Bombay high court appoints receiver to trace hypothecated construction equipment, declines bank account attachment in section 9 petition

Bombay High Court Appoints Receiver for Hypothecated Equipment, Rejects Bank Account Attachment Request in Section 9 Petition.

Tata Capital Ltd. v. Jain Globals and Ors. Citation: (2026) ibclaw.in 4173 HC Court: High Court of Bombay Case No.: Comm Arbitration Petition (L) No. 8727 of 2026 (with 23 connected petitions) Decided on: 28-Jul-26 Coram: Mr. Justice Amit Borkar

The Bombay High Court has held that while a financier is entitled to interim protection for tracing and preserving hypothecated construction equipment pending arbitration, reliefs such as attachment of bank accounts, direction to furnish a bank guarantee or additional security cannot be granted merely on the strength of a prima facie monetary claim, in the absence of material showing that the secured asset itself has become unavailable or that the borrower is dissipating funds. A Single Bench of Justice Amit Borkar was dealing with a batch of Section 9 petitions filed by Tata Capital Ltd. against the borrower and guarantors under Loan-Cum-Hypothecation Agreements executed for financing Construction Equipment. According to the petitioner, the respondents defaulted in repayment despite disbursement, following which the loan was recalled and arbitration was invoked. The respondents remained absent despite service.

The petitioner sought several reliefs, including disclosure of assets, attachment of bank accounts, a bank guarantee, additional security, disclosure of the equipment's location and of contracts and receivables generated from its use, appointment of a Receiver, an injunction against third party dealings, directions to transport authorities to blacklist the equipment, and permission to take possession with police assistance.

Examining Clauses 18.1, 18.2 and 18.5 of the Facility Documents, which permitted repossession and sale of the hypothecated equipment on default, the Court noted that these clauses strengthened the petitioner's prima facie case but did not entitle it to every relief sought as a matter of course. Relying on Essar House (P) Ltd. v. Arcellor Mittal Nippon Steel (India) Ltd. and Sadbhav Engineering Ltd. v. Efftech Infra Engineers, the Court held that Section 9 relief must have a reasonable connection with preservation of the subject matter of arbitration, and is not meant to secure a money decree before adjudication.

The Court allowed disclosure of the equipment's present location and of the contracts under which it was deployed, holding this had a direct bearing on preserving the secured asset, but declined disclosure of receivables and cash flows since the Facility Documents created no charge over them. It appointed the Court Receiver to trace and take possession, with liberty to seek police assistance, relying on ICICI Bank Ltd. v. Nidhi Sharma for the principle that hypothecated movable assets depreciate with delay and require timely preservation. Sale of the equipment was left subject to further orders. An injunction restraining creation of third party rights over the equipment was also granted.

However, the Court rejected the prayers for attachment of bank accounts, furnishing of a bank guarantee, and furnishing of additional security, holding that mere apprehension of non-recovery, without material showing dissipation of funds or unavailability of the agreed security, could not justify such drastic relief. The prayer for blanket directions to Regional Transport Offices across the country to blacklist the equipment was also rejected as unsupported by material.

The petitions were accordingly partly allowed, with the Court clarifying that its findings were prima facie in nature and would not bind the Arbitral Tribunal.