movable, depreciating, and potentially difficult to trace, and because the respondents gave no undertaking regarding its availability, appointment of a receiver was necessary to preserve the secured assets.

Nevertheless, the receiver’s powers were confined to tracing, identifying, taking and preserving possession; sale required a further order after notice to the respondents.

A restraint against transfer or creation of third-party rights was proportionate and necessary to maintain the equipment’s availability, whereas nationwide directions to transport authorities were excessive and unsupported by specific evidence of attempted registration changes or misuse.

The respondents were directed, within two weeks of service, to file affidavits disclosing the present location, identifying particulars, and deployment contracts of the hypothecated construction equipment.

They were restrained from selling, transferring, alienating, encumbering, creating third-party rights in, or parting with possession of the equipment without permission of the Arbitral Tribunal or, until its constitution, the Court.

The Court Receiver, High Court, Bombay, was appointed with powers under Order XL Rule 1 CPC to locate, identify, and take symbolic or physical possession, with liberty to seek police assistance; the Receiver was required to prepare an inventory and preserve the equipment.

The Receiver could not sell or dispose of the equipment without further orders after notice.

Reliefs seeking attachment or freezing of bank accounts, a bank guarantee, additional security, disclosure of receivables and cash flows, and omnibus directions to transport authorities were rejected at that stage.

The findings were declared prima facie, and Tata Capital was directed to commence or continue arbitration in accordance with Section 9(2).

There was no order as to costs.