Remanded

Central Railway through Senior Divisional Mechanical Engineer (Carriage and Wagon) Office v. the Cosmos Co-Op Bank Ltd.

DRAT15 Apr 2025MISC APPEAL/39/2025

Case brief

AI extract

What is this about?

Debt Recovery Tribunal restrained the bank from taking possession of laundry machinery while arbitration between the railway and contractor is pending, ensuring rights of both parties are protected.

What did the court decide?

Directed DRT to hear stay application on merits; restrained bank from taking possession of plant and machineries.

Central Railway through Senior Divisional Mechanical Engineer (Carriage… — Corruption | DRAT (2025)

¶1

DEBT RECOVERY APPELLATE^TRIBUNAL. MUMBAI {SITTING^{AT -CHENNAI)}

¶2

Misc. Appeal No,^3912025 and Misc. Appeal No,^{45/20 25} {

¶3

Dated: 15.04.2025

¶4

EOMMOII ORDER

¶5

1-. MA^,39i2o25 is^{filed agarnst the'orderin m} 7gOl2O25 in SA 36612Ot24^{phssedon 16.01.2iA25} by DI(T, Pune.

¶6

The aforesaid SA^{was liled by Appellant} Central Railway challenging^{the orderpassedby} Learned CJM, Pune, dated,^{27.1O.2024and} Possession Notice dated^{26.12.2024 issuedby the} Court Commissioner.^{In the said SA, lA I3O/2A25} was filed seeking stqy of ail^{further proceedings'} Frior to that, the Appeliant^{filed 1A296612024, and} against the rejection of^{the said IA on 04-12'2A24,} the connected Appeal in^{Misc, Appeai No. 4512025} is Iiled. The common issue^{involved in both the} Appeals is the stay of^{proceedingsin SA 36612024.}

¶7

It is the submission^{of Learned Counselfor} Appellant- that Respondent^No'. 2^{M/s- Sadguru} Services (AOP) entered into an^{agreementwith}

¶8

¶9

Central Railway to ,set, trp .and operate a mechanized laundry of capacity of minimum 8.6 tonhes rated. dai$ oulput (ilr two shifts of 8 hours each) in Railway premises at Ghorpadi, Pune, on Build, Own, Operate,and. Transfer (BOOT) basis for a period of 10 year. The csntract arnount is Rs.39,50,13,293/-. This contract is signed between Appellant and Respondenl No.2 on 72.12.2018.

¶10

4, As per the terrns of eontraet, especially clause 3.10, "(the laundry shall be set up and operated. under^aAOOy s1,steln for a period of 1-0 Jaeais or exoEutior af 12,5o/a of schedule qua$tity whiehever is earlier after'coaimis:sjoning Af the rnechaaized laundry- After completion of 10 years or execution of l.25Yo, of schedule quantity w,hiqhever is e4slier, all the machines and plant, ancillary equipment, utilities 'and fixed asset$ of tlle mecharljZed laundr.y shall stand transferred to Central Raiiway absoh,rtely^.without arry extra costlch€irges and Central Railway shall be the absoliLrte owRer of the safn€. The Contraetor will have to ensure that the laundly iS in good working condition,at the time of dompletion of the^{.cdntract,pgnO4} and free from any en-cumbrimce."

¶11

Ciause^{3i,9,L21eqdsthatqin all o&er cases of} default by the e.o,ntractor^{leading to terminationof} the contract, the^{cofl.tractorshallhave no claimon} the laundr,y equiprnent {or^{land)and the same sha-ll} beeome t}le^{propertlr o{ the Railway in suctr an} eventualitvo.

