Tyger Capital Private Limited vs Advanced It Solutions & Ors.

By filing this Petition under Section 9 of the Arbitration and Conciliation Act, 1996, the Petitioner has asked for interim reliefs as mentioned in prayer clauses (a) to (f) of the Petition.

The case of the Petitioner is that on 31 August 2025, it issued a Sanction Letter in favour of the Respondents. On the very same day, the Petitioner and Respondent Nos. B and C entered into a Facility Letter cum Agreement. On that day itself, Respondent Nos. 1 and 2 also executed a Letter of Guarantee in favour of the Petitioner to secure the said facility. According to the Petitioner, thereafter the Respondents became jointly and severally liable to pay an amount of Rs.2,01,35,899.07/- to the Petitioner. Since the said amount was not paid, the Petitioner, through its Advocates, issued a notice dated 7 March 2025 calling upon the Respondents to clear the outstanding dues. Even after receiving the said notice, the Respondents did not make payment of the outstanding amount. It is the case of the Petitioner that disputes and differences thereafter arose between the parties. According to the Petitioner, although there was an arbitration agreement between the parties, the Respondents neither appointed an Arbitrator nor suggested the name of any Arbitrator as required under the agreement. Therefore, the Petitioner filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of a learned Arbitrator to decide the disputes between the parties. Along with the said proceedings, the Petitioner has also filed the present Petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim protection in relation to the disputes between the parties.

On going through the record, it appears that Clause (17) of the Facility Letter cum Agreement dated 31 August 2025 contains an arbitration clause between the parties. On 1 April 2026, this Court granted Respondent Nos. 1 to 3 two weeks' time to file their reply. At the same time, by way of ad interim protection, this Court directed that if the four cheques issued by Respondent No.4 were encashed by Respondent Nos. 1 to 3, they should not deal with or use the amount received under those cheques till the next date of hearing.

Pursuant to the said order, Respondent Nos. 1 to 3 have filed their reply. In the reply, they have stated in paragraphs 5 and 11 that the default in repayment was not intentional. According to them, the working capital facility depended upon timely recovery of money from their customers. They have stated that Respondent No.4 accepted the goods supplied by Respondent No.1 and thereafter issued four cheques for an amount of more than Rs.24 Crores. However, all those cheques were dishonoured when they were presented for payment. Because of dishonour of the cheques, Respondent No.1 faced financial difficulty and its working capital cycle was disturbed. Therefore, Respondent No.1 was required to file proceedings under Section 138 of the Negotiable Instruments Act against Respondent No.4. They have further stated that the loan account became irregular only because Respondent No.4 failed to honour its payment obligation even after accepting the goods. It is also their case that these facts were not disclosed by the Petitioner before this Court even though they are relevant for deciding the reliefs claimed in the present Petition.

After the reply was filed, the matter was listed on 29 July 2026 as a last opportunity for Respondent Nos. 1 to 3. However, at the request of their learned Advocate, the hearing was adjourned and the matter was thereafter listed on 5 August 2026. On 5 August 2026, the learned Advocate appearing for Respondent Nos. 1 to 3 submitted that because of personal difficulty he was not in a position to argue the matter. Therefore, the matter was directed to be placed today. Today, when the matter was called out, the Advocate appearing for Respondent Nos. 1 to 3 submitted that the main Advocate was available through Video Conferencing. However, it was not possible for this Court to hear the matter through that mode. The learned Assistant Advocate also declined to make any submissions on behalf of the Respondents. In these circumstances, this Court has proceeded to decide the present Petition on the basis of the material available on record and on its own merits.

I have carefully looked into the pleadings, documents placed on record and also the stand taken by Respondent Nos.1 to 3 in their reply affidavit.

From the documents available on record, it appears that Facility Letter cum Agreement dated 31 August 2025 was executed between the parties. It also appears that Respondent Nos.1 and 2 executed Letter of Guarantee in favour of the Petitioner. In the reply affidavit, execution of these documents has not been specifically denied. The Respondents have also not disputed that Clause (17) of the Facility Letter cum Agreement contains arbitration clause. Therefore, at least at this stage, there is enough material to show that relation was existing between the parties and there was also an arbitration agreement binding them.

The Petitioner has placed on record statement of account showing outstanding dues of Rs.2,01,35,899.07/-. It also appears that demand notice was thereafter issued asking the Respondents to clear the said outstanding amount. The Respondents have nowhere stated that after receipt of the notice the whole amount was paid. There is also no material placed before this Court to show that the account thereafter became regular or that entire liability stood satisfied. Therefore, at least prima facie, an existing money dispute appears between the parties which requires decision before the learned Arbitrator.

Defence of Respondent Nos.1 to 3 is that there was never any intentional default on their part. According to them, repayment of the loan was depending upon recovery of business money from customers. It is their case that Respondent No.4 accepted the goods supplied by Respondent No.1 and thereafter issued four cheques for substantial amount. According to them, all those cheques were dishonoured after presentation. Because of dishonour of those cheques, Respondent No.1 faced serious financial problem and its working capital got disturbed. They have also stated that proceedings under Section 138 of the Negotiable Instruments Act have been initiated against Respondent No.4.

