Deepak Maini vs Dedicated Freight Corridor Corporation Of India Limited

That the Corporate Debtor, M/s Arnzen Transportation Industries Private Limited (“Corporate Debtor”), had approached the Dedicated Freight Corridor Corporation of India Ltd. (“Respondent”) seeking rail connectivity of its Private Siding near Sadhugarh with the Eastern Dedicated Freight Corridor (EDFC). The ex-management of the Corporate Debtor had submitted a proposal for such connectivity, pursuant to which the Respondent granted ‘In-Principle Approval’ (“IPA”) on 21.10.2013 vide letter no. HQ/OP/EDFC/AMTEK.

It is submitted that, upon preliminary examination of the revised proposal submitted by the ex-management vide letter no. ATIPL/Con/DFC/2019/2 dated 17.02.2020, and further correspondence dated 18.03.2020 bearing the same reference number, seeking clarifications from the Respondent, the Competent Authority of DFCCIL accorded a fresh ‘In-Principle Approval’—superseding the earlier IPA dated 21.10.2013—for connectivity of the Corporate Debtor’s Private Siding at Sadhugarh with the EDFC, vide letter dated 13.05.2020 bearing no. HQ/OP&BD/EDFC/AMTEK.

That, as per Clause 3 of the letter dated 13.05.2020 bearing no. HQ/OP&BD/EDFC/AMTEK, the concept plan of the Private Siding Owner (“PSO”) was agreed to in principle, subject to the following provisions:

That, on 12.01.2023, the Respondent convened a meeting with the Applicant, during which it was stated that retaining the diamond crossing would constitute a violation of the IPA, as the said crossing was a temporary arrangement to be removed once the Dedicated Freight Corridors (‘DFC’) became operational. The Respondent further noted that, since operations on the DFCCIL main line were expected to commence shortly, the continued existence of the temporary diamond crossing would hinder section commissioning and affect the overall effectiveness of this nationally important DFC project, thereby necessitating its removal in compliance with the terms of the IPA. On the same day, the Applicant requested the Respondent to submit its claim for an amount of Rs. 27,58,307/-.

Thereafter, the Resolution Professional apprised the CoC that two members of his team had visited the factory premises at Sadhugarh on 17.02.2023. During the visit, they were informed that a team from DFCCIL, led by Mr. Pankaj Gupta from Ambala Cantt., along with approximately 20 members, had arrived to commence removal of the diamond crossing, which had been provided only as an interim measure. The Applicant sought an explanation for the absence of prior notice and expressed that such action was in violation of the moratorium. Consequently, the Applicant immediately approached the DFCCIL Corporate Office to meet with its officials and apprised them that the CIRP of the Corporate Debtor was at a critical stage, with four Resolution Applicants expected to submit their Resolution Plans by 21.02.2023. It was further conveyed that any such unilateral and uninformed action by the Respondent could discourage participation by the Resolution Applicants or lead to lower bid values.

In light of the powers and duties vested in the Applicant under the Code to preserve and maximize the value of the Corporate Debtor and safeguard its assets, the Applicant requested the Respondent to withdraw or defer the proposed removal of the diamond crossing until the Resolution Plan of any one of the Resolution Applicants was approved by the Committee of Creditors.

The Applicant submitted that the Ministry of Railways initiated the formation of a Special Purpose Vehicle for the construction, operation, and maintenance of the Dedicated Freight Corridors, resulting in the establishment of the Dedicated Freight Corridor Corporation of India Limited (DFCCIL). DFCCIL was incorporated on 30th October 2006 as a Schedule ‘A’ company under the Companies Act, 1956, with the mandate to undertake planning and development, mobilization of financial resources, construction, operation and maintenance, and business development of the Dedicated Freight Corridors. The mission of the Respondent/DFCCIL is:

The Respondent is a Public Sector Undertaking under the Ministry of Railways, Government of India, incorporated on 30 October 2006 under the Companies Act, 1956, to plan, develop, finance, construct, operate, and maintain the Dedicated Freight Corridors (“DFC”), a project of national importance. Conceived in response to India’s growing rail freight demand, the Ministry established it as a Special Purpose Vehicle to develop the Eastern and Western DFC routes.