¶12

6" It is his further^{submissionthat Ctrause4.3.2} reads that "the capital^{assets createdby the} contractor for setting^{up the mechanized1q.und4r} will not be eneumbered,^{b.y the contr:actorin an}} :mariner^{which prohibits, preventsor: restrains} opefation'of^{the laundryby the Railways, e.ither} thr,ough their own traine.d stafl^{or otherwisq} during or after the currency^{period of the csntract} in the veat of premature^{terrr.iL-lnatio-nof the} eontract for artSr,reasoo^whatsoever'"

¶13

Ciause 4.3.3, reads that^{*in case of dispute or} prematrrre termination of the^{colttract, while} settlement of dues^{w-ou1d be submitted to tle} Dispute Resolution^{Mechanism, the' Railwaywould} have unencumbered^{possession of and access to} the laundry plant for operation^{qnd supply of linen} to the Lraveliing public."

¶14

He &rrther subrnitted that Lsit^Re-sponde41 Bank knew :abo.Et this Agreearent entered into b'etw€en the Atrpellaiit and Respo.pdent No.2.^;In a let-ter addressed to the C.entrair naitway dated ,Q2,CI2.20t9,, the l"t Responderit Bant< infprmed abotit the sapction of credit limits of Rc,'390 Lakhs to- the Respondent No,2 vide Sanction^Letterdated 24-0L.Z0L9, for set$ag up 'arld operating^a mechaqized launtffi at Ghor,Padi Station.^The Bank requested to cred.it the^payment of^{billsof the} subject conkact to its^I escrow^account No.12410O10602,(IFSC eodei^{COSBOOOQt'2+1.} Onllr thelp,after, the hypothecation of^plant arld rnaehineries'trad beeri done by borrowe;^{in favou;} of Barak on 06.02.2019, A11 along^{the Bank is} awa.re of the contract betwden^{the Appellant and} Respondent No,2 that^{Respondent No.2should not} encumber the plant and^{meichineries ofthe} 1aundry.

¶15

It ls his further^{,subrnission tha't Znd} Respondent's service was^{notsatisfactory,} theref,ore,. flre contract with^{Respondent.No.'Zwas} terrrrinated. ,by Appellant'^{,Agalhstwhich, the} Respondent No.2 moved^{Hon'bleHigh Courtof} Bomba:r th Arbitration,^{OP No.561,212024. He also} moved.arr Applicatioti^{for ati interifi-i-rellef} and that 4 bvwt

¶16

got rejected.. Arbitration^{proceedings initiated by} the 2'd Respondent^{is pending. If the possessionof} plant arrd machineries^{are not protected, the} Appellant will^{beseriously prejudiced,and} therefore,^{theseAPPeals.}

¶17

Learned^{Counsel for L=t Respondent Bank} submitted that the^{plant and machineries were} purchased by^{Respondent No'2 using financiaJ} assistance sanctioned^{by the 1"t Respondent Bank'} llypothecation rgr'""*"rrt^{was executedbetween} the Respondent^{No.2 and the Bank'On the} borrower/Respondent^{No.2 failing to repay the} debt, proceedings^{underSARFAESI Act, 2002, was} initiated. Therefore,^{the Bank'sliabilitycannotbe} curtailed by^{Central Raiiway, and hence,prays for} d"ismissa-l of these^{Appeals. He alsobroughtto my} notice the^{Clause3.9. 72 of the same Agreement'} wherein, it is^{referred that, "ifunderany} unforeseen circumstances,^{ciuringthe currency of} the contract not later^{than 4 years afterthe} commissioning^{of the laundry, the contractor is not} in a position to^{operate the laundry furtherand} deliver the requirements^{as per contr'act, amd} wishes to free himself^{of the obligations under the} cr:ntract, he^{may do so by giving six months':notice}

¶18

Io the Railway .{dministratipn to this effbct. Uninterrupted. sUpply of was:hed linen as per the workload/requirements. n:ust however be ensured during this period. He shali ftrrther be required to de-commission aJI the laundryr eqqipments and free the RaiIWay laad withih one nponth of the e.nd of the notice periqd, failing which the contractor shall l,rane ts' further elaim oa the l,aUndry eerlipmeqt and tJ:e serne- shali become the pforperfy of the Railway thereafLer,', and thrrg, lie prayed for dismissal of these Appeals. EIe further, submitted that the Railway is tr-ying to hand over possession 'of the Bla$taqd m-achiaeries tq sorne. third party.

