Srei Equipment Finance Limited vs Dr. Prafulla Rajaram Hede

The petitioner seeks interim reliefs under a loan-cum-hypothecation Agreement dated 2nd November, 2017. An Arbitrator appointed

by the petitioner recused himself on 19th June, 2021 and Receivers appointed by the Arbitrator in a Section 17 application filed by the petitioner filed

two reports indicating that the assets were attached to the earth and could not be removed.

Learned counsel appearing for the petitioner relies on the reports of the Receivers to submit that the hypothecated assets may presently be in jeopardy

since the Receivers were prevented from making inventory of the same. According to counsel, there is presently an outstanding amount of Rs.42.85

crores due from the respondent and the fact that the respondent has reduced his share-holding in one of the companies would show that the

respondent is in financial distress.

Learned counsel appearing for the respondent resists the orders prayed for only on the point of physical possession of the assets but submits that there

may be a restraint on the respondent from alienating the land and the shares held by the respondent in the four companies till further orders of the

Court, with the caveat that the respondent has transferred some of the shares held by him in the 4 companies.

Upon considering the materials on record, there is admittedly a substantial amount outstanding from the respondent to the petitioner on account of the

assets purchased by the respondent in terms of the Loan Agreement. No arbitration has taken place between the parties after 19th June, 2021 when

the Arbitrator recused himself. The Agreement contains clauses under which the petitioner is entitled to take actual physical possession of the assets

upon an event of default. Since there is an event of default on the respondent failing to make the payments according to the agreed terms, the

petitioner has established a prima facie case for appointment of a Receiver to take actual physical possession of the assets which are presently lying

with the respondent.

The issue with regard to a direction on the respondent to furnish a bank guarantee amounting to Rs.42.85 crores in terms of prayer ( c ) of the notice

of motion is, however, not accepted for the following reason: the Arbitrator recused himself on 19th June, 2021 after which the petitioner has not made

any attempt to appoint a new Arbitrator in terms of the arbitration clause or in an application under Section 11 of the 1996 Act. The contention that the

respondent has reduced his shares in one of the companies to a negligible percentage and that the assets are in jeopardy would only appear from

pleadings without any corroborative evidence. Since counsel appearing for the respondent has no objection to the respondent being restrained from

alienating his assets in respect of the land and the shares held by him in the companies, this Court is disinclined to pass any further orders as prayed

for.

There shall, accordingly, be an order in terms of prayer (b) of the notice of motion. There shall also be an injunction on the respondent from selling or

alienating his properties including the land and shares held by the respondent in the companies mentioned in the petition filed by the petitioner. This

order shall remain in force for a period of ten weeks until affidavits are filed.

Affidavit-in-opposition be filed within four weeks from date, as prayed for; reply thereto within two weeks thereafter.

Mr. Sahidul Islam of Bar Association Room No. 14 is appointed Receiver to take physical possession of the assets in question. The Receiver shall be

entitled to a remuneration of Rs. 70,000/- and also travel and accommodation expenses shall be borne by the petitioner. The Receiver shall also be

entitled to take police help, if required, for carrying out the directions passed in this order.

List this matter after six weeks.