Trucap Finance Restrained from Encumbering Assets Amidst Arbitration Proceedings; Arbitrator Appointed
In a significant judgment delivered by the Delhi High Court, Ugro Capital Limited has been granted interim relief in a dispute with Trucap Finance Limited concerning a co-lending arrangement. The Court has restrained Trucap Finance from creating third-party rights or encumbering assets up to Rs. 1.70 crores, pending arbitration proceedings.
The dispute arose under a Business Partnership Agreement dated October 20, 2022, between the two non-banking financial companies. The agreement involved a co-lending arrangement where both companies were to jointly grant loans. A significant aspect of the agreement was the First Loss Default Guarantee (FLDG) that Trucap Finance was obliged to furnish, which included a lien-marked fixed deposit and a corporate guarantee.
The Court noted that Trucap Finance failed to provide the required security, leading Ugro Capital to file a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim measures to protect its interests. Ugro Capital argued that the financial health of Trucap Finance had deteriorated, which could jeopardize the enforceability of any arbitral award.
Justice Om Prakash Shukla, who presided over the case, held that the balance of convenience favored Ugro Capital. The Court was persuaded that without interim measures, Ugro Capital might face irreparable harm, as any favorable arbitral award could become unenforceable.
In response to the petition, the Court appointed Ms. Manisha Suri as the sole arbitrator to adjudicate the disputes between the parties. The arbitration will be conducted under the Delhi International Arbitration Centre's aegis, with the arbitrator's fees determined according to the Centre's schedule.
The Court's order permits the interim arrangement to continue until the arbitrator addresses the matter and issues appropriate orders. The arbitrator has been directed to commence proceedings within three weeks, ensuring that all parties can present their pleas, including objections related to arbitrability and jurisdiction.
Bottom Line:
Arbitration, Section 9 of the Arbitration and Conciliation Act, 1996 - Interim measures of protection granted in favor of the Petitioner to secure obligations under a Business Partnership Agreement, pending arbitration - Respondent restrained from creating third-party rights or encumbrances over assets to the extent of Rs. 1.70 crores.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 9, 12(2), 17
Ugro Capital Limited v. Trucap Finance Limited, (Delhi) : Law Finder Doc id # 2973748
