Disposed

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

DRAT15 Apr 2025MISC APPEAL/45/2025

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal directed the DRT to decide the merits of the stay application on a time-bound basis and issued a restraint order preventing the bank from taking possession of the plant and machinery pending arbitration between the borrower and the contractor.

What did the court decide?

Directing the lower court to dispose of the stay application within three months; issuing a temporary restraint order against the Bank taking possession of the plant and machinery.

Central Railway through Senior Divisional Mechanical… — Execution and Attachment | DRAT (2025)

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DEBT RECOVERY^{APPELLATtr TRIBUNAL-} MUMBAI (SIT'IING AT -CHBNNAI)

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Misc. Appeal^{No' 3912025} and Misc. Appeal^{No' 4512025}

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Dated: 15.O4'2025

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COMilION ORDER

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MA 39/2025^{is file.d against the order in IA} 't3Ol2O25 in SA g66 2A24 passed' orr 16'01'2O25 b5r DRT, Pune',

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The aforesaicl^{SA was filed by Appe1lan1-} Central Railwal'^{challenging the orderpassed by} Learned CJM,^{Pune, dated,21'LO'2024aud} PossessionNoticedated26.12.2024issr.reclbytl-re Court Commissioner.^{In the said SA, lA T3O]2O25} was fi.led seeking^{stay of all furtherproceedings'} Prior to that, the^{Appellant filed lA 296612A24' and} against the rejection^{of the said IA on O4'L2'2O24'} the connected^{Appeal in Misc' Appeal No' 45/2025} is filecl. The^{cornmonissue ir:volvedin both l-he} Appeals is the^{stay of proceedingsin SA 36612024'}

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it is the^{submis-siono[ Learned Counsel lor} Appellant that^{ReepondentNo' 2 M/s' Sadguru} Services^{(AOP) enteredinto an agreementrvith}

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Central Bailway to set lrp and eperate a mechanized laundry of capaciry of minimum 8.6 tonnes rated daily output (in two shif,ts of 8 hours each) in Railway premises at Ghorpadi, pune, on i Build, Own, Operate and Transfer (BOOT) basig for a period of 10 year. The contract afnoli(rt is Rs.39,50,13,2931-, This contract is signed trtetween Appellant a:ld Respondent No.2 on 72.1.2.201.8.

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,As^pef the terms of contract, es-pecially clause 3.1O, "the laundry shall be set up and operated under "BOO? system for a period of 10 year-s or execution of 725o/o of schedule quantity whiehever is earlier af,ter commissioning of the rnechanized larrndry. After completion of 1O years or execution of 125% of sehedule quantit5r whichever is, earlier, all the rnachines alrd p.!ant, Snciila::5r equipment, utilities afld fixed assets of'tnb, rriechanized laundry shall stAtd trimsferred to Central Railway absolut-ely without any ex[ra cosl/charges and Central RaiiWay shall be the absolute ovmer of the sar-ne. The Contractor will have to ensure that the laundry is in good working condition a.t the time of completion of the contract period, and free from ' any,eneumbraaee.'^'

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5, Clause 3.9..12 reads^{that "iE all sthercases of} deiault by the^{contractor:leading to termination of} the contrirct,^{the contractor shall have oo clarn on} tiie laundrf €quipment'(or^{land'l and the same shall} Ueeoine the^{propert5rof tlee RailwaX in such a-rr.} eventualiff".

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It is his^{furtleer submission thatC1ause4.3'2} reads that^{othe capital as$ets created b5r the} contractor for setting^{up the mechanizedlaundry} 'orill not^{be encuulberedbly the contractorin any} mallner rlihieh^{prohibits, prevents' or restrains} operation of^{the laundryby the Railways, eittler} through their own^{trained staff or olherwise} dufing^{or after the cufrenclr period of the contract} in the vent^{of, prremature terminationqf the} contragt for^{any reason whatsoevef.'}

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7, Clause 4.3.3, reads^{that "in case of dispute or} prer,nature termination^{of the eontract, while} settlement of^{due.s wouldbe subndttedto the} Digpu,te Resolution^{14s6fia4isfi,the Railway would} hqve unencurnbered.^{possessign of and access to} the iaundry plant^{for operation and srrpply of linen} ts t'he travelling^public."

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8, He further subrnitted that lst^Respondent Bank knew aborrt this Agreement entered irltil 'bet.ween the App.ella4t and Rqspondent No,2; -in a letter^,addressed to the^{Cerrtral Railway dated} O2-A2.2AL9, !^'the l"t^{RespondentBank} 1r-rformed about the sanction of credit^{limits of Rs.39OLakhs} to the Respondent No,2 vide Sanction^{Letter d'ated} 24.0L,2019, for setting up^{.and operatinga} mechanized laundry at Ghorpadi Station.^The Bank reque,sted. to credit^{thq paymentof bills of the} subject contract to its^{escrow account} No.tr2410010602^{(IFSC eode: COSB00O0124).} Onl;z thereaf.ter, the h)lpothecation^{of plant and} maehineries had been^{dotre by borrowerin favour} of Barrk on O-6-.O2.2OLI.^{A11 along ttle Bank is} a\n are of the contract^{between the Appellant and} Respond.ent No..2 that^{Respondent No.2 should not} encumber: the^{plant and' machineries oftfre} Iaundry.

