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2013 DIGILAW 1112 (MP)

Alok Saboo v. State Bank of India

2013-09-13

D.K.PALIWAL, S.K.GANGELE

body2013
JUDGMENT Gangele, J. This petition has been filed by the petitioners against the order dated 12-03-2013 (Annexure P-1) passed by Debts Recovery Appellate Tribunal, Allahabad and the order dated 17-12-2012 (Annexure P-2) passed by Debts Recovery Tribunal, Jabalpur. 2. One private limited Company-M/s. Shrinivas Synthetic Packers (P) Ltd. advanced cash credit limit/hypothication limit by the respondent No.1- Bank. The petitioners were Directors of the Company at the relevant time. Various documents were executed by the Company including the petitioners as guarantee of loan amount. An amount of Rs.8,86,75,238=69 was due against the Company. On 16-09-2011, the Bank filed original application for recovery of the aforesaid amount under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred as to “the Act of 1993”). The aforesaid application was registered as O.A. No.275/2011. The Office of the tribunal issued notices to the petitioners on 29-09-2011, but nobody appeared before the tribunal. The notices were published in the newspaper on 08-01-2012 and the date of appearance was fixed 16-02-2012. The counsel on behalf of the petitioners appeared before the Registrar and filed his memo but no Vakalatnama was filed. The Registrar granted time to file Vakalatnama and next date was fixed on 14-03-2012. The counsel did not appear on the aforesaid date, hence, the case was placed before the Presiding Officer. Then the tribunal proceeded ex parte against the petitioners vide order dated 12-04-2012. The case was fixed on 15-05-2012 and 17-07-2012, however, on the aforesaid dates, hearing could not take place. On 14-08-2012, the counsel filed his Vakalatnama on behalf of the petitioners and he came to know that the petitioners were proceeded ex parte. On 14-09-2012, an application for setting aside the ex parte order dated 12-04-2012 was filed by the petitioners along with an affidavit. The Debts Recovery Tribunal vide order Annexure P-2 permitted the petitioners to contest the claim subject to deposit an FDR of Rs.1 crore each in the name of the Registrar, Debts Recovery Tribunal within a period of thirty days. Against the aforesaid order, an appeal was filed before the Debts Recovery Appellate Tribunal. Learned appellate tribunal vide order Annexure P-1 modified direction of the Debts Recovery Tribunal in regard to depositing an amount of Rs.1 crore each and directed to deposit an amount of Rs.50 lacs each to the petitioners. 3. Against the aforesaid order, an appeal was filed before the Debts Recovery Appellate Tribunal. Learned appellate tribunal vide order Annexure P-1 modified direction of the Debts Recovery Tribunal in regard to depositing an amount of Rs.1 crore each and directed to deposit an amount of Rs.50 lacs each to the petitioners. 3. Learned counsel appearing on behalf of the petitioners has contended that the conditional order passed by the tribunal in regard to permitting to contest the case, is contrary to law and the tribunal has no jurisdiction and power to impose condition in a pending proceeding. He further submitted that by imposing the condition the tribunal has made impossible to the petitioners to contest the case because the condition is stringent. He further submitted that a substantial amount has been recovered by the Bank in pursuance to the proceeding initiated by the Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short “the SARFAESI Act”). Learned counsel further submitted that when the proceeding had taken place, the petitioners already made their appearance before the Presiding Officer, hence, the order of ex parte was illegal. In support of his contentions, learned counsel relied on the following judgments: (I) Moin Leather Wear Exports & others v. Oriental Bank of Commerce, Chennai, 2012 (2) DRTC 829 (Mad); (II) M/s. Jholei Baba Agency v. State Bank of India, AIR 2009 Orissa 109; (III) G. L. Vijain v. K. Shankar, (2006) 13 SCC 136 : ( AIR 2007 SC 1103 ); (IV) Great Punjab Agro Industries Ltd. v. Khushian and others, (2005) 13 SCC 503 ; (V) Vijay Kumar Madan and others v. R.N. Gupta Technical Education Society and others, AIR 2002 SC 2082 ; and (VI) Suresh Bansal v. Bank of India & others [unreported order dated 06-03-2012 passed by Indore Bench of this High Court in Writ Petition No.1674/2012] 4. Contrary to this, learned counsel appearing on behalf of the respondent No.1- Bank has contended that the tribunal has jurisdiction to impose condition under the provisions of Act of 1993 and looking to the conduct of the petitioners, the tribunal has rightly imposed the condition. He further submitted that the petitioners deliberately did not appear before the tribunal in order to delay the proceedings, hence, the order passed by the tribunal is in accordance with law. 5. He further submitted that the petitioners deliberately did not appear before the tribunal in order to delay the proceedings, hence, the order passed by the tribunal is in accordance with law. 5. The main question for consideration before the Court is that whether the tribunal has jurisdiction to impose rigorous and stringent condition in setting aside the ex parte order. 