Bombay High Court Orders ₹32.60 Crore Security to Safeguard Future Arbitral Award

In Ingram Micro India Private Limited v. Best Hawk Infosystems Private Limited, the Bombay High Court considered whether a company seeking recovery of outstanding business dues could obtain interim protection under Section 9 of the Arbitration and Conciliation Act 1996,¹ when the respondent’s financial position indicated a possibility that its assets might become insufficient to satisfy a future arbitral award. 

The dispute arose from the supply of goods by Ingram Micro India Private Limited to Best Hawk Infosystems Private Limited. Between July 26, 2024, and April 30, 2025, the petitioner raised several invoices for goods supplied to the respondent, but the payments remained outstanding. According to the petitioner, the respondent had accepted and used the goods while repeatedly assuring that the dues would be paid. The petitioner relied on an email sent by the respondent dated March 18, 2025, containing a balance confirmation of Rs.23,84,35,447. Subsequently, on July 29, 2025, the respondent acknowledged an outstanding amount of Rs.24,06,01,649.69. In another email dated August 20, 2025, the respondent assured the petitioner that it would make a payment of approximately Rs.6-8 crore by the end of that month. However, the outstanding amount was not cleared.

The petitioner also relied on cheque no. 181675, dated February 18, 2026, for Rs.24,03,01,646. When presented for payment, the cheque was dishonoured with the reason “Account Closed”. The petitioner subsequently issued demand notices and invoked the arbitration clauses contained in its invoices. It approached the High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection before the arbitral tribunal was constituted. The petitioner claimed. The petitioner claimed Rs.32,60,37,480 and also sought protection against the respondent dealing with its assets in a manner that could prejudice the enforcement of a future arbitral award.

The petitioner argued that the respondent’s financial statements demonstrated a substantial deterioration in its financial position. Its audited accounts for the financial year 2024-25 showed a net loss of approximately Rs.15.23 crore, compared with a profit of approximately Rs.0.82 crore in the preceding financial year. The respondent had negative reserves and surplus of approximately Rs.12.01 crore, short-term borrowings of approximately Rs.33.57 crore and trade payables of approximately Rs.87.01 crore, while its cash and cash equivalents stood at only approximately Rs.0.73 crore. The petitioner further pointed out that the respondent’s disclosure of assets identified only three immovable properties, with a combined gross value of approximately Rs.12.5 crore, some of which were encumbered. It also brought to the Court’s attention that insolvency proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016,² had been initiated against the respondent by another creditor before the National Company Law Tribunal.

The respondent disputed the petitioner’s claim and argued that the cheque relied upon by the petitioner was an old blank cheque issued as security during earlier business dealings. According to the respondent, the cheque belonged to an HSBC account that had been closed in March 2021 and was not a fresh instrument issued in 2026 towards the alleged outstanding liability. The respondent also contended that the balance confirmation was provisional and prepared for insurance purposes. It relied on issues concerning reconciliation of accounts, credit notes, rebates, OEM adjustments and other commercial adjustments to dispute the amount claimed. The respondent maintained that these matters required examination in arbitration and that the cheque could not establish the alleged liability.

The Court examined the correspondence between the parties alongside the invoices and the respondent’s financial statements. It observed that the correspondence contained repeated references to outstanding amounts and assurances of payment. Although the respondent’s objections concerning reconciliation, credit notes and the cheque remained open for determination by the arbitral tribunal, the Court found that these disputes did not outweigh the material indicating a substantial deterioration in the respondent’s financial condition. It emphasised that the petitioner was not required to establish dishonest intent to transfer or conceal assets. The Court also explained that a “strong possibility” of diminution of assets, supported by objective material, was sufficient. Section 9 is preventive in nature and enables the Court to protect the effectiveness of a potential arbitral award before enforcement becomes difficult.

The Court accordingly found that the petitioner had established a prima facie case and that the balance of convenience favoured securing the claim. It directed Best Hawk Infosystems Private Limited to deposit Rs. 32,60,37,480 with the Prothonotary and Senior Master within four weeks or, alternatively, furnish a bank guarantee from a nationalised bank or scheduled commercial bank for the same amount, to the satisfaction of the Prothonotary and Senior Master. The security is to remain subject to the orders of the Court and the final decision of the arbitral tribunal. The Court expressly clarified that the direction was not a decree for payment and did not finally determine the respondent’s liability. The questions concerning the principal amount payable, reconciliation, credit notes, interest and the validity and effect of the cheque were left open for arbitration. The petition was disposed of in these terms.

Citations

1. The Arbitration and Conciliation Act, 1996, s. 9 ↩︎
2. The Insolvency and Bankruptcy Code, 2016, s. 9 ↩︎

Expositor(s): Adv. Gaurangi Tandon