Delhi High Court Appoints Receivers to Secure EVs Under Section 9 of the Arbitration and Conciliation Act - 2025-05-07

Protecting the Charge: Delhi High Court Steps in to Secure Electric Fleet

In a significant interim order, the High Court of Delhi has intervened in a commercial dispute involving the leasing of 210 electric vehicles (EVs). Hon’ble Ms. Justice Jyoti Singh, acting under Section 9 of the Arbitration and Conciliation Act, 1996 , directed the appointment of receivers to secure and maintain the leased fleet, ensuring the preservation of these high-value assets pending further arbitration.

The Breakdown of a Lease Agreement

The Petitioner, Smas Auto Leasing India Pvt Ltd, a company specializing in vehicle leasing and Fleet Management Services, approached the court following a severe financial default by the Respondents. In 2021 and 2022, the Petitioner had entered into Master Lease Agreements (MLA) for 164 and 46 EVs respectively with Respondent No. 1, Gensol Engineering Limited, and Respondent No. 2.

The situation spiraled when, on April 5, 2025, NACH (National Automated Clearing House) mandates for monthly lease rentals were dishonored due to "insufficient funds." This financial instability was compounded by media reports suggesting the Respondents had curtailed their cab and ridesharing operations, alongside an interim SEBI order against Respondent No. 1 and its promoters regarding alleged fund siphoning.

Arguments for Urgent Intervention

The Petitioner argued that their ownership of the EVs was absolute and that the vehicles required active operational maintenance to ensure the longevity of their lithium-ion batteries. Counsel for the Petitioner highlighted the risks of leaving the EVs immobile for long periods, which could lead to irreversible battery damage.

Furthermore, the Petitioner expressed a "reasonable apprehension" that the Respondents—faced with financial distress—might attempt to alienate, mortgage, or dispose of the assets in violation of the MLA's restrictive covenants.

Key Observations from the Bench

The Court emphasized the necessity of protecting the underlying assets to prevent irreparable harm. Relevant excerpts from the order include:

• "This Court is of the view that Petitioner has made out a prima facie case for grant of an interim relief."
• "It is accordingly directed that till the next date of hearing, Respondents shall not sell, alienate, transfer or encumber or in any manner create third party rights in respect of the aforementioned EVs."
• "[The Receivers] will take possession of the EVs and make an inventory and take photographs etc. after inspection... It will be open to the Receivers to take all necessary steps to charge and preserve the EVs so that they remain in good and working condition."

The Court’s Decision: A Call for Preservation

Recognizing the urgency, the Court appointed three receivers to conduct an inspection, inventory the vehicles, and ensure they remain in functional condition. The Respondents have been ordered to cooperate fully by identifying the locations of the parked vehicles within two days, with a strict warning against shifting or hiding the fleet. The court also sanctioned the use of local police assistance should the receivers face any obstruction during the execution of the order.

This ruling underscores the judiciary’s role in utilizing Section 9 of the Arbitration Act to safeguard material assets when a contractual relationship collapses, particularly in high-stakes technology infrastructure where the physical state of the assets—like EV batteries—is critical to their commercial value. The matter is set for further hearing on July 22, 2025.