The Delhi High Court has held that where a loan is secured by an existing mortgage and the secured creditor has already initiated SARFAESI proceedings which is pending before the Debt Recovery Tribunal (DRT), parallel interim protection under Section 9 of the Arbitration and Conciliation Act is not warranted. The Court explained that Section 9 of the Arbitration Act empowers the Court to pass interim measures for protection of the subject matter of the arbitration agreement and for securing the amount in dispute in arbitration. However, the expression ‘subject matter of the arbitration’ refers to the substantive dispute between the parties, namely, the outstanding amounts payable under the loan agreements, and not merely the security property furnished for such liability.
The High Court also clarified that a mere apprehension that the realisable value of the mortgaged property may be insufficient to satisfy the entire outstanding liability, without demonstrating an immediate necessity for protection, cannot justify a wide restraint order over all the assets of the debtor. Thus, permitting parallel proceedings before different forums for securing the same outstanding amount would not be appropriate.
The Division Bench comprising Justice Anil Kshetarpal and Justice Amit Mahajan noted that once a property is mortgaged, any subsequent transfer does not affect the rights of the mortgagee, and the mortgagee’s rights continue to have priority over any rights created in favour of a third party after the creation of the mortgage. The Court observed that the power under Section 9 of the A&C Act is to be exercised having regard to the facts and circumstances of each case and the nature of the protection sought.
In the present case, the mortgaged property had already been furnished as security for the amount in dispute in arbitration, and the appellant had also initiated proceedings under the SARFAESI Act for enforcement of the said security. The Court further observed that the mere apprehension that the value of the secured property may ultimately prove insufficient, in the absence of any further material demonstrating an immediate necessity for protection under Section 9, cannot by itself justify the grant of a wide restraint over all the assets of the respondents.
The Court also noted that arbitration had not yet been invoked by the appellant, while proceedings initiated by the respondents before the DRT in relation to the SARFAESI measures were pending. The appellant had only identified two vehicles and three bank accounts of the respondents, without disclosing the amounts lying in those accounts, and was essentially seeking a direction requiring the respondents to disclose their assets, a relief which could more appropriately be sought before the DRT.
Briefly, Axis Finance Limited, a Non-Banking Financial Company, extended two separate mortgage loan facilities to Rishab Mago and others, aggregating to Rs. 2.86 crores, under two Mortgage Loan Agreements. As security, the respondents created a mortgage by deposit of title deeds over a residential property situated at Shivalik Enclave Extension, Mohali, Punjab, with the mortgage being recorded through Memorandums of Entry. Following defaults in repayment, the loan accounts were classified as Non-Performing Assets with effect from Aug 03, 2025.
The appellant issued a demand notice under Section 13(2) of the SARFAESI Act on Sep 30, 2025 for Rs. 2.82 crores, followed by a Section 13(4) notice on Nov 03, 2025 for symbolic possession of the mortgaged property. The respondents challenged the SARFAESI proceedings before the Debts Recovery Tribunal, which led to a status quo order. The appellant recalled the SARFAESI notices, and the said application was dismissed for non-prosecution.
A fresh Section 13(4) notice was thereafter issued and the respondents filed application before the DRT, which remains pending. As on April 13, 2026, the outstanding amount had risen to Rs. 3.03 crores, apart from further interest. The appellant then approached the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, seeking interim protection including restraint on alienation of assets and disclosure of the respondents’ assets. The Single Judge dismissed Section 9 petition, principally on the ground that the subject matter of the arbitration was already secured by the mortgage.
