Safiya Malik

The High Court of Calcutta Single Bench of Justice Shampa Sarkar has vacated the injunction that previously restrained the respondent from operating its ICICI Bank account without maintaining a minimum balance of Rs. 40 crores. Holding that the existing protection under the SARFAESI Act was sufficient, the Court directed the respondent to preserve and not part with any of the disclosed and future investments until further orders of the arbitrator. The Court concluded that the petitioner did not require any additional protection beyond what was secured under the hypothecation deeds and SARFAESI Act.

The dispute stemmed from a rupee loan agreement dated August 28, 2020, and a supplementary agreement dated November 2, 2020, under which a sum of Rs. 26 crores was advanced by the petitioner to the respondent. The loan was secured through two deeds of hypothecation dated August 28, 2020, and February 18, 2021, creating a first charge on all investments of the respondent, present and future, on a pari-passu basis with the petitioner's existing loans.

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An interim order was passed by the Court on December 19, 2024, under Section 9 of the Arbitration and Conciliation Act, 1996, directing the respondent to maintain a minimum balance of Rs. 40 crores in its bank account with ICICI Bank, R.N. Mukherjee Road, Kolkata. This was in addition to the statutory injunction under Section 13(13) of the SARFAESI Act following the issuance of a Section 13(2) notice by the petitioner on July 25, 2024.

The petitioner filed the application AP COM No. 1049 of 2024 seeking interim protection under the Arbitration Act. Subsequently, the respondent filed GA COM 1 of 2025 to vacate the interim injunction. GA COM 2 of 2025 was also filed for preponement of the hearing.

The petitioner contended that the loan was undisputed and that more than Rs. 53 crores were currently due, including interest. It alleged non-cooperation by the respondent, citing a communication dated November 16, 2024, and supported its claim with a letter from the respondent dated April 23, 2024, acknowledging an outstanding principal of Rs. 26 crores. The petitioner further alleged that the respondent had failed to disclose all investments and had depleted assets in violation of the order.

The respondent submitted that both the petitioner (SEFL) and the respondent were, at the time of the loan, wholly-owned subsidiaries of SIFL. It contended that the amount was not a loan but an internal investment, and that SIFL's opposition to a Rights Issue intended to repay the loan indicated bad faith. The respondent also contended that the SARFAESI Act’s statutory injunction provided adequate protection to the petitioner and that the order on the bank account hindered its day-to-day business and affected third-party investors.

The Court recorded, "A, prima facie, case of the petitioner’s dues of Rs. 26,00,00,000 is available from the books of accounts of the respondent. This was admitted in the letter dated April 23, 2024." However, it noted that the petitioner’s claim of Rs. 53,61,39,447 was not supported by any direct admission.

Referring to the hypothecation deeds, the Court stated, "The petitioner is entitled to protection of what was charged to the petitioner as per the deeds of hypothecation." It observed that the deeds did not specify particular investments or provide for further security in case of value depletion.

On the issue of depletion, the Court remarked, "There is nothing on record to show that the alleged reduction in the value of the assets was attributable to any malafide conduct of the respondent." It also recorded the corporate structure at the time of the loan, stating, "SEFL was a 100% fully owned subsidiary of SIFL, on the date of grant of loan, i.e., August 28, 2020. Trinity, was also a 100% fully owned subsidiary of SIFL."

The Court noted the subsequent changes including Payaash acquiring 49% in the respondent and the initiation of CIRP against SEFL and SIFL. It stated, "The petitioner had an independent right to recover the dues from the respondent." However, the inclusion or exclusion of the petitioner’s claim in the resolution plan approved by the NCLT was a matter for the arbitrator to decide.

The Court acknowledged the SARFAESI Act's protection: "The injunction under the SARFAESI Act over all the secured assets as per the schedule is sufficient protection." It further stated, "If the order of injunction is not vacated, it would amount to interference with the day-to-day business of the respondent."

The Court ordered that the injunction previously issued on the bank account of the respondent is vacated. It directed, "The interim order passed is modified to the extent that there shall be an injunction on all the investments, which have been disclosed by the respondent in the two supplementary affidavits and also on those which may be made in future."

The respondent was directed not to dispose of, transfer, part with, or redeem the shares or units held in the investments and funds. The Court specified, "This injunction will apply to all future investments to be made. This order will continue until further orders are passed by the learned Arbitrator."

Additionally, the Court directed that, "The last audited accounts of the respondent shall be handed over to the petitioner within two weeks." It also instructed, "The respondent shall be obliged to provide such information to the petitioner as may be required from time to time with regard to the past, present and future investments. Financial statements for the last 6 months shall be supplied to the petitioner within two weeks from date."

Finally, the Court concluded that no further protection was required and that the petitioner could seek relief from the arbitrator. It stated, "The petitioner does not require any further protection. The petitioner at this stage is entitled to the security as mentioned in the schedule of the deeds of hypothecation agreement."

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It recorded, "The respondent is continuing its business activity, and is fully functional. The pleadings do not indicate that the respondent had tried to remove its assets or alienate its properties which would give rise to an apprehension that even if an award is passed in favour of the petitioner, the same will be a paper decree."

The Court further noted, "The arbitration has commenced and it is informed that the same has been fixed before the learned arbitrator in the end of June. The petitioner is always at liberty to pray for interim orders before the learned arbitrator. The observations made herein are tentative."

Accordingly, the Court disposed of the applications stating, "AP COM 1049 of 2024, I.A. G.A. COM 1 of 2025 and I.A. G.A. COM 2 of 2025 are disposed of."

Advocates Representing the Parties:

For the Petitioners: Mr. Ranjan Bachawat, Sr. Adv., Mr. Debnath Ghosh, Sr. Adv., Mr. Sushovit Dutt Majumder, Adv., Ms. Pubali Sinha Chowdhury, Adv., Ms. Rajeshwari Prasad, Adv.

For the Respondents: Mr. Joy Saha, Sr. Adv., Ms. Hashnuhana Chakraborty, Adv., Ms. Soma Chatterjee, Adv., Ms. Arpita Das, Adv.

Case Title: SREI Equipment Finance Limited vs Trinity Alternative Investment Managers Limited

Case Number: AP-COM/1049/2024, IA GA-COM 1 of 2025, GA-COM 2 of 2025

Bench: Justice Shampa Sarkar

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