Injunction Can't Be Granted In Absence Of Any Risk Of Assets Dissipating Or Pleadings Indicating Frustration Of Award: Calcutta High Court
The Calcutta High Court bench of Justice Shampa Sarkar has held that at this stage, the petitioner is adequately secured under the schedule to the deeds of hypothecation agreement. The respondent remains fully operational and continues its business activities. There is nothing in the pleadings to suggest that the respondent has attempted to remove or alienate its assets in a...
The Calcutta High Court bench of Justice Shampa Sarkar has held that at this stage, the petitioner is adequately secured under the schedule to the deeds of hypothecation agreement. The respondent remains fully operational and continues its business activities. There is nothing in the pleadings to suggest that the respondent has attempted to remove or alienate its assets in a manner that would render any future award in favour of the petitioner unenforceable or illusory.
Brief Facts:
Under the said loan agreements, a sum of Rs. 26,00,00,000/- (Rupees Twenty Six Crores) was lent and advanced by the petitioner to the respondent. The said loan was secured by two deeds of hypothecation, dated August 28, 2020, and February 18, 2021.
The Petitioner submitted that adjudication of the disputes and differences between the parties were to be settled by arbitration. The application for injunction had been filed in aid of the main relief. The current dues of more than Rs. 53 crores should be secured. The respondent was already in contempt of the order of the court.
It was further submitted that this court had directed the respondent to disclose other assets, investments, bank accounts both past and current, but such direction had not been followed. The petitioner was entitled to secure its claim as the loan was an agreed incident and the amount was not disputed.
It was further submitted that the supplementary affidavit lacked clarity on whether the disclosed securities belonged to the respondent or third parties, and showed discrepancies and inflated valuations, indicating possible dishonesty. Therefore, continued injunction on the bank account was sought.
It was also argued that SIFL's status as a shareholder in SEFL or the respondent does not affect the petitioner's independent right to seek interim relief or recover dues from the respondent. Moreover, the petitioner never gave any assurance or undertaking to the respondent in proceedings before the NCLT.
It was also argued that the respondent, with malafide intent, issued rights during the Administrator's control over petitioner and SIFL's assets, aiming to dilute SIFL's stake from 51% to 11%, despite knowing SIFL couldn't participate. Discrepancies between the December 31, 2024 Management Accounts and later disclosures revealed omissions and inflated valuations, notably Bharat Nirman Fund's value rising from Rs. 1.82 crores to Rs. 36.96 crores.
In reply, the Respondent submitted that Trinity intended to initiate a Rights Issue to raise funds for repaying SEFL's debt, but the move was opposed by SIFL, leading to its permanent deferment, as noted by the NCLT in its order dated March 24, 2022. An injunction was already in place over the hypothecated assets. Subsequently, on July 25, 2024, the petitioner issued a notice under Section 13(2) of the SARFAESI Act, triggering Section 13(13), which bars the borrower from transferring secured assets—except in the ordinary course of business—without the secured creditor's consent.
It was submitted that the petitioner had no tangible securities in the form of movable and immovable assets. In that sense, it was an unsecured creditor. It was trite law that an unsecured creditor having a money claim, could not be converted to a secured creditor.
Lastly, it was submitted that the petitioner sought attachment before judgment under Order 38 Rule 5 CPC, which applies only if the defendant intends to obstruct or delay execution by disposing of or removing property. In this case, there is no evidence that Trinity attempted to sell or deal with its assets. Therefore, the interim injunction should be vacated, and the application dismissed. The injunction on the bank account has hindered the respondent's business and blocked funds belonging to third-party investors.
Observations:
The court noted that the petitioner's claim of Rs. 53.61 crores being due is unsupported by any admission from the respondent. While the petitioner valued certain investments at Rs. 12.41 crores, additional investments disclosed in this proceeding were valued at Rs. 41.04 crores.
It further observed that although the petitioner disputes these valuations, no concrete calculations have been provided to disprove them. Further examination would amount to a mini-trial, and investment values are subject to market fluctuations. The charge on these investments was created consciously between experienced commercial entities, with no evidence of malafide conduct by the respondent.
It further added that notably, SEFL and Trinity were both wholly owned subsidiaries of SIFL at the time the loan was granted on August 28, 2020. Later, SIFL sold 49% of Trinity to Payaash but retained 51% control. A tripartite agreement was executed on September 1, 2020, between SIFL, Trinity, and Payaash. On October 8, 2021, the RBI initiated CIRP proceedings against the petitioner and SIFL before the NCLT, Kolkata, under Section 227 of the IBC, 2016, and applicable FSP Rules.
It further observed that whether the petitioner's claim was included in the sum of Rs. 32,749.26 crores admitted as financial creditor claims is a matter for determination by the learned arbitrator. If the petitioner's claim, or any part of it, was excluded from the resolution plan, it stands extinguished. Additionally, the question of whether SIFL intended to regain control from Payaash through coercive measures via SEFL is also to be decided by the arbitrator. Meanwhile, proceedings remain pending before the NCLT.
The court held that Interim relief depends on a prima facie case, balance of convenience, and risk of irreparable harm. While the petitioner has shown a prima facie claim of Rs. 26 crores, admitted in the respondent's letter dated April 23, 2024, the balance of convenience and irreparable injury do not justify continuation of the injunction on the bank account. Given that SIFL and SEFL are managed by NARCL, which also controls the respondent, NARCL's interests remain adequately protected.
It said that the SARFAESI injunction over secured assets provides sufficient protection. Given the balance of convenience, the bank account injunction is vacated to avoid disrupting the respondent's business.
It further held that instead, an injunction is imposed on all disclosed and future investments, restraining the respondent from transferring, redeeming, or disposing of such assets. This will remain in effect until further orders by the Arbitrator. The respondent must provide its last audited accounts and financial statements for the past six months to the petitioner within two weeks and share relevant investment information as required.
The court concluded that the petitioner requires no further protection at this stage, as security is already provided under the hypothecation agreement. The respondent remains fully operational, and there is no indication in the pleadings of any attempt to alienate assets or frustrate enforcement of a potential award. Arbitration proceedings have commenced and are scheduled for hearing by end of June. The petitioner remains free to seek interim relief from the learned arbitrator.
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
Judgment Date: 18/06/2025
For the petitioner : 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.