6. Section 19 of the Act of 1993 prescribes procedure of tribunal. Section 19(4) of the Act is in regard to issuance of summons and Section 19(5) of the Act is in regard to submitting written statement by the defendant. The aforesaid Sections are as under:- “Sec.19(4): On receipt of the application under sub-section (1) or sub-section (2), the Tribunal shall issue summons requiring the defendant to show cause within thirty days of the service of summons as to why the relief prayed for should not be granted. Sec.19(5): The defendant shall, at or before the first hearing or within such time as the Tribunal may permit, present a written statement of his defence.” 7. Section 22 of the Act of 1993 prescribes that the Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice. Sub-section (2) of Section 22 further prescribes that the Tribunal has the same powers as are vested in a civil court under the Code of Civil Procedure while trying a suit in respect of the matters. One of them is Section 22(2)(f) of the Act dismissing an application for default or deciding it ex parte, another is Section 22(2)(g) of the Act setting aside any order of dismissal of any application for default or any order passed by it ex parte. It means that the tribunal has power while setting aside ex parte order or dismissal of any application or decide it ex parte pari materia with the powers as vested in a civil court under the Code of Civil Procedure. 8. Rules have also been framed by the Central Government to regulate the procedure of Debts Recovery Tribunal, named as “The Debts Recovery Tribunal (Procedure) Rules, 1993 [hereinafter referred to as “the Rules of 1993”] in exercise of the powers conferred by sub-sections (1) & (2) of Section 36 of the Act, 1993. 8. Rules have also been framed by the Central Government to regulate the procedure of Debts Recovery Tribunal, named as “The Debts Recovery Tribunal (Procedure) Rules, 1993 [hereinafter referred to as “the Rules of 1993”] in exercise of the powers conferred by sub-sections (1) & (2) of Section 36 of the Act, 1993. Rule 12 of the Rules of 1993 is in regard to filing of reply and other documents by the defendant. The aforesaid Rule is as under: “12. Filing of reply and other documents by the defendant.-(1) The defendant may file two complete sets containing the reply to the application along with documents in a paper book form with the registry within one month of the service of the notice of the filing of the application on him. (2) The defendant shall also endorse one copy of the reply along with documents as mentioned in sub-rule (1) to the applicant. (3) The Tribunal may, in its discretion on application by the defendant, allow the filing of reply referred to in sub-rule (1), after the expiry of the period referred to therein. (4) If the defendant fails to file the reply under sub-rule (1) or on the date fixed for hearing of the application, the Tribunal may proceed forthwith to pass an order on the application as it thinks fit.” Sub-rule (3) of Rule 12 of the Rules of 1993 prescribes that the tribunal has discretion to allow time to take written statement on record of the defendant filed after expiry of the period under sub-rule (1) of Rule 12. 9. From the aforesaid provisions, it is clear that the tribunal has to guide itself while setting aside ex parte proceeding taking into consideration the provisions of Civil Procedure Code. 10. Order IX Rule 7 of CPC prescribes the procedure where defendant appears on day of adjourned hearing and assigns good cause for previous non-appearance. The relevant provision is as under:- “R.7. 10. Order IX Rule 7 of CPC prescribes the procedure where defendant appears on day of adjourned hearing and assigns good cause for previous non-appearance. The relevant provision is as under:- “R.7. Procedure where defendant appears on day of adjourned hearing and assigns good cause for previous non-appearance.- Where the court has adjourned the hearing of the suit ex parte, and the defendant, at or before such hearing, appears and assigns good cause for his previous non-appearance, he may, upon such terms as the Court directs as to costs or otherwise, be heard in answer to the suit as if he had appeared on the day fixed for his appearance.” 11. In our opinion, it was obligatory on the tribunal to consider the provisions of Order IX, Rule 7 of CPC while setting aside the ex parte proceeding, because the petitioners were proceeded ex parte on the ground that they did not file written statement within time. Order IX, Rule 13 of CPC is in regard to setting aside ex parte decree, that is not applicable in the case. 12. Hon’ble the Supreme Court in the case of Vijay Kumar Madan and others v. R.N. Gupta Technical Education Society and others, AIR 2002 SC 2082 has held as under in regard to power of the Court while exercising its jurisdiction under Order 9, Rule 7 CPC: “Order 9, Rule 7 empowers Court, while setting aside ex parte order to impose costs and also to put the defendants applicants on terms power in the Court to impose costs and to put the defendant-applicant on terms is spelled out from the expression “Upon such terms as the Court directs as to costs or otherwise”. On an adjourned hearing, in spite of the Court having proceeded ex parte earlier the defendant is entitled to appear and participate in the subsequent proceedings as of right. An application under R.7 is required to be made only if the defendant wishes the proceedings to be relegated back