The Corporate Debtor, formerly M/s AMTEK Railcar Industries Pvt. Ltd., sought rail connectivity of its private siding near Sadugarh with the Eastern Dedicated Freight Corridor (EDFC) and submitted a proposal for the same. The Respondent granted ‘In-Principle Approval’ (IPA) vide letter No. HQ/OP/EDFC/AMTEK dated 21.10.2013. Subsequently, after its name was changed to M/s AMZEN Transportation Industries Pvt. Ltd., the Corporate Debtor requested reconsideration of the connectivity and resubmitted a revised proposal vide letter No. ATIPL/Con/DFC/2019/2 dated 17.02.2020.

Upon preliminary examination of the revised proposal received vide letter No. ATIPL/Con/DFC/2019/2 dated 18.03.2020, the Respondent granted ‘In-Principle Approval’ (IPA) vide letter No. HQ/OP&BD/EDFC/AMTEK dated 13.05.2020 for a private siding with Sadhugarh Station (IR), proposed to be connected with the EDFC, to be developed entirely at the Corporate Debtor’s cost.

Thereafter, vide letter No. HQ-OPBD/BD (PSP)/1/2020 dated 23.12.2020, the Respondent directed the Corporate Debtor (Applicant herein) to deposit the interim cost for laying a diamond crossing. In compliance, the Corporate Debtor, on 28.12.2020, deposited ₹25,00,000/- (Rupees Twenty-Five Lakh only) with the Respondent (CGM/Ambala) towards this interim cost. The said letter also stated that the final cost would be communicated upon completion of the work.

As per the IPA, the Corporate Debtor was required to submit a Detailed Project Report (DPR) and pay overhead charges in accordance with the DFCCIL Private Siding Rail Connectivity Policy. However, the Corporate Debtor neither submitted the DPR nor paid the overhead charges, and both remain outstanding.

Despite multiple correspondences, personal meetings, and telephonic interactions, the Corporate Debtor failed to initiate the process of depositing the cost for the diamond crossing or submitting the DPR. The Respondent issued several reminder emails on 20.04.2021, 04.05.2021, 02.06.2021, 25.06.2021, 08.07.2021, 11.08.2021, 30.08.2021, 28.09.2021, 25.10.2021, 04.12.2021, 11.01.2022, 22.02.2022, 23.03.2022, 21.04.2022, and 12.05.2022, but no action was taken.

On 15.03.2021, a meeting was held between the Respondent and the Corporate Debtor regarding rail connectivity of the private siding with the EDFC at New Sadhugarh. During the meeting, the Corporate Debtor informed that the mechanical work had been completed, electrification was in progress, and the work was being executed by DFCCIL. The Respondent once again advised the Corporate Debtor to expedite submission of the Detailed Project Report (DPR) for the rail connectivity.

However, due to the Corporate Debtor’s continued non-responsiveness and considering the critical requirement of NTC machine movement for EDFC track linking, the Respondent was left with no option but to proceed with the work of providing the diamond crossing at its own initiative, while keeping the Corporate Debtor informed that the final cost—payable by the Corporate Debtor, would be communicated upon completion of the work.

The Respondent executed the work of laying the diamond crossing at the SDY yard, incurring a total cost of ₹52,58,307/-(Rupees Fifty-Two Lakh Fifty-Eight Thousand Three Hundred Seven only) as per IR requirements. Since the Corporate Debtor had already deposited ₹25,00,000/- on 28.12.2020 as an interim payment, the Respondent, vide letters CGM/UMB/AMTEK Siding/2020 dated 20.01.2022 and HQ-OPBD/BD (PSP)/1/2020 dated 03.02.2022, requested payment of the balance ₹27,58,307/-. However, the Corporate Debtor failed to make any payment towards the outstanding amount, which remains unpaid to date.

