M/S Ugro Capital Limited vs Bharat Electrical Accessories (P) Ltd. ...
2026 Latest Caselaw 413 Cal/2

Calcutta High Court

M/S Ugro Capital Limited vs Bharat Electrical Accessories (P) Ltd. ... on 3 February, 2026

                     IN THE HIGH COURT AT CALCUTTA
                          COMMERCIAL DIVISION                                    2026:CHC-OS:34

                             ORIGINAL SIDE
                         RESERVED ON: 27.01.2026
                         DELIVERED ON: 03.02.2026
                                 PRESENT:
                      HON'BLE JUSTICE GAURANG KANTH
                              AP-COM 891OF 2025
                         M/S UGRO CAPITAL LIMITED
                                    VERSUS
           BHARAT ELECTRICAL ACCESSORIES (P) LTD. AND ORS.

Mr. Swatarup Banerjee, Adv.
Mr. K. K. Pandey, Adv.
Ms. Sonia Nandy, Adv.
Ms. Mallika Bothra, Adv.
                                                                ...for the petitioner

Mr. Ishaan Saha, Adv.
Ms. Bhawna Tekriwal, Adv.
                                                    ...for the respondent nos.1 to 3

Mr. Shounak Mukhopadhyay, Adv.
Mr. Shivam Bhimsaria, Adv.
Ms. Akansha Singhania, Adv.
                                                    ...for the respondent nos.4 to 6

                                  JUDGMENT

Gaurang Kanth, J.:-

1. The present petition has been preferred by the Petitioner under Section 9

of the Arbitration and Conciliation Act, 1996 seeking a direction upon the

Respondent to furnish adequate security towards the alleged outstanding

dues payable to the Petitioner. In the alternative, it is prayed that, in the

event of the Respondents failure to furnish such security, the Respondents

be restrained from operating their bank accounts as specified in Annexure

-H, so as to secure the outstanding amount of Rs. 2,93,07,298/-.

2. The facts leading to the present case are as follows:

3. The Petitioner is a registered non-banking financial company engaged 2026:CHC-OS:34 in

the business of providing customized loan solutions to business entities

requiring working capital. The Respondents are engaged in the business of

retail trade and deal with various suppliers.

4. In or about July 2023, Respondent No. 1 approached the Petitioner

seeking a short-term working capital facility. The Petitioner extended a

loan facility of Rs. 2,00,00,000/- to Respondent No. 1 pursuant to a

Facility Agreement and Sanction Letter, both dated 25.07.2023, in relation

to Loan Account No. UGDADEL000000481. Respondent No. 1 was the

principal borrower, while Respondent Nos. 2 to 6 were co-applicants. The

Respondents also executed a demand promissory note and a letter of

continuity in connection with the said facility.

5. At the outset, it was submitted on behalf of the Petitioner that Respondent

Nos. 4 to 6 have disputed the validity of their signatures on the loan

documents, alleging that the same were obtained by fraud. In this regard,

a Special Leave Petition being SLP No. 35407 of 2025 is stated to be

pending before the Hon'ble Supreme Court. In view of the pendency of the

said proceedings, no relief is presently claimed by the Petitioner against

Respondent Nos. 4 to 6.

6. Respondent No. 1 was engaged in retail trade with various suppliers,

including Vedanta Limited. As per the Sanction Letter and the Facility

Agreement dated 25.07.2023, the credit facility was structured against

invoices raised by Vedanta Limited, and each disbursement made by the

Petitioner was treated as payment towards the supply of goods and/or

services rendered by Vedanta Limited to Respondent No. 1. Each tranche

of the facility was to be released against a corresponding invoice. The

facility was sanctioned as a short term working capital loan for a tenure 2026:CHC-OS:34 of

one year, with each disbursement tranche carrying a repayment cycle of

90 days. Repayment was due on the 91st day, and failure to repay

constituted an event of default, entitling the Petitioner to recall the facility.

7. In accordance with the said terms, upon invoices being raised by Vedanta

Limited on Respondent No. 1, corresponding loan amounts were disbursed

by the Petitioner.

8. A default is stated to have occurred in respect of repayment against the

invoice dated 30.10.2023. Consequently, by a letter dated 18.11.2023, the

Petitioner recalled the facility and demanded repayment of outstanding

dues quantified at Rs. 2,08,19,870/-.