and re-open the proceedings from the date wherefrom they became ex parte so as to convert the ex parte hearings into bi-parte. While exercising power of putting the defendant on terms under R.7 the Court cannot pass an order would have the effect of placing the defendant in a situation more worse off then what he would have been if he had not applied under R.7. While exercising power of putting the defendant on terms under R.7 the Court cannot pass an order would have the effect of placing the defendant in a situation more worse off then what he would have been if he had not applied under R.7. So also the conditions for taking benefit of the order should not be such as would have the effect of decreeing the suit itself. Similarly, the Court may not in the garb of exercising power of placing upon terms make an order which probably the Court may not have made in the suit itself. The purpose of R.7 in its essence is to ensure the orderly conduct of the proceedings by penalizing improper dilatoriness calculated merely to prolong the litigation.” 13. Hon’ble the Supreme Court further in the case of G.L. Vijain v. K. Shankar (2006) 13 SCC 136 : ( AIR 2007 SC 1103 ), has held as under in regard to power of the Court under Order IX, Rule 7 and Order IX, Rule 13 of CPC:- “7. The courts power to impose condition for entertaining an application must be provided for under the statute itself. We may immediately notice the distinction between the power of the Court exercised under Order 9, Rule 7 of the Code of the Civil Procedure vis-a-vis Order 9, Rule 13 thereof. Whereas while exercising its jurisdiction under Order 9, Rule 7 of the Code of Civil Procedure, the court can impose conditions in regard to payment of costs, but while exercising its power under Order 9, Rule 13 thereof, the court can exercise a larger jurisdiction in the sense that it can impose other conditions.” 14. From the aforesaid judgments of Hon’ble the Supreme Court, the principle of law is that while exercising powers under Order IX, Rule 7 of CPC the Court can impose condition in regard to payment of costs but it cannot impose such hard and stringent condition which would negate the purpose of adjudication. As observed by the Court, purpose of the provision is to ensure orderly conduct of the proceedings of the Court by penalizing improper dilatoriness calculated merely to prolong the litigation. 15. As observed by the Court, purpose of the provision is to ensure orderly conduct of the proceedings of the Court by penalizing improper dilatoriness calculated merely to prolong the litigation. 15. Section 22(2) of the Act of 1993 provides that while setting aside an order of ex parte the tribunal has the same powers as are vested in a civil court under the Code of Civil Procedure, in our opinion, the tribunal cannot impose a condition in setting the ex parte proceeding which is so stringent amounting to finalization of dispute that it would become impossible for the party to comply the condition. However, the tribunal can impose the cost. 16. The Orissa High Court in the case of M/s. Jholei Baba Agency v. State Bank of India, AIR 2009 Orissa 109 has held as under in regard to power of the tribunal to grant of time for filing the written statement beyond the prescribed period:- “22. In view of the above, law can be summarised that the Tribunal is competent to grant time for filing the WS beyond the period prescribed under the statute. What should be the reasonable time to be granted would depend upon the facts of the case and complexity of the issues involved therein. However, the Court or Tribunal should not proceed in hot haste, rather exercise the discretion judiciously. The Tribunal does not have the power to impose a condition of pre-deposit of any part of the claim amount while considering the application for grant of time for filing the WS. Undoubtedly, in such a case the Tribunal can impose a cost if the facts so require.” 17. Madras High Court in the case of Moin Leather Wear Exports & others v. Oriental Bank of Commerce, Chennai, 2012 (2) DRTC 829 (Mad), has held as under in regard to power of the tribunal in passing an order of setting aside ex parte order: “10. It is true that the Debts Recovery Tribunal was entitled to pass discretionary orders as a condition precedent to set aside the ex parte order. However, such condition should not be onerous. It is not as if the Petitioners have filed the application belatedly to set aside the ex-parte order, whithin the statutory period. It is true that the Debts Recovery Tribunal was entitled to pass discretionary orders as a condition precedent to set aside the ex parte order. However, such condition should not be onerous. It is not as if the Petitioners have filed the application belatedly to set aside the ex-parte order, whithin the statutory period. Under the guise of setting aside the ex parte order, Debts Recovery Tribunal made an attempt to recover the amount without taking up the matter on merits. The Debts Recovery Appellate Tribunal also committed the very same illegality by confirming the order, of course, with modification in respect of amount. The hyper-technical attitude taken by the Debts Recovery Tribunal and the Appellate Tribunal made the Petitioners to approach this Court on account of this and the very proceeding before the Debts Recovery Tribunal is still pending. We are, therefore, of the aforesaid opinion that the order impugned in the Civil Revision Petition deserves to be set aside.” 