Introduction:

In the matter titled SREI Equipment Finance Limited vs Trinity Alternative Investment Managers Limited [AP-COM/1049/2024; IA GA-COM 1 of 2025, GA-COM 2 of 2025], the Calcutta High Court delivered a significant judgment on 18th June 2025 under Justice Shampa Sarkar, addressing the scope of interim reliefs during pending arbitration and the rights of secured creditors under hypothecation agreements.

Arguments:

The petitioner, SREI Equipment Finance Limited (SEFL), had lent Rs. 26 crores to Trinity under two hypothecation deeds dated 28th August 2020 and 18th February 2021. Alleging non-payment and claiming current dues exceeding Rs. 53 crores, the petitioner sought an injunction against the respondent’s bank accounts and a broader freezing of assets to secure their claims pending arbitration.

The respondents, on the other hand, contended that they remained a fully operational entity, with no attempt to alienate or conceal assets, and that the freezing of bank accounts severely impeded their functioning, particularly where funds belonged to third-party investors. The petitioner highlighted its secured status under the hypothecation deeds and contended that the respondent had not adhered to the Court’s previous order to disclose all assets and bank accounts. It argued the supplementary affidavit disclosed inflated asset valuations, particularly regarding Bharat Nirman Fund, whose value shot up from Rs. 1.82 crores to Rs. 36.96 crores between December 2024 and recent disclosures. It further pointed to SIFL’s inability to participate in the rights issue due to regulatory proceedings under IBC, thereby diluting SIFL’s stake from 51% to 11%, as part of a mala fide strategy. The petitioner insisted that it had not assured the respondent in NCLT proceedings and that its claims should be independently recognized and secured through interim relief. Meanwhile, the respondent argued that the hypothecation deeds alone did not confer a right to broader injunctions, especially absent any evidence of asset alienation or intent to defeat any future award. It said SEFL’s invocation of SARFAESI Act Section 13(2) in July 2024 triggered Section 13(13), already barring any unauthorized asset transfers. The respondent further stated that no evidence had been brought showing attempts to dispose of properties or obstruct execution under Order 38 Rule 5 of CPC, a precondition for attachment before judgment. Further, it was contended that the continuation of bank account freezing unjustly disrupted third-party investors and their business operations. Justice Sarkar found that while a prima facie claim existed for Rs. 26 crores, backed by the respondent’s letter dated 23rd April 2024, no conclusive evidence supported the entire claimed amount of Rs. 53.61 crores. She also noted that while the petitioner had valued certain investments at Rs. 12.41 crores, the respondent disclosed additional investments totalling Rs. 41.04 crores, which had not been proven false or overvalued.

Judgement:

The Court stressed that determining these asset valuations would lead to a mini-trial, unsuitable at this interim stage. Moreover, the Court noted that the hypothecation deeds provided sufficient security for now and that the respondent had neither concealed nor alienated any assets to frustrate enforcement of a future arbitral award. It noted the corporate structure, wherein both SEFL and Trinity were formerly subsidiaries of SIFL, and the current control of SIFL, SEFL, and Trinity lay with the National Asset Reconstruction Company Limited (NARCL) following proceedings initiated by RBI before NCLT. The Court reasoned that NARCL’s control served as a safeguard for all stakeholder interests, including the petitioner’s, pending arbitral resolution. While vacating the injunction on the respondent’s bank accounts, the Court directed a more balanced interim relief: a prohibition against transferring or redeeming disclosed and future investments, preserving the petitioner’s security without freezing third-party investor funds. It held that bank account freezes should be exceptional and only upon clear evidence of intent to obstruct recovery. Moreover, the respondent was ordered to provide audited financials and investment details within two weeks. The Court concluded that further protective measures were unnecessary at this juncture and that the matter was best left to the jurisdiction of the arbitral tribunal now that proceedings had commenced. The Court upheld that the rule of balance of convenience weighed against freezing business accounts without urgent cause. Interim orders that hinder business must be narrowly tailored and backed by clear evidence of risk.