9. Thereafter, the Petitioner instituted AP (Com.) 39 of 2023 before this Court

under Section 9 of the Arbitration and Conciliation Act, 1996, seeking

security for the said amount. During the pendency of the said proceedings,

discussions took place between the parties regarding settlement and

restructuring of the repayment schedule. By an order dated 12.11.2024,

this Court declined to grant interim relief, recording that the Respondents

had repaid Rs.2,00,00,000/- against the invoice dated 31.07.2023 and

had discharged the dues under Loan Account No. UGDADEL000000481.

The order further recorded that, pursuant to the restructuring, fresh

invoices were raised, and against such invoices the Petitioner disbursed an

aggregate sum of Rs.1,99,44,000/-. It is stated that the said

disbursements remain unpaid and that the outstanding amount continues

to stand at Rs.2,08,19,871/-.

10. The Petitioner asserts that the Facility Agreement dated 25.07.2023

continues to subsist and that the disbursements made on 23.03.2024,

2026:CHC-OS:34 26.03.2024, 27.03.2024, 28.03.2024 and 10.04.2024 were advanced

pursuant to a restructuring of the original contractual arrangement.

11. In the meantime, the Respondents instituted CS (Com.) 55 of 2025,

alleging, inter alia, that the Petitioner had fraudulently procured their

digital signatures on the loan documentation. The Petitioner invoked

Sections 5 and 8 of the Arbitration and Conciliation Act, 1996. By order

dated 11.09.2025, the suit was disposed of and the parties were referred to

arbitration.

12. As per the statement of account placed on record, the outstanding liability

is stated to have increased to Rs. 2,93,07,298/- as on 10.11.2025.

13. Clause 15.1 of the Facility Agreement dated 25.07.2023 contains an

arbitration agreement. It is further recorded that the transaction was

executed within the territorial jurisdiction of this Court.

14. In view of the said position, the Petitioner preferred the present Petition

under Section 9 of the Arbitration and Conciliation Act, 1996 seeking a

direction upon the Respondent to furnish adequate security towards the

alleged outstanding dues payable to the Petitioner

Submission on behalf of the Petitioner

15. Mr. Swatarup Banerjee, learned Counsel for the Petitioner submits that

the present outstanding liability unequivocally arises out of, and is

traceable to, the original Facility Agreement dated 25.07.2023, which

continues to govern the contractual relationship between the parties.

Drawing the attention of the Court to various clauses of the said Facility

Agreement, it is contended that the structure of the transaction

contemplated multiple tranches under a single overarching facility. Under

the said agreement, Respondent No. 1, being the principal borrower, had

2026:CHC-OS:34 agreed to identify buyers from its network for whom payments were to be

made by the Petitioner. In the initial phase, Vedanta Limited was identified

as the buyer, pursuant to which the Petitioner disbursed funds in

accordance with invoices raised at the request of the Respondent. Each

tranche carried a defined repayment period of 90 days.

16. Learned Counsel for the Petitioner further submitted that upon default in

repayment of the said tranches, the Petitioner was constrained to institute

AP (Com.) 39 of 2023. During the pendency of the said proceedings, the

Respondent repaid the outstanding tranches pertaining to Vedanta Limited

and sought restructuring of the facility. Pursuant to such restructuring

and at the request of the Respondent, the Petitioner disbursed further

amounts towards invoices raised by other buyers identified by the

Respondent. These subsequent disbursements, it is submitted, were not

independent transactions but were made strictly within the framework of,

and pursuant to, the same Facility Agreement.

17. Learned Counsel for the Petitioner further submits that no dispute has

been raised by the Respondent with regard to the payments advanced by

the Petitioner.

18. Mr. Swatarup Banerjee, learned counsel for the petitioner further submits

that since all disbursements, both prior to and subsequent to the

restructuring, were advanced under the subsisting Facility Agreement, the

Petitioner's claim for the present outstanding amounts is contractually

founded and enforceable. It is therefore contended that the Petitioner is

entitled to the reliefs as prayed for in the present proceedings.

