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Refuses to Bow to NPA Threat, Upholds Attachment Against SEPC and Twarit
The has firmly rejected a plea by to recall or keep in abeyance the attachment of Rs. 154.63 crore in trade receivables, holding that it cannot “bow down” to arguments that continued attachment could lead to the companies' assets being classified as . Justice K. Kumaresh Babu, in an order dated , dismissed the application filed by SEPC and also rebuffed a similar request from the consortium banks, emphasizing that the attempt to use the NPA threat as a shield against enforcement of a amounted to intimidation.
The dispute stems from a dated , which was affirmed by the on . In proceedings under , the had on held that the award was enforceable as a decree of the court. After the issued directions, a sum of Rs. 120 crore was paid towards the award, leaving a balance of Rs. 154,63,23,499 payable.
The Attachment Order and Audit
On , the High Court ordered of Rs. 154.63 crore from SEPC's total trade receivables of Rs. 499.62 crore. To ensure transparency and ascertain the true financial position, the court also directed a detailed audit through independent agency . The audit report was filed on , providing a comprehensive picture of the company's receivables.
SEPC subsequently sought modification of the 19 February order, relying on an undertaking by co-judgment debtor to pay Rs. 7.50 crore every quarter until the award was fully satisfied. The company argued that the attachment had brought its business to a stage where its assets could be classified as NPAs, and that the trade receivables needed to be reinvested into projects to keep the company operational. It further submitted that it incurred Rs. 2.08 crore every month towards employee salaries.
SEPC's Plea and the 'NPA Threat'
The consortium banks also joined SEPC in seeking “breathing space,” contending that classification as NPAs would benefit none of the parties. The award holders—, , and —opposed the plea, arguing that it was a transparent attempt to nullify the effect of the attachment and prolong execution.
Justice Babu, in his order, noted the core argument presented by the and the banks: “The arguments made by the as well as the Consortium banks is the nature of intimidation that if the is continued, the would fall as non-performing assets which would not be helpful for any of the parties.” The court observed that SEPC had attempted to portray itself as a , claiming that continued attachment would force it to lose business if the trade receivables were not re-infused into the company for further operation.
Court's Response: 'Cannot Bow Down'
The High Court was unimpressed. It held that it could not “bow down” to such arguments, which it characterized as a form of intimidation. The bench stated: “An attempt had been made by the first Judgment Debtor that it is a and if the continues, it would have to lose its business if the trade receivables are not re-infused into the Company for further operation.” The court emphasized that the enforcement of a decree—here, a —cannot be sidestepped by commercial inconvenience.
Crucially, the court found that SEPC and Twarit had not acted in . Despite repeated directions to disclose the for the proposed Rs. 7.50 crore quarterly payments, Twarit merely stated that it was negotiating with prospective entities for financial assistance. A subsequent affidavit that offered an assurance to honour the entire payment also failed to identify any concrete source. The court remarked: “The said affidavit was wholly vague and this Court is of the considered view that the attempt made by the was only to protract the proceedings and not allowing the to enjoy the as the amount payable by the had also not been arrived at and details were not given with regard to the source.”
Lack of and Protraction
The court also noted that SEPC and Twarit had neither disclosed the source of the proposed payment nor made any further payment after the initial undertaking. This lack of transparency, coupled with the failure to provide any credible timeline, convinced the court that the application was a delaying tactic. Accordingly, SEPC's application was dismissed with no order as to costs.
Aftermath: Twarit's Additional Affidavit
Interestingly, immediately after the order was pronounced, Twarit filed an additional affidavit seeking permission to deposit Rs. 7.50 crore and proposing to settle the remaining arbitral dues by . However, the High Court noted that Twarit's request for quarterly instalments had already been rejected. The court said that Twarit could settle the dues if it actually secured the proposed financial facility, but it did not modify the earlier order.
The appearances in the matter were noted: appeared for ; appeared for the award holders; and other advocates represented Twarit and the consortium banks.
Legal Implications
This decision sends a strong message to who attempt to leverage commercial distress—such as the threat of NPA classification—to avoid compliance with court orders. The has made it clear that the enforcement of arbitral awards, especially foreign awards recognized under the Arbitration and Conciliation Act, cannot be frustrated by self-created liquidity crises or by vague promises of future payment.
The ruling reinforces the principle that courts will not be swayed by arguments of economic hardship unless accompanied by a demonstrable good-faith effort to satisfy the decree. The requirement of disclosing the is a critical tool for courts to assess the credibility of payment undertakings. The judgment also underscores the importance of independent audits in , as the PwC report provided the court with an objective basis to assess the attachment.
For legal practitioners, the case highlights the need for to present concrete evidence of financial arrangements when seeking modification of attachment orders. Vague negotiations with prospective financiers will not suffice. The decision is likely to be cited in future where seek to leverage NPA or similar commercial classifications to escape their obligations.
The 's firm stance ensures that the sanctity of arbitral awards and the efficiency of the enforcement mechanism under the 1996 Act are preserved, even in the face of significant economic pressure from the banking sector.
