Court directs asset disclosure and restrains Respondents from alienating assets pending arbitration outcome, while clarifying limits of enforceability of enhanced settlement amount
In a significant ruling on October 22, 2026, the Bombay High Court, presided over by Justice Amit Borkar, delivered its judgment in the commercial arbitration dispute between Swan Corp Limited (formerly Swan Energy Limited) and Subramanya Constructions and Developments Co. Limited along with others. The Court addressed a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim reliefs to safeguard a claim for an Enhanced Settlement Amount of Rs. 278 crores following a consent arbitral award.
The dispute arose from a Memorandum of Understanding executed in 2012 and subsequent settlement agreements culminating in Consent Terms dated February 22, 2026, and a Final Arbitral Award on March 16, 2026. The Consent Terms required payment of Rs. 240 crores within six months, extended to September 6, 2026. The Respondents failed to pay the amount by the extended deadline, leading to the Petitioners invoking default clauses which increased the payable sum to Rs. 278 crores and triggered agreed security arrangements involving Master General Powers of Attorney (MGPAs) over scheduled properties.
The Court found that the Respondents' arguments that ongoing financing efforts and pending removal of encumbrances over Chennai Lands extended the payment deadline were untenable, especially given the earlier dismissal of a similar challenge by the Court on September 7, 2026. The Court held that mere efforts to arrange finance or execution of term sheets did not constitute payment or an extension of time. Consequently, an Event of Default under the Consent Terms had occurred.
Rejecting the Respondents' contention that the enhanced settlement amount was a penal clause unenforceable under Section 74 of the Indian Contract Act, 1872, the Court clarified that at the Section 9 stage, it was not required to finally decide the enforceability of the entire enhanced amount but could grant protective interim relief to preserve the security arrangement.
Accordingly, the Court granted the Petitioners' prayers for interim measures including:
- Mandatory disclosure by Respondent Nos. 1 and 2 of all assets, bank accounts, investments, encumbrances, and income-tax returns within seven days.
- Injunction restraining Respondent Nos. 1 and 2 from selling, transferring, encumbering, or creating third-party interests in their movable or immovable assets that may defeat or frustrate the Petitioners' claim, subject to prior leave of the Court or arbitral forum.
- Clarification that the injunction would not hinder Petitioners from exercising rights under Clauses 3.2 and 3.3 of the Consent Terms and MGPAs according to law.
- Limited status quo orders against Respondent No. 4, a confirming party who is not personally liable for the settlement amount but whose Mysore properties form part of the security, to preserve identifiable and unsold portions of scheduled properties, subject to third-party rights and ongoing civil court orders.
- Directions to Respondent Nos. 3 and 4 to disclose and deposit any sale proceeds received from scheduled Mysore properties still available with them.
The Court emphasized that the interim order does not determine final liability, ownership, or enforceability of the enhanced settlement amount, leaving all such issues open for arbitration or competent forums. The Court rejected a proposal to appoint a Receiver with broad powers, stating that any receiver appointed should have limited powers strictly to preserve the properties and not interfere with the contractual enforcement mechanism under the Consent Terms.
In rejecting the Respondents' plea for stay, the Court underscored the importance of preserving the subject matter of arbitration to prevent frustration of the Petitioners' remedy.
This judgment reiterates the principle that consent arbitral awards embodying settlement terms carry binding effect, that default clauses and agreed security arrangements can be protected by interim measures under Section 9 of the Arbitration Act, and that efforts to arrange finance do not dilute the agreed payment obligations.
Bottom Line:
Arbitration and Conciliation Act, 1996 Section 9 Consent arbitral award based on settlement terms - Non-payment of settlement amount within extended time constituted Event of Default - Default clauses and security arrangement under Consent Terms could be protected by interim measures - Court can direct disclosure of assets, restrain Respondent Nos.1 and 2 from dealing with assets, and grant limited status quo/disclosure directions regarding scheduled properties of confirming parties, while leaving final enforceability of enhanced settlement amount and rights of third parties open.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 9, Indian Contract Act, 1872 Section 74