In commercial transactions, business depends upon timely payments received from customers. If purchaser fails to honour payment obligation, shortage of funds may naturally arise in business. Therefore, explanation given by Respondent Nos.1 to 3 cannot be treated as incorrect merely because repayment remained unpaid. This Court is inclined to accept that such circumstances may create financial difficulty.

However, merely because financial hardship is shown, it does not answer the liability undertaken by Respondent Nos.1 to 3. Both aspects are different. Liability arising from finance documents remains separate. Whether Respondent No.4 committed breach or not is a dispute between Respondent No.1 and Respondent No.4. Such dispute does not wipe out liability arising under finance documents executed in favour of the Petitioner. Prima facie, the Petitioner cannot be made to wait for an uncertain period till Respondent No.1 succeeds in recovering money from Respondent No.4.

Respondent Nos.1 to 3 have also contended that the Petitioner did not disclose these facts before this Court. This submission also deserves consideration. However, even assuming that proceedings under Section 138 of the Negotiable Instruments Act are pending and Respondent No.4 had issued dishonoured cheques, still these facts by themselves do not weaken the Petitioner's prima facie claim. On the contrary, these very facts show that according to Respondent Nos.1 to 3 substantial amount is recoverable from Respondent No.4. Therefore, those receivables themselves become relevant while considering whether interim protection should be granted.

It is also important to notice that nowhere in the reply have the Respondents’ defence proceeds on the basis that Respondent No.4 is liable to pay substantial amount but failed to honour the cheques issued by it. Therefore, for present purpose, existence of receivables from Respondent No.4 appears admitted. The real dispute appears to be about recovery of that amount and not about existence of such liability.

This aspect assumes importance because one of the reliefs sought by the Petitioner relates to the money payable by Respondent No.4 to Respondent No.1. If, according to Respondent Nos.1 to 3 themselves, Respondent No.4 is liable to pay amount, then allowing unrestricted payment of such amount to Respondent No.1 during pendency of arbitration may make the future award difficult to enforce if it is passed in favour of the Petitioner. One object behind Section 9 is to avoid such a situation where successful party gets only a paper award without effective enforcement.

This Court also notices that Respondent Nos.1 to 3 have not placed before this Court satisfactory material showing their present financial position or giving details of assets from which future arbitral award can conveniently be satisfied. Except giving explanation regarding dishonour of cheques, no proper particulars regarding assets, financial capacity or available resources have been disclosed before this Court. Looking to the amount involved in the present proceedings, this omission also assumes importance.

Because of these circumstances, the Petitioner has expressed apprehension that if interim protection is not granted now, recovery under future arbitral award may become difficult. Such apprehension cannot be said to be without basis. It gets support from admitted circumstances that repayment has remained unpaid despite demand notice and that Respondent Nos.1 to 3 themselves state that their financial difficulty arose because substantial business receivables from Respondent No.4 could not be recovered.

Prayer clause (c) seeks restriction upon operation of bank accounts only to the extent of the claim amount. At the same time, it permits the Respondents to operate any amount lying beyond the claim amount. Therefore, it is not a case where complete banking operations are sought to be stopped. Relief claimed is only for securing the Petitioner's claim while permitting ordinary business transactions beyond that limit. Thus, the nature of relief appears balanced and it does not prevent Respondent Nos.1 to 3 from carrying on their business.

Likewise, prayer clause (f) is also of limited nature. The Petitioner is not asking that the money should be paid to it. The request is only that Respondent No.4 should deposit before this Court, or in an escrow account, such amount as becomes payable to Respondent No.1, restricted to the Petitioner's outstanding claim, till arbitration proceedings are decided. Such direction does not determine ownership of that amount. Rights and contentions of all parties shall remain open for final adjudication before the learned Arbitrator.

Balance of convenience also appears to lean in favour of granting limited interim protection. If the Respondents succeed before the learned Arbitrator, appropriate directions for release of the amount can always be passed. However, if protection is refused now and receivables or available funds are freely dealt with, there is every possibility that the Petitioner may face serious difficulty in recovering the amount even after obtaining a favourable award. Such consequence would defeat the purpose for which powers under Section 9 have been conferred upon this Court.

Therefore, after considering the entire material placed on record, this Court finds that though there appears to be some substance in the explanation of Respondent Nos.1 to 3 that financial difficulty arose because Respondent No.4 dishonoured the cheques, that circumstance alone, at this prima facie stage, is not sufficient to defeat the Petitioner's rights or to refuse interim protection. On overall consideration of the pleadings, documents and admitted facts, this Court is satisfied that the Petitioner has made out a strong prima facie case for protection of the disputed funds till arbitration proceedings are concluded. Interest of justice would therefore be served by granting reliefs in terms of prayer clauses (c) and (f), while making it clear that all rival rights, claims and defences shall be decided by the learned Arbitral Tribunal on their own merits.

In view of the foregoing discussion, and upon overall assessment of the material record, the following order is passed:

All pending Interim Applications, if any, also stand disposed of.