¶19

11, Learned Counsel fpr ResBqadent No.Z 'submitted that he haB no p1bjecti,gn fer the Bank to take.possession of the plarrt and maehineries, for. the reason that, thq machineries were purchased and the plant was erecte.d on the {inancial lissis-tanqe sancaioned by the 1"t Respondent Bank.

¶20

Considered the rival submissions and per.used the lecords,

¶21

It is seen from ttre submissions and docunaelrtg referred, above, gspecial]y dgreement entered into betWeen tl+e ApBeilant and Respondent

¶22

No.2 with regard^{to settingr-rp and operating a} mechanized laundry^{plant, there areclear-} conditions incorporatecL^{in the agreementthat the} borrourer had to build,^{own,operateand transfer,} at the end of^{the contract period of 1O years'} Before end of^{10 years o[ contract period, it appears} that the^{Respondent No.2's contract \ ras} terminated for^{deficiencyin services'Now, the} Arbitration^{proceedings are pendingbetween the} Appella:rt and the^{RespondentNo'2' The Letter} clated O2.O2.2O19^{shows that the 1't Respondent} Bank had advanced^{the loan of Rs'390 Lakhs on} 24.O1.2O1g, oniy after^{knoq'ing aboutthe contract} between the Appellant^{and RespondentNo'2, and} for the^{purpose for settingup and operating a} mechalized laundry^{plant, at Ghorpadi,Central} Railway. Only^{on A6.A2,2A79,the plantand} rnachineries^{were hypothecatedto the Bank'} Therefore, the hypothecation^{agreementwillbe} given effect subject to,^{only to the agreeroent} between the Appellant^{and RespondentNo'2'}

¶23

These Appeals^{are liledonly against the} interim orders^{refusing togrant ofstay and} granting limited stay.^{The entilfement ofthe} Appellant and^{R'espondent No.2 has tobe} adjudicated in Arbitration proceedingS 7

¶24

hrt,rl I

¶25

Meatiwhile, if the pla+t and machineries are talren possession h5z lut Respondent Bank, it witl be seri'ously prejudiced the rights sf the Appellant. In this view of matter, this Tribunal diiects Learned Presiding Oflicer, DRT, Pune, to dispose of the SA, fl661'2924, og merits and in accordirnce^w-i1-h law, as expeditiously as possible,^preferably within the period of three months from the date of receipt^qf copy of this order.

¶26

15: It is further ord^efed that ti-1i the dfsposal^of SA 366/'2A2+,. there shall^be an^{oriler pf restraint} against l.st Respondent Bank from^taking poss-ession olthe plant and maihineries.

¶27

1'5,. In the, result, tlre Appeatrs in Misc.^{Appeal No.} ggl2}25 arrd Misc., Appeal No. 4512025 are diSposed of as directed above.^{Both parties} shall bear their own costs. AIl^{pending IAs, if any,} stand closed.

¶28

"jdiiAt, cHENNAI {IN-CHARGE,^{DRAT, ll Utrtrat)}

¶29

PAM

Central Railway through Senior Divisional Mechanical Engineer (Carriage and Wagon) Office v. the Cosmos Co-Op Bank Ltd.

Case brief

What is this about?

What did the court decide?

Central Railway through Senior Divisional Mechanical Engineer (Carriage and Wagon) Office v. the Cosmos Co-Op Bank Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Case details

Similar cases

Kashish Trade link Pvt. Ltd. versus Union Bank of India

Vishal Laxmanrao Dandge versus Union Bank of India

Home First Finance Company India Limited versus Dipen Shah

Ms Shivshankar Plywood Industries Pvt. Ltd. versus Asset Reconstruetion Company India Ltd.

Central Railway through Senior Divisional Mechanical Engineer (Carriage and Wagon) Office versus the Cosmos Co-Op Bank Ltd.

M/s B J Grain and Ors. versus Bank of Baroda