Securitisation Application No. 25 of 2005. Case: Prakash Khandelwal Vs State Bank of India and Ors.. Mumbai Debt Recovery Tribunals

Case NumberSecuritisation Application No. 25 of 2005
CounselFor Appellant: B.P. Colabawala, Adv., i/b., Madekar & Co. and For Respondents: Girin Pandit, Adv.
JudgesK.J. Paratwar, Presiding Officer
IssueArbitration and Conciliation Act, 1976 - Sections 9; Indian Contract Act - Section 62; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Sections 13(2), 13(3A) and 17
CitationII (2006) BC 102
Judgement DateFebruary 21, 2006
CourtMumbai Debt Recovery Tribunals


K.J. Paratwar, Presiding Officer

  1. This application/appeal under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'SRFAESI Act') takes exception to the notice dated 24.2.2005 issued by the respondent No. 1 Bank under Section 13(2) of SRFAESI Act and taking to possession, albeit symbolic, Flat No. 23, on 5th Floor (with car parking space), Kashmira Amrita Co-operative Housing Society (CHS), Queens Barracks Estate Scheme, Cadastral Survey No. 7/1 of Fort Division, J. Bhosle Marg, Nariman Point, Mumbai-400021 pursuant to the notice.

  2. The applicant has rested its case on these facts. The respondent No. 3 entered into agreement with respondent No. 2 for construction and maintenance of rural road under the Pradhan Mantri Gram Sadak Yojana (PMGSY) in Khandwa District (M.P.). The respondent No. 2 in turn entrusted part of work to the extent of Rs. 489.89 lakh. A formal agreement thereto was entered on 17.8.2004. Under the agreement, respondent No. 4 received a mobilisation advance of Rs. 25 lakh and loan of Rs. 25 lakh from respondent No. 2. The respondent No. 4 (sub-contractor) was required to issue Bank guarantee in favour of respondent No. 2 for Rs. 50 lakh, The respondent No. 1 Bank, at the behest of respondent No. 4, thereupon issued the two Bank guarantees.

  3. The respondent No. 4 executed work of about Rs. 93 lakh and raised running bills but respondent No. 2 did not make the payment. The respondent No. 2, also withdrew the contract and floated new tender on 6.1.2005 for the same job. The respondent No. 4 came to know on or about 14.1.2005 that respondent No. 3 issued a letter to respondent No. 2 stating that respondent No. 2, by sub-letting the job, had violated condition of agreement between them. The respondent No. 2 by letter dated 27.1.2005 formally terminated contract with respondent No. 4. Subsequently, by letter dated 2.2.2005, respondent No. 3 terminated contract with respondent No. 2 in respect of the job on the ground of breach of contract.

  4. In the aforesaid circumstances, the respondent No. 2 by letter to respondent No. 1 dated 4.2.2005 invoked the two Bank guarantees and demanded payment. The respondent No. 4, brought to the notice of respondent No. 2, the fraud played by respondent No. 2 and asked the Bank not to pay Rs. 42.50 lakh (Rs. 50 lakh minus margin money Rs. 7.5 lakh). But, the respondent No. 1 did not pay any heed whereupon...

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