The High Court of Judicature at Bombay has issued a stringent interim order restraining Subramanya Constructions and Developments Co. Limited and Prakruthi Infrastructure and Development Co. Limited from alienating or encumbering their assets. The ruling, delivered by Justice Amit Borkar on October 22, 2026, stems from a dispute regarding a ₹278 crore arbitration settlement with Swan Corp Limited and its associates, Cardinal Energy and Infrastructure Private Limited and Pegasus Ventures Private Limited. The Court’s decision mandates comprehensive financial disclosures from the developer respondents and imposes strict conditions on the preservation of property to ensure the effectiveness of the underlying arbitration proceedings.

The controversy originated from a long-standing business arrangement initially captured in a February 2012 Memorandum of Understanding. Following extensive negotiations and subsequent arbitration, the parties reached a settlement in early 2026, which was formalized in Consent Terms and later incorporated into a final Arbitral Award dated March 16, 2026. Under the terms of this settlement, the respondent companies were obligated to pay a total of ₹240 crore by August 23, 2026. This deadline was subsequently extended to September 6, 2026. The agreement stipulated that a failure to adhere to the payment schedule would trigger an "Event of Default," increasing the total liability to an "Enhanced Settlement Amount" of ₹278 crore and allowing the petitioners to invoke specific security mechanisms, including the use of Master General Powers of Attorney held in escrow.

The petitioners moved the High Court under Section 9 of the Arbitration and Conciliation Act, 1996, alleging that the respondents failed to make the required payments within the extended timeframe while simultaneously pursuing real estate transactions that threatened the security of the petitioners' claims. The respondents countered that the additional ₹38 crore penalty was unenforceable under Section 74 of the Indian Contract Act, 1872, and sought the appointment of a Court Receiver to facilitate a sale of properties to satisfy the original debt. Justice Borkar, however, emphasized the binding nature of the Consent Terms, noting that the court is tasked with preserving the subject matter of the dispute rather than rewriting the bargain struck by the parties.

Judicial Oversight and Enforcement Mechanisms

In his analysis of the dispute, Justice Borkar highlighted that the court’s primary function in an application under Section 9 is to secure the arbitration's subject matter and prevent the remedy from becoming illusory due to asset depletion. He observed that the parties had clearly contemplated the consequences of non-payment. Regarding the respondents' attempts to explain the payment failure as a product of delays in removing encumbrances, the Court maintained that genuine effort does not equate to the fulfillment of a payment obligation.

"This Court is not required to conclude that the financing efforts were dishonest merely because they were made. However, it can be seen that transactions concerning properties and interests relevant to the Petitioners' claim were being considered. Therefore, the present position of those properties and interests needs to be disclosed and protected," Justice Borkar noted.

The Court further rejected the respondents' proposal for a Court Receiver , ruling that such an appointment might interfere with the security enforcement powers already granted to the petitioners under the existing Arbitral Award . The ruling underscores the finality of consent-based settlements, citing the precedent that a consent decree operates as an estoppel against the parties. "A judgment by consent is intended to stop litigation between the parties just as much as a judgment resulting from a decision of the court at the end of a long drawn out fight," the court emphasized.

Protective Orders and Third-Party Interests

The High Court’s order directs the respondent companies to provide a detailed disclosure of their assets, including bank accounts, investments in stocks, mutual funds, and cryptocurrency, within seven days. Furthermore, the court imposed a blanket restraint on the respondent developers, prohibiting them from selling, transferring, or creating third-party interests in their movable and immovable assets unless authorized by the court or the arbitral tribunal.

The status of properties in Mysore, which formed a significant portion of the security package, was addressed with nuance. While the court directed a status quo on identified unsold portions of the land to prevent further dissipation, it carefully excluded completed transactions involving innocent third-party purchasers. This ensures that while Swan Corp Limited retains its leverage for recovery, the court does not unnecessarily disrupt the rights of legitimate allottees. The order explicitly preserves the integrity of other pending litigation, including proceedings before the Civil Court at Srirangapatna in O.S. No. 440 of 2026, ensuring that the High Court’s intervention does not conflict with existing judicial injunctions.

Financial Transparency and Ongoing Obligations

In addition to the injunction, the court mandated that respondents Arjun Balasubramanyam and Chandregowda alias Chandrappa provide sworn affidavits detailing any proceeds received from the sale or transfer of the scheduled Mysore properties. If these individuals are found to be holding sale proceeds that were not previously disclosed or utilized in accordance with the settlement, they are required to deposit those funds with the Court.

The respondents' plea for a stay of the judgment to appeal the decision was summarily rejected by the court. With the petitioners' claims now protected, the matter moves into the next phase of arbitration, where the parties will litigate the substantive questions surrounding the enforceability of the enhanced settlement figure and the ultimate valuation of the secured assets. The court’s order serves as a safeguard, ensuring that regardless of the final outcome of the arbitration, the respondents cannot unilaterally dispose of the assets necessary to satisfy a potential award. The proceedings highlight the rigorous scrutiny courts now apply to asset-stripping maneuvers in the wake of commercial defaults, reaffirming that agreed security arrangements are not merely technical clauses but operative pillars of financial settlements. The respondents are now required to file their initial disclosure affidavits within the prescribed seven-day window, signaling the start of a period of heightened financial monitoring for the developer entities involved.