Delhi High Court Restrains TruCap Finance From Disposing Assets Worth Rs. 1.70 Crore

The Delhi High Court on 1 September restrained TruCap Finance Limited from creating third-party rights or encumbrances over, or disposing of, assets worth up to Rs. 1.70 crore in a dispute with UGRO Capital Limited.

Justice Om Prakash Shukla also appointed Advocate Manisha Suri as the sole arbitrator to adjudicate the dispute arising from a co-lending arrangement between the two non-banking financial companies. The Bench observed:

“Having heard learned Senior counsel for the Petitioner and perused the petition along with the documents annexed thereto, this Court is satisfied that the balance of convenience lies in favour of the Petitioner, and that unless the Petitioner is protected by way of interim measures, the Petitioner would be exposed to irreparable harm inasmuch as any Award that may be passed in the intended arbitration would be reduced to a paper decree.”

The dispute arose from a Business Partnership Agreement dated 20 October 2022, under which UGRO Capital and TruCap Finance agreed to jointly provide loans to borrowers in an agreed ratio.

Under Clause 5.4 read with Schedule X of the agreement, TruCap was required to furnish a First Loss Default Guarantee (FLDG), comprising a lien-marked fixed deposit equivalent to 5% of the monthly portfolio outstanding and a corporate guarantee equivalent to 5% of the quarterly portfolio outstanding.

TruCap furnished a fixed deposit of only Rs. 1.75 crore and did not provide the required corporate guarantee. It subsequently made a part-payment of Rs. 1.27 crore in January 2024, leaving a corporate guarantee shortfall of Rs. 1.09 crore. UGRO communicated an aggregate FLDG shortfall of Rs. 1.70 crore to TruCap on 30 January 2025.

The following day, TruCap sought updated FLDG calculations and undertook to escalate the matter to its management without disputing its obligation. However, the shortfall remained unpaid.

The dispute escalated on 16 July 2025 when UGRO sought to invoke the fixed deposit. The bank holding the lien-marked deposit informed UGRO that it could not encash the deposit because of an alleged stay order passed by another Court in separate proceedings restraining encashment of securities furnished on behalf of TruCap.

UGRO was not a party to those proceedings and therefore had no direct knowledge of the alleged stay order. It then approached the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996, which empowers a Court to grant interim measures before or during arbitration. It sought security for the amount TruCap had allegedly failed to furnish under the agreement and replacement security for the fixed deposit that could not be invoked.

It submitted that TruCap's FLDG obligation was admitted and undisputed. It further submitted that TruCap's financial condition had deteriorated, citing defaults in servicing its borrowings, a lowering credit rating and mounting losses. It also argued that unless the amount was secured, there was a reasonable apprehension that any award obtained in the proposed arbitration would become a “paper decree”.

The Court found that the balance of convenience lay in UGRO's favour and that failure to grant interim protection would cause irreparable harm. TruCap, meanwhile, stated that it had no objection to the dispute being referred to arbitration.

Accordingly, the Bench appointed Advocate Manisha Suri as the sole arbitrator under the rules and aegis of the Delhi International Arbitration Centre.

The Bench restrained TruCap, including through its directors, officers, servants or agents, from creating third-party rights or encumbrances over, or disposing of, its assets to the extent of Rs. 1.70 crore.

It further directed that upon constitution of the arbitral tribunal, the Section 9 petition would be treated as an application under Section 17 of the Arbitration and Conciliation Act, 1996, which empowers an arbitral tribunal to grant interim measures.

The interim arrangement will continue until the arbitrator considers the matter, with the tribunal at liberty to continue, modify, vary or vacate the protection.

Appearances for petitioner (UGRO Capital Limited): Advocates Jayant Mehta, Monisha Handa, Mohit D. Ram, Mansvini Jain, Arnav Chaudhary.

Appearances for respondent (TruCap Finance Limited & Anr.): Advocates Utkarsh Joshi, Sharian Mukherji, Vinay Thakur, Sudarshana Bandyopadhyay.