18. Division Bench of Indore Bench of this High Court in the case Suresh Bansal v. Bank of India and Ors. [unreported order dated 06/03/2012 passed in Writ Petition No.1674/2012] has held as under in regard to power of Debts Recovery Tribunal while taking the written statement on record which was passed beyond prescribed period : “In the circumstances the DRT while ordering to take the W. S. on record was not justified in imposing such a harsh condition. In the facts and circumstances the W.S. could have been ordered to be taken on record by imposing reasonable cost. The Tribunal also without adverting to the record dismissed the appeal by maintaining the order of DRT that too by imposing cost of Rs.25,000/-. Thus in our view both the impugned orders are not liable to be sustained and as such are hereby quashed.” 19. In this view of the matter, in our opinion, the Debts Recovery Tribunal and Debts Recovery Appellate Tribunal both have committed an error of law while imposing the condition on the petitioners to deposit an amount of Rs.1 crore by the Debts Recovery Tribunal which has been modified subsequently as Rs.50 lacs by Debts Recovery Appellate Tribunal because the condition is stringent. The application is in regard to recovery of an amount of Rs.8,86,75,238.69/- and as per counsel for the petitioners some of the amount has already been recovered by the Bank under the proceedings of SARFAESI Act and property has also been attached. In our opinion, looking to the conduct of the petitioners, a cost has to be imposed upon the petitioners because, prima facie, we are of the view that the petitioners were responsible for not filing the written statement within prescribed period mentioned in the Rule of 1993. 20. Hon’ble the Supreme Court in the case of Amarjeet Singh v. Devi Ratan, (2010) 1 SCC 417 : ( AIR 2010 SC 3676 ) has held as under in regard to imposition of costs by the Court:- “The courts constant endeavour must be to ensure that everyone gets just and fair treatment. The court while rendering justice must adopt a pragmatic approach and in appropriate cases realistic costs and compensation be ordered in order to discourage dishonest litigation. The object and true meaning of the concept of restitution cannot be achieved or accomplished unless the courts adopt a pragmatic approach in dealing with the cases.” 21. Hon’ble the Supreme Court further in the case of A. Shanmugam v. Ariya Kshatriya Rajakula Vamsathu Madalaya Nandhavana Paripalanai Sangam represented by its President and others (2012) 6 SCC 430 : ( AIR 2012 SC 2010 ) has held as under in regard to imposition of costs by the Court : “36. Unless wrongdoers are denied profit or undue benefit from frivolous litigations, it would be difficult to control frivolous and uncalled for litigations. Experience also reveals that our courts have been very reluctant to grant the actual or realistic costs. We would like to explain this by giving this illustration. When a litigant is compelled to spend Rs.1 lakh on a frivolous litigation where is hardly any justification in awarding Rs.1000 as costs unless there are special circumstances of that case. We need to decide cases while keeping pragmatic realities in view. We have to ensure that unscrupulous litigant is not permitted to derive any benefit by abusing the judicial process.” 22. Keeping in mind the aforesaid principle and conduct of the petitioners, in our opinion, it would be just and proper to impose cost of Rs.1lac on the petitioners. 23. We need to decide cases while keeping pragmatic realities in view. We have to ensure that unscrupulous litigant is not permitted to derive any benefit by abusing the judicial process.” 22. Keeping in mind the aforesaid principle and conduct of the petitioners, in our opinion, it would be just and proper to impose cost of Rs.1lac on the petitioners. 23. The argument advanced by the learned counsel for the petitioners that in accordance with the provisions of Section 19(5) of the Act of 1993, the date of hearing means the first hearing when the case is fixed before the Presiding Officer and not before the Registrar, could not be accepted. Rule 12(1) of the Rules of 1993 provides that the defendant shall file reply to the application along with documents in a paper book form with the Registrar within one month of the service of the notice of filing of the application on him. If we accept the contention of the learned counsel for the petitioners, then it would negate and redundant the statutory provisions of Rule 12(1) of the Rules of 1993. Hence, we do not find any merit in the contention put forth by the learned counsel for the petitioners. It is hereby rejected. 24. This writ petition is disposed of with the following directions: (I) That, the impugned orders dated 12-03-2013 (Annexure P-1) passed by Debts Recovery Appellate Tribunal, Allahabad and dated 17-12-2012 (Annexure P-2) passed by Debts Recovery Tribunal, Jabalpur, are hereby quashed. (II) That, the petitioners are permitted to participate in the proceedings and the written statement filed by the petitioners be taken on record, on the condition that they shall pay cost of Rs.1 lac to the respondent No.1-Bank within a period of thirty days from the date of passing of this order. Order accordingly.