2026:CHC-OS:34 Submission on behalf of the Respondent Nos. 1 to 3

19. Mr. Ishaan Saha, learned Counsel for the Respondent nos. 1 to 3 has

vehemently opposed the present petition. It is submitted that this Court,

by an order dated 12.11.2024 passed in AP (Com.) 39 of 2023, had already

declined the Petitioner's prayer for interim protection under Section 9 of

the Arbitration and Conciliation Act, 1996. The Respondents contend that

all dues arising out of the original Facility Agreement dated 25.07.2023

stood fully discharged. In this regard, reliance is placed on the Petitioner's

own statement of account dated 01.04.2024, wherein the relevant loan

account was marked as "Closed Tranche." It is submitted that the

Respondents made payments of Rs.25,00,000/- each on 23.03.2024,

26.03.2024 and 28.03.2024; Rs. 24,50,000/- on 27.03.2024; and a further

sum of Rs. 1,00,50,000/- on 31.03.2024, aggregating to Rs.2,00,00,000/-,

thereby extinguishing the liability under Loan Account No.

UGDADEL000000481. According to the Respondents, this factual position

also stands expressly recorded in the order dated 12.11.2024 passed in AP

(Com.) 39 of 2023.

20. It is further submitted that the subsequent advances relied upon by the

Petitioner were not made under the original Facility Agreement but

pursuant to a fresh and independent lending arrangement, which

continues to subsist and in respect whereof no default has occurred. It is

contended that no event of termination has arisen under the subsequent

arrangement and that the Petitioner is now seeking protective orders by

mischaracterising the later advances as part of the closed loan account.

The Respondents submit that such an approach is impermissible,

particularly when the original loan account was admittedly closed.

Reliance is also placed on the guidelines issued by the Reserve Bank 2026:CHC-OS:34 of

India to contend that the Petitioner's conduct in treating the subsequent

advances as part of the original facility is contrary to the regulatory

framework governing non banking financial companies.

21. Learned Counsel submits that out of the five subsequent transactions,

four disbursements were admittedly made at the request of the

Respondents, but under the later arrangement and not under the Facility

Agreement dated 25.07.2023. It is contended that since the said advances

were not made pursuant to the Facility Agreement, they do not fall within

the scope of the arbitration clause contained therein. Consequently, the

disputes arising from the subsequent transactions are not arbitrable, and

the Petitioner, if so advised, must pursue appropriate civil remedies for

recovery. The Respondents assert that they are bona fide borrowers and

have, on earlier occasions, duly repaid the amounts advanced. It is further

submitted that there is no written agreement governing the subsequent

transactions.

22. During the course of oral arguments, learned Counsel for the Respondents

submitted that the advances were made pursuant to an oral

understanding between the parties. On the basis of the aforesaid

submissions, it is contended that the present dispute is not arbitrable and

that the Petitioner is not entitled to any relief under Section 9 of the Act.

Legal Analysis

23. This Court has heard the arguments advanced by the learned counsel for

the parties.

24. The principal issue that arises for consideration is whether the present

claim and the consequential prayer for interim protection under Section 9

2026:CHC-OS:34 of the Arbitration and Conciliation Act, 1996 arise out of the Facility

Agreement dated 25.07.2023 containing the arbitration clause, or whether

the subsequent disbursements constitute a distinct and independent

transaction falling outside the scope of the said agreement.

25. The Petitioner contends that the Facility Agreement constituted a

continuing and overarching contractual arrangement, under which

multiple tranches were disbursed based on buyers identified by the

principal borrower, and that even the subsequent advances were made

pursuant to a restructuring of the original facility. According to the

Petitioner, there was no novation or extinguishment of the contractual

framework and, consequently, the arbitration clause continues to govern

the disputes arising from the subsequent disbursements. The

Respondents, on the other hand, rely on the order dated 12.11.2024

passed in AP (Com.) 39 of 2023 and the statement of account dated

01.04.2024 to contend that the liabilities under Loan Account No.

UGDADEL000000481 stood fully discharged and that the account was

closed, rendering the subsequent transactions independent and non

arbitrable.

26. At this stage, while exercising jurisdiction under Section 9, the Court is

not required to adjudicate upon the merits of the rival contractual

interpretations. The scope of enquiry is limited to examining, on a prima

facie basis, whether a live arbitration agreement exists covering the subject

matter of the dispute and whether interim protection is warranted.

