Delhi high court refuses additional protection to lender where mortgage already secures the debt

Delhi High Court Decision: No Extra Protection for Lenders Beyond Mortgage Security, Confirms Court.

In a recent ruling, the Delhi High Court dismissed an appeal filed by Axis Finance Ltd against Rishab Mago and others, upholding an earlier decision of a Single Judge that had declined to grant interim relief to the lender under Section 9 of the Arbitration and Conciliation Act, 1996. The judgment was delivered on 1 September 2026 by a Division Bench comprising Justice Anil Kshetarpal and Justice Amit Mahajan, in an appeal registered as FAO(OS) (COMM) 157/2026.

The dispute arose out of two mortgage loan agreements dated 1 September 2023, under which Axis Finance had extended credit facilities together amounting to about Rs 2,86,36,838 to the respondents. Both loans were secured by a mortgage created through deposit of title deeds over a residential property in Mohali, Punjab. When the respondents defaulted, the accounts were classified as non performing assets, and the lender-initiated recovery proceedings under the SARFAESI Act. These proceedings were challenged before the Debts Recovery Tribunal, where they remain pending.

Separately, Axis Finance approached the High Court seeking interim measures under Section 9, apprehending that the respondents might alienate or encumber other assets such as vehicles and bank accounts, and arguing that the mortgaged property alone might not cover the outstanding dues, which by then had risen to over Rs 3.03 crore. The Single Judge rejected this plea, reasoning that the subject matter of the arbitration already stood adequately secured through the existing mortgage.

On appeal, counsel for Axis Finance narrowed the relief sought to a restraint on the respondents from transferring or creating third party rights over their assets. It was argued that the Single Judge had wrongly equated the mortgaged property itself with the subject matter of arbitration, when in truth the dispute concerned the outstanding loan amount, of which the property was merely security. It was further contended that Section 9(1)(ii)(b) permits courts to secure the amount in dispute and is not limited to assets already mortgaged.

The Division Bench was not persuaded. It observed that once a property is mortgaged, any later transfer remains subject to that mortgage, so the mortgagee's rights continue to enjoy priority regardless of any subsequent dealing by the borrower. This alone defeated the apprehension of prejudice from third party transfers. The Court also noted that arbitration had not yet even been invoked by the appellant, while parallel proceedings before the Debts Recovery Tribunal concerning the same SARFAESI action were already pending. Allowing simultaneous protection before two different forums for the same outstanding amount was, in the Court's view, inappropriate.

The Bench further pointed out that beyond two vehicles and three bank accounts, no other assets of the respondents had been disclosed, nor had the balances in those accounts been specified, weakening the case for a sweeping restraint order. Since adequate remedies for securing the claim were available before the Debts Recovery Tribunal, the Court held that recourse should be sought there rather than through parallel proceedings under the Arbitration Act.

Concluding that the mortgaged property already served as security, that DRT proceedings were pending, and that no additional circumstances justified separate interim protection, the Division Bench found no reason to interfere with the order of the Single Judge and dismissed the appeal along with the connected application.

This ruling reinforces a consistent judicial approach that Section 9 relief is not meant to duplicate protection already available through an existing security interest or through parallel statutory forums such as the DRT, and that courts will be cautious before extending interim restraints beyond what the facts genuinely demand.

Case Citation: Axis Finance Ltd v Rishab Mago and Ors, decided by the Delhi High Court on 1 September 2026 in FAO(OS) (COMM) 157/2026, reported at (2026) ibclaw.in 5003 HC.