Further, on 15.11.2023, the Respondent submitted a representation regarding the execution of work carried out by DFCCIL and the treatment of dues arising from such execution in the context of the CIRP of the Corporate Debtor. The Respondent also made it clear that, in the absence of the aforesaid requisitions, it would be constrained to disconnect the existing connectivity (diamond crossing), as the same is required for commissioning the DFC alignment in accordance with the IPA Final Phase compliance.

The Respondent submitted that, in this context, it is pertinent to note that failure to remove the diamond crossing would constitute a violation of the In-Principle Approval (IPA) dated 13.05.2020. Clause 1 of the IPA stipulates:

Accordingly, the temporary connection through the diamond crossing must be removed once the DFC becomes operational. Since operations on the DFCCIL main line are expected to commence shortly, the continued existence of this temporary connection would hinder section commissioning and adversely affect the overall effectiveness of the DFC project, a project of national importance. Therefore, the removal of the diamond crossing is warranted in strict compliance with the terms of the IPA granted to the Corporate Debtor.

That vide letter/representation dated 17.02.2023, the Respondent reiterated to the Applicant that, as per the IPA dated 13.05.2020, the “Interim Phase” involving provision of the diamond crossing during the construction stage stood completed, and its removal was underway owing to the commissioning of the DFCCIL project. The “Final Phase” under the IPA, connecting the Corporate Debtor’s two holding lines (790 m CAL) to the DFC with suitable points and crossings, had commenced, but the requisite proposal from the Corporate Debtor was still awaited. In line with the IPA, the Corporate Debtor was required to submit a Detailed Project Report (DPR) and pay overhead charges as per the DFCCIL Private Siding Rail Connectivity Policy; both remained pending.

Consequently, due to the conduct of the Corporate Debtor, the Respondent filed a claim in the prescribed form for the balance outstanding amount of ₹27,58,307/- (Rupees Twenty-Seven Lakh Fifty-Eight Thousand Three Hundred and Seven only). This claim was subsequently admitted in full by the Applicant, as confirmed via email dated 02.05.2023, wherein the entire amount was acknowledged as part of the CIRP cost.

Further, it is submitted by the Respondent that the removal of the present connectivity (diamond crossing), necessitated for commissioning the DFC alignment due to non-payment of its laying cost, does not amount to “recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor” under Section 14(d) of the IBC, as the Corporate Debtor was never in actual or constructive possession of the diamond crossing laid by the Respondent.

DFCCIL’s projects are of national importance and bound by deadlines set by the Ministry of Railways. The diamond crossing, sanctioned for a tenure of two years, must now be removed in compliance with the IPA dated 13.05.2020 to complete the project. This action is not punitive but in accordance with the IPA, which also envisages connecting the Corporate Debtor’s holding lines to the DFC under Phase-II, an added value for any prospective resolution applicant. Hence, the removal of the diamond crossing is both indispensable and legitimate.

The Applicant submits that the Respondent has overlooked the fact that the Corporate Debtor is undergoing CIRP pursuant to order dated 04.05.2022 passed by this Adjudicating Authority, and that a moratorium under Section 14 of the IBC, 2016 stands imposed. The object of Section 14 is to grant the Corporate Debtor protection from recovery proceedings and litigations, thereby affording an opportunity for revival and resolution.

It is Applicant’s contention that Section 14(1)(d) of the Code prohibits recovery of any property by an owner or lessor where such property is in the possession of the Corporate Debtor. Despite being aware that the Corporate Debtor is under CIRP, the Respondent has unilaterally removed the Diamond Crossing adjacent to the Corporate Debtor’s plant at Sadhugarh without notice or intimation. The Applicant, in discharge of duty under Section 20 of the Code to keep the Corporate Debtor as a going concern and to maximize its value, specifically requested the Respondent not to remove the Diamond Crossing. However, the Respondent disregarded such request and proceeded with the removal, jeopardizing the CIRP process.

treat the outstanding Rs. 27,58,307/- as insolvency resolution process costs under Section 5(13) of the IBC, to be accorded priority under Section 53;

provide assurance/commitment towards approx. Rs. 45 crores for the new Sadhoogarh station as operational cost, considering the Applicant has stepped into the shoes of the Corporate Debtor; and

convene a meeting to deliberate on these issues and determine the future course of action.