Court holds vague undertakings and nondisclosure of fund sources as lack of bona fides; insists on strict enforcement of decree despite claims of business hardship and risks of non-performing assets
In a significant judgment delivered on 21st September 2026, the Madras High Court dismissed the application filed by SEPC Limited (formerly Shriram EPC Limited) seeking to modify the interim attachment order on trade receivables in the execution proceedings of a foreign arbitral award against GPE (India) Ltd. and others.
The dispute arose from a foreign arbitral award amounting to over Rs. 154 crores, which was confirmed as a decree by the Court under the Arbitration and Conciliation Act, 1996. Pursuant to an earlier order dated 19.02.2026, the Court had directed interim attachment of trade receivables worth Rs. 154,63,23,499/- out of the total receivables of Rs. 499,62,35,793/- to secure the decree holder’s claim.
The second judgment debtor approached the Court seeking modification of the attachment order, citing severe business hardships including delays in salary payments amounting to Rs. 2.08 crores monthly, statutory compliance issues, and the risk of the company’s assets being declared non-performing assets (NPA). They argued that the trade receivables were not profit but capital in rotation essential to keep the company as a going concern. The first judgment debtor had given an undertaking to pay Rs. 7.50 crores per quarter and an initial Rs. 2.50 crores within 15 days, which the second judgment debtor relied upon to support their plea.
However, the Court found the undertakings to be vague and the affidavits filed by the judgment debtors lacking in specifics about the source of funds to make the payments. Despite repeated directions, the first judgment debtor failed to disclose credible sources or produce concrete evidence of financial arrangements, instead relying on bald assertions of ongoing negotiations with potential financiers.
The Court observed that these attempts were not bona fide efforts to satisfy the award but rather tactics to protract the execution proceedings and frustrate the decree holder’s rights. Moreover, the Court emphasized that the plea that enforcement of the attachment would convert the company into an NPA was not a valid ground to dilute or vacate the attachment order, especially since the judgment debtors had previously made substantial payments (Rs. 120 crores) under pressure of proceedings.
Highlighting the seriousness of the matter, the Court reiterated that the attachment order was to continue until an audit report from an independent firm (PriceWaterHouseCoopers) was submitted. The Court expressed its unwillingness to bow to intimidation or vague financial assurances that delay the realization of the award.
In the aftermath of dismissing the modification application, the first judgment debtor made an offer to deposit Rs. 7.50 crores by demand draft and sought permission to settle the remaining dues negotiated with the decree holder. The Court clarified that since the application for quarterly installments was rejected, no modification would be granted; however, the judgment debtor was free to settle the dues if able to secure funds.
This judgment underscores the judiciary’s firm stance on ensuring prompt execution of foreign arbitral awards and resisting tactics that undermine decree enforcement. It also clarifies that financial hardships or risks of business degradation do not justify dilution of court orders securing decree holders’ rights, especially in the absence of clear and credible disclosures.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Execution of foreign award - Application by second judgment debtor to modify interim attachment of trade receivables rejected - Court held that vague undertakings without disclosure of source of funds and repeated attempts to seek time showed lack of bona fides - Mere plea that continuation of attachment may render company a non-performing asset or affect business operations is no ground to dilute execution proceedings.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 47 to 49
