Bombay High Court Restrains Developers From Dealing With Assets In ₹278 Crore Swan Corp Dispute
The Bombay High Court on 22 October restrained Subramanya Constructions and Developments Co. Limited and Prakruthi Infrastructure and Development Co. Limited from dealing with their assets in a Rs. 278 crore arbitration settlement dispute with Swan Corp Limited.
A Bench of Justice Amit Borkar granted interim protection to Swan Corp Limited (formerly Swan Energy Limited), Cardinal Energy and Infrastructure Private Limited and Pegasus Ventures Private Limited, and directed the developers to disclose their financial records and preserve specified unsold properties in Mysore. It observed:
“This Court is not required to conclude that the financing efforts were dishonest merely because they were made. However, it can be seen that transactions concerning properties and interests relevant to the Petitioners' claim were being considered. Therefore, the present position of those properties and interests needs to be disclosed and protected.”
The dispute arose from a Memorandum of Understanding executed on 10 February 2012 between Swan Corp, Subramanya Constructions, Prakruthi Infrastructure, Arjun Balasubramanyam and Chandregowda alias Chandrappa.
Following arbitration proceedings, the parties executed Consent Terms on 22 February 2026, which the arbitrator incorporated into a final arbitral award dated 16 March 2026.
Under the settlement, Subramanya Constructions and Prakruthi Infrastructure agreed to pay Rs. 240 crore by 23 August 2026. The parties later extended the deadline to 6 September 2026. The settlement provided for an increase in the amount to Rs. 278 crore upon default and enforcement of security over properties in Sarjapur, Chennai and Mysore.
After the developers failed to pay, the arbitrator, acting as escrow agent, recorded the default on 7 September 2026 and released the original Master General Powers of Attorney held as security.
Swan Corp approached the High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking protection against asset transfers that could frustrate enforcement of the award. It argued that the developers had defaulted while pursuing transactions involving secured properties in Mysore and Chennai without complying with the settlement conditions.
The developers argued that the additional Rs. 38 crore amounted to an unenforceable penalty under Section 74 of the Indian Contract Act, 1872. They proposed that the Court appoint a receiver to sell properties, pay Rs. 240 crore to Swan Corp and deposit the disputed Rs. 38 crore in court. Chandregowda, a confirming party to the settlement, disputed personal liability.
The Court held that the developers' failure to pay by 6 September 2026 triggered the agreed default provisions. It rejected their proposed receivership arrangement because it conflicted with the settlement's enforcement mechanism.
It clarified that a substantial monetary claim alone could not justify freezing assets. However, it found interim protection necessary because the developers were considering transactions involving secured properties despite the default.
Further, the Bench held that Chandregowda bore no personal liability for the settlement amount, although it could protect his secured properties. It left the enforceability of the enhanced Rs. 278 crore amount, including the disputed Rs. 38 crore, open for determination in appropriate proceedings.
It directed Subramanya Constructions and Prakruthi Infrastructure to disclose their assets, bank accounts, investments and income-tax returns within seven days. It restrained them from dealing with their assets in ways that could frustrate Swan Corp's claim without prior court permission. It also ordered the preservation of identified unsold Mysore properties measuring 41 acres 23 guntas and 29 acres 1 guntha, subject to existing third-party rights and court orders.
Justice Borkar also directed Arjun Balasubramanyam and Chandregowda to disclose proceeds from sales of the scheduled Mysore properties within two weeks and deposit any amounts established to remain available with them within a further two weeks, subject to the specified conditions. He also rejected the developers' request to stay its judgment.
Accordingly, the High Court disposed of the petition.
Appearances for petitioner (Swan Corp Limited & Ors.): Advocates Siddhesh Bhole and Ashwin Pimpale, instructed by SSB Legal Advisory.
Appearances for respondent (Subramanya Constructions and Developments Co. Limited, Prakruthi Infrastructure and Development Co. Limited and Arjun Balasubramanyam): Senior Advocate Ashish Kamat with Advocates Karl Tamboly, Ankit Lohia, Kausar Banatwala, Tanya Sheth and Harshita Bajla, instructed by Tushar Goradia.
Appearances for respondent (Chandregowda alias Chandrappa): Senior Advocate Zal Andhyarujina with Advocates Ankita Singhania, Vishal Thaker, Mulanshu Vora, Adish Shah and Yash Sinha, instructed by V. Thaker's.