The recently authorized the appointment of a to take physical possession of a high-end medical imaging system after finding that the borrower, Nadeem Ahmad Khandey, repeatedly failed to honor repayment obligations under a with . Presiding over the commercial division, Justice Amit Borkar issued the directive to ensure the preservation of the asset, a “Somatom Go Now Compact” machine, amid ongoing disputes regarding the total outstanding liability and the validity of default interest claims.
The conflict stems from a loan facility sanctioned on , where the lender provided financial assistance of Rs 1,05,00,000 to the borrower for the acquisition of diagnostic medical equipment. The terms stipulated a 72-month repayment window at an annual interest rate of 11.50%. However, the account encountered significant turbulence within its first year, leading to its classification as a on . While the borrower initially signaled an intent to cooperate by issuing a surrender letter on , claiming an inability to regularize the account due to operational difficulties, the physical transfer of the equipment never occurred.
Operational Strains and Contractual Breaches
The situation escalated when the lender issued a formal on , citing persistent defaults and unauthorized shifts in the borrower’s business structure, which had allegedly transitioned from a sole proprietorship to a partnership without the lender's consent. Representing the borrower, legal counsel argued that the machinery served as the primary engine for the medical center’s revenue and that an immediate seizure would cause irreparable harm to their ability to function. They also pointed to a concurrent civil suit initiated before the , which had passed an order restraining the creation of in the equipment.
Justice Borkar, however, noted that the existence of a civil suit involving different parties did not automatically override the specific contractual rights established in the finance agreement. The court emphasized that the lender’s request for was grounded in the need to prevent the that was directly tied to the contested loan. Explaining the legal rationale for the decision, the court observed: “The order is not being passed on the basis of any finding of fraud or a proved attempt to defeat the proceedings. It is being passed because of the contractual security, the continued defaults, the failure to hand over possession and the need to preserve the machinery until the dispute is decided.”
Preservation of Secured Assets
The ruling carefully balanced the lender’s right to security against the borrower’s need to maintain business operations. By appointing the receiver, the court sought to move the equipment into " " status—meaning the asset remains under the legal authority of the court rather than becoming the de facto property of the lender. This arrangement prevents the lender from exercising an unilateral right to sell, auction, or dismantle the machine, thereby shielding the borrower from premature liquidation of their core business assets before the underlying arbitral dispute is resolved.
Citing established legal principles regarding , the bench highlighted the importance of upholding contractually defined rights when dealing with movable assets. The court noted: “Therefore, there can be no doubt about the fact that creates a charge, without delivery of possession of the movable asset. Since is not a statutory creation, the rights of the hypothecatee are governed by the terms of the contract.” This distinction proved pivotal, as it allowed the court to acknowledge the validity of the underlying agreement while maintaining the flexibility to impose conditions that prevent potential overreach by the creditor.
Balancing Financial Disputes
During the proceedings, a significant portion of the deliberation focused on the calculation of the outstanding amount. The borrower strongly contested the lender's demand of approximately Rs 1.22 crore, arguing that the inclusion of default interest at 36% per annum was highly inflated. The court clarified that the current order for possession was strictly an interim safety measure and did not imply a final judicial endorsement of the lender’s financial calculations. By refusing to rule on the validity of the interest rates at this preliminary stage, the court ensured that both parties retain the opportunity to contest the final quantum of liability during the formal process.
The guarantor involved in the transaction, Dr. Manzoor Ahmad Dar, appeared to support the appointment of the receiver, suggesting that the formal intervention of a court-appointed official would be the most appropriate way to manage the asset as the business struggled to stabilize. This alignment of interests further substantiated the court's decision to move forward with the appointment, providing a layer of oversight that private recovery efforts often lack.
The court has directed that the receiver be granted the necessary authority to seek police assistance if they encounter obstruction at the premises. However, these powers are strictly limited to the act of taking possession and conducting an inventory of the machine and its accessories. The petitioner, Siemens Financial Services, is tasked with bearing the initial administrative and preservation expenses, which will remain subject to future adjustments depending on the outcome of the substantive . With the receiver now tasked with taking physical custody of the medical system, the matter is expected to shift toward the formal stage, where the parties will finally adjudicate the total debt, the legitimacy of the default interest, and the specific repercussions of the alleged unauthorized business partnership conversion. The equipment will remain safely preserved, held in trust by the custodian on behalf of the High Court, until a final award settles the conflicting financial claims.
interim protection - asset hypothecation
