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Legal Case Shots

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Arbitration & Commercial LawDelhi High Court

M/S Axis Finance Ltd. vs. Rishab Mago & Ors.

First Appeal from Order (Original Side, Commercial) · 2026:DHC:7306-DBDecided 1 Sept 2026New Delhi Bench
FAO(OS) (COMM) 157/2026CNR: DLHC010271852026
Justice Anil Kshetarpal · Justice Amit Mahajan

Background

A non-banking finance company (NBFC) had given two mortgage-backed loans to borrowers, who later defaulted; the loans (with an arbitration clause) turned into a dispute over roughly Rs. 3 crore. The NBFC had already started recovery action under the SARFAESI Act (using the mortgaged property as security) and separately asked the High Court, before arbitration formally began, to freeze all of the borrowers' assets (not just the mortgaged property) to make sure it could recover its money. A single judge had refused this, reasoning that the mortgage already secured the dispute.

Decision Breakdown

The Division Bench upheld the refusal to freeze the borrowers' other assets. It explained that even if the mortgaged property is sold to someone else, the lender's mortgage rights still take priority over any new buyer, so there was no real risk from that angle. It also noted the borrowers already had separate proceedings pending before the Debts Recovery Tribunal (DRT) regarding the same loan recovery, and the NBFC could seek any further asset-freezing protection there instead of running parallel cases in two forums for the same money. The mere worry that the mortgaged property's value might not fully cover the debt was not, by itself, enough to justify broadly freezing all of the borrowers' other assets.

Lesson Learnt

Courts are reluctant to grant sweeping freezes over a debtor's entire assets under Section 9 of the Arbitration Act when the debt is already secured by a mortgage and a parallel recovery forum (like the DRT) is available: a lender must show a concrete, specific risk to unsecured assets, not just a general concern that the security might fall short.

M/S Axis Finance Ltd. vs. Rishab Mago & Ors. – Legal Case Shots | LegalAware