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9.. Jt is his further^{submissionthat2nd} ,Respondent's^{servicg was notsatisfactory,} therefor€, the contract^{with Re-spondentNo'Z was} ter.miiiated bJ' Appellant'^{Againstwhich, the} RespohdE-nt No.2^{moved Hon'ble High Court of} Bomb'ay in Arbitration^{OP Na:5,6I2/2Q24' He also} moved an Application^{for an interim relief iar:d tl-rat}

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

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Leatred Counsel for I't^{Respondent Bank} submitted that the^plant and^{machineries were} purchased by Respond,ent No.2 using financial assistalce sanctioued by^{the lst Respondent Bank.} Hypothecation agreement was executed^between the Respon.dent No.2 and the Bank.^{On the} borrower/Respondent No.2 failing to^{repay the} debt, proceedings under SARFAESI^{Act,2AO2,lvas} initiated. Therefore, the Bank's^{liabilitycannot be} curtailed by Central Railway, and^{hence,prays for} disnissal of these Appeals.^{He also'brought to my} notice the Clause 3.9.12 of the^{sameAgreenr.ent,} wherein, it is referred that, "if^{under ally} unforeseen circumstalrces, during^{the currency of} the contract not later than 4^{yea-rs after the} comrnissioning of the laundry,^{the contractor is not} in a position to operate the laundry^{further ald} deliver the requir-ements as^{per contract,and} wishes to free himself of the obiigations under^the contract, he may do so by giving six rnouths'notice

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to the^,R.ailwa;r Adrninistratiorn to t*ris effect. Unin-termpted supA1y of'washed linen as per the workload/requirements must however be ensured during this period. IIe slrall further be required to ,de-qonr-nission all the laundry equipments and. fiee the Railway land wtthin one month of the end of the notice period, failing which,the contractor shall have to further claim on the laundry equipment ,and the :sofrr€ skalX hecome the propert5r of the RqJlway there-afteC, and thus, he prayed f,or disrniss.al of these ,A,ppeals. He further, submitted that the Railway is ttying to harld,over possession of the plant and machineries to some third party.

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Learned Counsel fbf Respondent No.2 submitted that he has,ao cibjection for the Bank to take possession of the plant anid machiheries, for the reason that, the rnachinlries d/ere purchased and the plant was erected on the financial assistance. sanctioned by the 1st Respondent Bairk.

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Considered the riva-l submissions and perusgd the records.

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13, It is seen frorr th.e submissions and documents referred,, al:ove, especially Agreement er:tered into between the Appeliant and Respondent

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No.2 with regard to^{setting up and operating a} mechanized laundry Plarrt,^{there areclear} corrditions^{incorporatedin the agreementttrat the} borrower had to build,^{own,operateand transfer,} at the end of the^{contract period' of 10 yea-rs'} Before end of^{1O years of contract period,it appears} tirat the Respondent^{No'2's eontractvras} terminated for^{d"e{icicncy iu services.Now,the} Arbitration^{proceedingsa.r'e pending betweenthe} Appellant and^{t1e Respondent No'2. The Letter} dated A2,02.2019^{shows that the l'tRespondent} Bank had advanced^{the loan of Rs.390 I'alchs on} 24.01.2019, only^{after knowing about the contract} between the Appellant^{and RespondentNo'2,and} for the purpose for setting^{up and operatinga} meehanized laundry^{plant, at Ghorpadi,Central} Railway, Only on^{O6.O2.2OL9, the plantand} machineries were^{hypothecatedto the Bank'} Therefore, the hypothecation^{agreementlvil1be} given ellect subject'to,^{only to the agreemettt} between the Appellant^{and Respondent No'2'}

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t4. These A.ppeats^{are filed only againstttre} interirn orders^{refusirrgtogrant of stay and} granting limited stay. The^{entitlement of the} Appellalt and Rbspondent^{No.2 has tobe} adjudicated in Aibitration^proceedings'

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Meanwhite.,,il the Elant arrd nnaefiinefies are takea possgssion by ,tst Respondeflt BEnk, it will be senoqsly pt€judicqd t&e rights .of^{,th.e,Appeflarit..} In this view of rnatter, this Tribunal directs Learned Presiding Qfficer, DRT, Pune, to dispose of the SA 366/2024, on merits and in.accordance with law, as expe.ditiously^as lpoSS-lble,^{prefeSablywithin the} pe-riod of three rnonths: fror-n the; date o,i receipt o-f copy of this order

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,15:. It is further^ordered that till^{the:dispos,al of SA} 3;561202{ tiefe shall be air order of restr,airtt against lst Respondent Banld^'frorn. taking, possession of the niant and oachineries.

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J..6, In the result,, the A,ppeals in Misc.^{Appqal No.} 3912625 arr-d Misc. A.ppeal N'o.^'45120:25 .!. rrre. di.sposed of as directed^{above-. Both parties} shall o-ear their own costs.^{A11 pendingIAs,} if^any, s-tairrd elos.ed.

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.H.^iRPERS.PM .HENNAI (IN-cHARGE, DEAT, UUUral)

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PAM

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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

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