HC restrains sale of GEAR trust’s assets after loan default

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₹35-crore loan from Axis Finance, a non-banking subsidiary of private lender Axis Bank. In its plea, Axis Finance sought the court’s urgent intervention to “protect and preserve" the outstanding loan amount, pending the hearing and final disposal of its arbitration petition. The bank had filed the arbitration petition after the Bengaluru-based education trust defaulted on its dues in September.

Axis Finance filed a commercial arbitration petition on 20 December under Section 9 of the Arbitration and Conciliation Act in the Bombay High Court after the default. The section relates to preservation or inspection of any property or thing that is the basis of an arbitration. The lender said that despite receiving the entire loan amount, Gifted Education did not comply with the terms and conditions of the loan agreement.

Under the agreement, the tenor of the loan was eight years from the date of initial disbursement and attracted an interest rate of 9.75% per annum, payable quarterly. Axis Finance had disbursed the loan in August 2022. Moreover, the loan was to be backed by security that included the creation of a mortgage on land and building adjoining the Gear Innovative International School in Bengaluru measuring 2 acres which has a built-up area of 116,568 square feet and is owned by GEAR Foundation.

Besides, Muthusamy Srinivasan, founder of GEAR Foundation and a respondent in the matter, had given a personal guarantee in favour of Axis Finance through a guarantee deed in August 2022. A bench led by Justice R. I.