27. The material placed on record indicates that the Facility Agreement

envisaged disbursement of funds in multiple tranches, linked to buyers

identified by the Respondent, with defined repayment cycles. It is also

2026:CHC-OS:34 undisputed that the Respondents repaid amounts aggregating to Rs.

2,00,00,000/- during the pendency of AP (Com.) 39 of 2023, leading this

Court, at that stage, to decline interim relief. However, whether such

repayment resulted in a complete closure of the contractual relationship,

or whether the subsequent disbursements were made pursuant to a

restructuring under the same agreement, is a matter that turns on

interpretation of the contractual terms and the surrounding

circumstances.

28. It is further significant that there is no pleading on behalf of the

Respondents asserting that the subsequent advances were made pursuant

to any oral agreement. Notwithstanding the absence of such a pleading,

learned counsel for the Respondents sought to contend, during the course

of arguments, that the Petitioner advanced the amounts on the basis of an

oral arrangement. Be that as it may, the Respondents' contention that the

subsequent disbursements were governed by an oral agreement, in the

absence of any independent written agreement between the parties, raises

disputed issues that necessarily require evidentiary adjudication.

29. The existence, scope and continuity of the arbitration agreement, as well as

the characterisation of the subsequent transactions, cannot be

conclusively determined at this interlocutory stage and fall within the

domain of the arbitral tribunal. The objection founded on alleged violation

of RBI guidelines similarly involves mixed questions of fact and law.

30. In these circumstances, the Court is required to balance the limited scope

of Section 9 with the necessity of preserving the subject matter of

arbitration, without prejudging the merits of the dispute. The enquiry,

therefore, centres on whether the Petitioner has established a prima facie

2026:CHC-OS:34 arbitrable dispute and whether denial of interim protection would render

the arbitral proceedings nugatory.

31. Upon consideration of the rival submissions, this Court is of the view that

the dispute raises serious and triable issues concerning the nature and

continuity of the contractual relationship between the parties. The

Petitioner has, at least prima facie, demonstrated that the Facility

Agreement dated 25.07.2023 contemplated multiple tranches and that the

subsequent advances were made pursuant to a restructuring of the

original facility. The existence of an arbitration clause in the said

agreement is not in dispute. Whether the subsequent disbursements

constitute a continuation of the original arrangement or arise from an

independent transaction is a matter requiring detailed adjudication by the

arbitral tribunal. While the Respondents' reliance on the closure of the

loan account and repayment of earlier tranches cannot be ignored, such

closure, by itself, does not conclusively establish novation or extinction of

the underlying contractual framework, particularly when subsequent

disbursements are admitted and no independent written agreement

governing such disbursements is shown to exist.

32. This Court is satisfied that the threshold requirement of a prima facie

arbitrable dispute is met. The balance of convenience lies in favour of the

Petitioner, having regard to the substantial amounts admittedly disbursed.

In the absence of interim protection, the Petitioner is likely to suffer

irreparable loss and injury, which may not be adequately compensated by

damages and may render the arbitral proceedings infructuous. No

corresponding prejudice is shown to be caused to the Respondents by

securing the claim amount.

33. Accordingly, this Court holds that the present petition under Section 9 2026:CHC-OS:34 of

the Arbitration and Conciliation Act, 1996 is maintainable and that the

Petitioner is entitled to interim protection. All observations made herein

are prima facie and shall not influence the merits of the disputes before

the arbitral tribunal.

34. In view of the aforesaid, the present petition is allowed. Respondent Nos. 1

to 3 are restrained from operating or dealing with the bank accounts

referred to in Annexure-H to the present petition, namely Punjab National

Bank, Account Nos. 4077008700001080 and 4077002100028106, IFSC

Code PUNB04077700, Saheednagar Branch, Bhubaneswar-751007, so as

to ensure that a joint minimum balance of Rs. 2,93,07,298/- is

maintained therein at all times.

35. The petitioner is directed to communicate this judgment to the concerned

Branch Manager of Punjab National Bank, Saheednagar Branch 699,

Saheednagar, Bhubaneshwar-751007.

36. The Petitioner is directed to take immediate steps for the constitution of

the Arbitral Tribunal.

37. The parties are at liberty to seek modification or variation of this judgment

before the Arbitral Tribunal.

38. With the aforesaid directions, the present petition stands allowed.

(GAURANG KANTH, J.)

Sakil Amed P.A.