Bombay High Court Says Freezing Bank Accounts Cannot Be Routine Interim Relief Under Arbitration Act

The Bombay High Court has partly granted interim relief to Tata Capital Limited in a batch of 46 petitions arising from loan-cum-hypothecation agreements executed for financing construction equipment.

The court directed the borrowers to disclose their movable and immovable assets, the present location of the hypothecated construction equipment and the contracts under which the equipment is deployed.

Justice Amit Borkar, however, declined Tata Capital's request to freeze the borrowers' bank accounts, direct them to furnish bank guarantees or additional security, and disclose their receivables and cash flows.

The court held that while Section 9 of the Arbitration and Conciliation Act, 1996 confers wide powers, interim measures such as freezing bank accounts, which interfere with a borrower's ability to continue business before liability is adjudicated, cannot be granted as a matter of routine. It observed:

"Attachment of bank accounts affects the respondent's ability to continue its business and therefore amounts to interference with its rights even before adjudication of liability. Merely because the petitioner has established a prima facie claim, it does not mean that every bank account of the respondent should be frozen.", the court ruled.

The dispute arose from Loan-cum-Hypothecation Agreements executed on November 8, 2024, under which Tata Capital financed construction equipment that was hypothecated as security for repayment.

Tata Capital said the borrowers stopped repaying the loan despite repeated reminders. Based on statements of account dated January 2, 2026, it first issued notices on January 21, 2026. When there was no response, it sent demand notices on February 4, 2026, recalling the loan facilities, demanding payment of the outstanding dues and invoking the arbitration clauses.

In the lead matter, Tata Capital demanded ₹87.02 lakh together with interest, overdue interest and other charges.

Claiming that it did not know the whereabouts of the hypothecated equipment and apprehending that the security could be be lost before completion of the arbitral proceedings, Tata Capital moved the court under Section 9 seeking interim protection.

Among other reliefs, it sought disclosure of assets, attachment of bank accounts, bank guarantees, additional security, disclosure of the equipment's location, the contracts under which it was deployed and its receivables, besides appointment of a court receiver.

After examining the loan agreements, statements of account and recall notices, the court found that Tata Capital had established a prima facie contractual relationship and that a subsisting arbitral dispute existed between the parties. It said the agreements strengthened Tata Capital's prima facie case, but every relief sought under Section 9 still required independent examination before it could be granted.

It observed, "Merely because the agreement permits repossession or sale of the secured assets, it does not mean that this court has to grant every relief asked in the petition as a routine matter. Once the parties come before the court, it becomes necessary for the court to examine whether exercise of those rights deserves protection in the facts of this case."

Referring to the settled legal position, the court reiterated that its powers under Section 9 are discretionary and meant to preserve the subject matter of arbitration, not to routinely secure monetary claims.

It accordingly directed the borrowers to disclose their movable and immovable assets, observing that such a direction merely enables the court to consider whether further protective measures are necessary without depriving them of ownership or possession.

The court also directed disclosure of the present location of the hypothecated equipment, holding that a borrower who has offered movable assets as security cannot refuse to disclose their whereabouts after default.

It further directed disclosure of the contracts under which the equipment is deployed, but declined Tata Capital's request for details of receivables and cash flows, holding that they did not form part of the agreed security.

The court also refused to freeze the borrowers' bank accounts or direct them to furnish bank guarantees or additional security. It noted that Tata Capital had not produced any material to show that the borrowers were dissipating bank balances or diverting funds with an intention to defeat its claim. Granting such relief, the court said, would effectively secure the lender's entire monetary claim before the dispute is adjudicated.

It observed, "Simply because the petitioner has shown a prima facie monetary claim, it cannot mean that the respondent must furnish security for the entire amount claimed. If such a view is accepted, then every dispute involving a money claim would result in an order securing the claim even before the dispute is decided. Such an interpretation was never intended either by Section 9 or by the judgments relied upon by the petitioner."

The court ultimately partly allowed the petitions. It directed disclosure of the borrowers' assets, the location of the hypothecated equipment and the contracts under which it was deployed, restrained the borrowers from creating third-party rights in the hypothecated equipment, and appointed a court receiver to secure the equipment.

At the same time, it declined broader interim measures such as freezing bank accounts, directing bank guarantees or additional security, and ordering disclosure of receivables and cash flows.

For Petitioner(s): Advocates Arsh Misra, Shivam Kukreja and Ravi Goenka, Advocates, instructed by Goenka Law Associates.