No Section 9 Relief If SARFAESI Proceedings Pending Before DRT: Delhi HC

Refusing to allow parallel proceedings for securing loan recoveries, the High Court has held that a lender cannot seek duplicate interim protection under Section 9 of the Arbitration and Conciliation Act, 1996 when proceedings arising out of action under security enforcement law are already pending before the Debt Recovery Tribunal.

A Division Bench of Justice Anil Kshetarpal and Justice Amit Mahajan dismissed an appeal filed by a lender challenging the refusal of interim relief by a Single Judge. The dispute arose after the lender sought orders to restrain borrowers from alienating their assets to secure an outstanding debt of over Rs 3.03 crore pending arbitration.

Key Takeaways

No Parallel Proceedings for Interim Security

Lenders cannot maintain parallel applications for securing the same debt before both the Debt Recovery Tribunal and the High Court under arbitration laws.

Existing Mortgage Limits Section 9 Relief

Mere apprehension that a mortgaged property's value may fall short does not automatically justify sweeping restraint orders over a debtor's other unencumbered assets.

Appropriate Forum for Asset Disclosure

Requests for asset disclosure and protective orders are more appropriately adjudicated by the tribunal where recovery and security enforcement actions are active.

The Court affirmed the Single Judge's decision, noting that the loan amounts were already secured by a mortgaged property and recovery proceedings were active.

The Court has following directions:

"Accordingly, the present Appeal, along with the pending application, is dismissed."

The Court, in its reasoning, observed: "Permitting parallel proceedings before different forums for securing the same outstanding amount would not be appropriate."

Ratio

Where loan recovery measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 are actively challenged or pending before the Debt Recovery Tribunal, a secured creditor cannot invoke Section 9 of the Arbitration and Conciliation Act, 1996 to seek parallel interim orders securing the same dispute amount, especially when the subject debt is already secured by a mortgage.

Background

The appellant, a Non-Banking Financial Company, extended two credit facilities totaling Rs.2,86,36,838/- under two Mortgage Loan Agreements to the respondents. The respondents secured the facilities by mortgaging a property situated in Mohali, Punjab. Following defaults in monthly repayments, the accounts were classified as Non-Performing Assets, and the lender initiated recovery actions under Section 13(2) and Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

The respondents challenged the recovery steps before the Debt Recovery Tribunal. After earlier proceedings were dismissed for non-prosecution, the lender issued a fresh notice under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, leading the respondents to file a fresh application before the tribunal. Fearing that the mortgaged property might not fully cover the escalated debt of Rs.3,03,71,992/-, the lender approached the High Court under Section 9 of the Arbitration and Conciliation Act, 1996 read with Section 13 of the Commercial Courts Act, 2015, seeking to restrain the respondents from alienating other assets and requiring asset disclosures.

The Single Judge dismissed the petition, holding that the subject debt was already secured by the mortgaged property. Upholding this view in appeal, the Division Bench held that mere apprehension of insufficient security value does not justify wide restraint orders over unencumbered assets, especially when the lender can seek appropriate interim protection in the pending proceedings before the Debt Recovery Tribunal.

Case Details:
Case No.: FAO(OS) (COMM) 157/2026 and CM APPL. 40223/2026
Case Title: M/S AXIS FINANCE LTD v. RISHAB MAGO & ORS.
Appearances:
For the Petitioner(s): Ms. Bhairavi S. N., Mr. Gaurav Nair, Ms. Nishtha Kumar, Ms. Veera Mathai, Mr. Shrom Sethi, Mr. Varun Agarwal, Ms. Adwitiya Ray and Ms. Kashish Bhushan, Advs.

Source: 2026 CaseBase(DEL) 4801