Omkara Asset Reconstruction Pvt. Ltd. Vs J.C. Flowers Asset Reconstruction Pvt. Ltd. (Bombay High Court)
Recently, the Division Bench of the Bombay High Court (the “Court“), in the matter of Omkara Asset Reconstruction Pvt. Ltd. V. J.C. Flowers Asset Reconstruction Pvt. Ltd. (2025:BHC-OS:7579-DB), held that a subsequent mortgage created by a borrower in violation of explicit covenants in a prior mortgage deed is rendered void at the instance of the first mortgagee.
This comes as a highly significant ruling as it provides clarity on the enforceability of negative covenants in mortgage deeds and the jurisdictional scope available to senior secured creditors during insolvency proceedings.
I. FACTS OF THE CASE
1. Original Loan and Mortgage (J.C. Flowers Predecessor): Yes Bank Limited (“Yes Bank“), the predecessor of J.C. Flowers, sanctioned a loan of Rs.350,00,00,000/- on 28th January 2016 to Sumer Radius, secured by a deed of mortgage over the Santacruz property. Subsequently, Yes Bank granted two additional term loan facilities aggregating to Rs.350,00,00,000/- secured by a second deed of mortgage on the same property. Further, supplemental deeds of mortgage were executed on 6th February 2018 over the ‘Ghia Compound’ property. Thus, as on 6th February 2018, the entire Suit property was mortgaged in favour of J.C. Flowers.
