Section 9 Relief Granted to Secure Movable Assets Despite Non-Termination of Contract via Receiver’s Symbolic Possession

The Petitioner, a construction equipment manufacturer, supplied bulldozers and graders to the Respondents under multiple "Agreements for Sale" on a deferred payment basis.

Per Clauses 3.1.2 and 3.2.1, the Petitioner retained absolute legal ownership of the machinery until full payment of the sale consideration.

The Respondents defaulted on payments, leading to an outstanding balance of approximately ₹7.38 Crores.

Following a Section 21 notice invoking arbitration, the Petitioner filed this Section 9 petition seeking interim measures, including the repossession of machinery.

During pendency, the parties entered a Conciliated Agreement via 'Samadhan' on 14.10.2025, settling for ₹7.66 Crores in 18 installments.

The Respondents subsequently defaulted on the new schedule but made partial payments totaling ₹7.05 Crores; the Respondents provided an undertaking to the Court to clear all dues by 10.07.2026.

1. Whether the Court should appoint a Receiver to repossess equipment when the contractual right to repossess is contingent upon a termination notice that was never issued.

2. Whether interim protection under Section 9 is warranted to prevent the diminution of value of the subject matter (depreciable machinery) pending arbitration.

Section 9 of the Arbitration and Conciliation Act, 1996, which empowers courts to grant interim measures for the preservation and custody of the subject matter of dispute.

The principle from Arcelor Mittal Nippon Steel India Ltd. v. Essar Bulk Terminal Ltd. regarding the necessity of granting interim relief to ensure an award does not become a mere "paper value".

The doctrine from Essar House Pvt. Ltd. v. Arcellor Mittal Nippon Steel India Ltd., which held that a "strong possibility of diminution of assets" justifies relief without strictly meeting the high threshold of Order XXXVIII Rule 5 CPC.

Value Source Mercantile Ltd. v. Span Mechnotronix Ltd., establishing Section 9 as a residuary power to pass orders that are "just and convenient".

The Court observed that while the Respondents had defaulted, the Petitioner’s specific contractual right to repossess and sell the equipment under Clause 12.2.2(c) had not "ripened" because the Petitioner failed to issue a formal cure notice or termination notice as mandated by the agreement.

The Court determined that judicial intervention was necessary under the "just and convenient" principle of Section 9(1)(ii)(e), reasoning that since the Petitioner remains the legal owner and the machinery is a "highly depreciable asset," continuous usage by the defaulting Respondents causes irreparable loss by eroding the market value.

The Court distinguished Skypower Solar India Pvt. Ltd. v. Sterling and Wilson International FZE, noting that this case involves specifically financed equipment with a pre-existing security interest rather than an attempt to secure an unsecured debt.

The Court held that if the Respondents fail to honor the undertaking or default on future installments, the Petitioner is authorized to take symbolic possession of the machinery via a Court-appointed Receiver (Petitioner’s Authorized Representative) to document the equipment's condition, following which the Respondents shall be restrained from further use.