Debt Recovery Appellate Tribunal - Delhi
O.P. Aggarwal vs Bank Of Rajasthan Ltd. And Ors. on 21 April, 2003
Equivalent citations: I(2004)BC60
ORDER
K.S. Kumaran, J. (Chairperson)
1. The Bank of Rajasthan Ltd. (hereinafter referred to as 'the 1st respondent-Bank) filed O.A. 454/1999 against (1) Ganpati Combines Ltd., (2) Sh. O.P. Aggarwal (hereinafter referred to as 'the appellant-defendant') and (3) Ganpati Exports Ltd., for the recovery of Rs. 9,80,81,396/- with interest and costs before the Debt Recovery Tribunal-II, Delhi (hereinafter referred to as 'DRT'). The learned Presiding Officer of DRT accordingly passed a common ex parte final order dated 22.1.2001 in O.A. No. 454/1999 as well as in O.A. No. 452/1999 and 453/1999.
2. Appellant-defendant who is the 2nd defendant in the above O.A. filed on 16.10.2001, a miscellaneous application under Section 22(2)(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as 'the Act'), for setting aside the above said ex parte final order. The learned Presiding Officer of the DRT, by the impugned order dated 17.10.2001, dismissed the said miscellaneous application observing that since the defendants could not be served with the show-cause notice of the O.A. in the ordinary course, they had to be served by publication, but none appeared despite deemed service and, therefore, they were rightly proceeded ex parte. The learned Presiding Officer also observed that there was no ground for setting aside the ex parte final order.
3. Aggrieved, the appellant-defendant has filed this appeal. The 1st respondent-Bank has filed a suitable reply opposing this appeal.
4. I have heard Counsels for both the sides and perused the records of the appeal and also of the O.A. before the DRT.
5. The learned Counsel for the appellant-defendant contends that the appellant was not served with the show-cause notice in the O.A. and was also not given a copy of the ex parte final order. He points out from the records that the O.A. was, for the first time, listed on 12.10.1999 before the DRT and learned Presiding Officer ordered summons to be issued to all the defendants with a direction to place the matter before the Registrar on 2.12.1999 and that on 2.12.1999, the Registrar, observing that he was busy in other works simply adjourned the matter to 21.1.2000. He further points out from the order dated 21.1.2000 that the learned Counsel for the 1st respondent-Bank requested for directing substituted service in respect of the appellant-defendant, which was accepted, and the appellant-defendant was ordered to be served by publication of the notice in the newspaper "Statesman" for the hearing dated 13.3.2000. The learned Counsel for the appellant-defendant also points out from the records that publication was also made (in the newspaper "Statesman" dated 26.2.2000) of the notice requiring the appellant-defendant to appear before the Tribunal on 13.3.2000, but on 13.3.2000, the matter was simply adjourned to 24.5.2000 as the Advocates were on strike, and that on 24.5.2000 also the matter was simply adjourned to 6.9.2000 on the ground that renovation work was in progress and, therefore, the Registrar could not hold the Court.
6. The learned Counsel for the appellant-defendant further points out from the records that on 6.9.2000, learned Counsel for the 1st respondent-Bank stated before the Registrar that he had already filed the affidavit regarding service along with the copy of the publication in the newspaper, and the Registrar, observing that despite publication none of the defendants had appeared, ordered the matter to be put up before the Presiding Officer on 23.10.2002.
7. Learned Counsel for the appellant-defendant points out from the records, that the 1st respondent-Bank had filed an application for the appointment of a Receiver to take possession of the mortgaged property, and that application was taken up in the meanwhile on 26.9.2000 and adjourned to 10.10.2000 for consideration, and that on 10.10.2000 the above said interlocutory application (I.A. 1/2000) was rejected by the learned Presiding Officer, but the learned Presiding Officer directed the O.A. to be taken up on 20.10.2000 itself instead of 23.10.2000.
8. The learned Counsel for the appellant-defendant also points out from the records that on 20.10.2000, the learned Presiding Officer observing that the publication in the newspaper "Statesman" was already on record which showed that the defendants have been served by way of publication which is valid service, that despite service by publication the defendants were not present and, therefore, they are proceeded ex parte. The learned Counsel for the appellant-defendant also points out that the learned Presiding Officer after directing the 1st respondent-Bank to file the affidavit by way of evidence, adjourned the matter to 22.1.2001 on which date passed the common ex parte final order.
9. These aspects pointed out by the learned Counsel for the appellant-defendant are borne out by the day-to-day orders passed by the DRT, the copies of which have been produced with this appeal also. Pointing out these aspects and also the fact that even in the O.A. the defendants 1 and 3 in the O.A. (who are respondents 2 and 3 in this appeal) have been shown to be represented by the official liquidator (in view of the liquidation proceedings), he contends that there was no service of any summons/notice of the O.A. on the appellant-defendant. He points out that though on 12.10.1999 summons were ordered to be issued for the hearing dated 2.12.1999, there is no material to show that the appellant-defendant was served in the O.A. with any show-cause notice/summons. Of course, learned Counsel for the 1st respondent-Bank points out that the affidavit regarding service was filed by Mr. Mukesh Srivastava, the Clerk of Mr. Anil Aggarwala, Advocate. But the learned Counsel for the appellant-defendant contends that this affidavit filed by Mr. Mukesh Srivastava, does not at all show that the appellant-defendant was served with the summons in the O.A. I have also perused the affidavit by Mr. Mukesh Srivastava, dated 30.11.1999 filed before the DRT. In this affidavit it has been mentioned by him that the original notice dated 28.10.1999 along with the copy of the O.A., documents, etc., have been duly sent by registered post to the respondent and copies of the receipts were produced along with the affidavit. It also shows that the acknowledgement cards have been received back from the 1st respondent (therein) and that the 1st respondent has been served by special messenger also. But, this affidavit does not show that the appellant-defendant was served with the summons along with the copy of the O.A. and the documents or that the envelope containing the summons to the appellant-defendant had returned unserved for any reason, or that any such un-served envelope was being produced along with the affidavit. In fact, this affidavit does not speak about the appellant-defendant at all specifically.
10. Pointing out these factors, the learned Counsel for the appellant-defendant contends that, it is clear that the appellant-defendant has not been served with any show-cause notice in the O.A. I agree with the learned Counsel for the appellant-defendant in-this regard. In view of the what has been pointed out above, it is obvious that appellant-defendant has not been served with any summons in the O.A. The learned Counsel for the 1st respondent-Bank has also not been able to point out any material to show that the appellant-defendant has been served in the O.A.
11. It is evident that no material was placed the DRT to show that the summons intended for the appellant-defendant had returned unserved for any reason. Therefore, the learned Counsel for the appellant-defendant contends that when the affidavit regarding service filed by Mr. Mukesh Srivastava does not show that the summons issued to the appellant-defendant had returned unserved for any reason, and when there was nothing to show that the appellant-defendant had avoided the service of the summons or that the appellant-defendant could not be served by the ordinary process, or that the DRT was satisfied about, it substituted service by publication ought not to have been ordered, since, there was no ground for doing so. He further contends that there was also no application similar to the one under Order V Rule 20 of Code of Civil Procedure requesting the Tribunal to order substituted service, and in these circumstances, the DRT was neither right nor justified in directing service by the mode of substituted service i.e. by publication. He contends that on the mere request of learned Counsel for the 1st respondent-Bank, with nothing more, the DRT had ordered substituted service which cannot be stated to be as valid service. Learned Counsel for the appellant-defendant, therefore, contends that the appellant-defendant ought not to have been proceeded ex parte and the final order passed. He contends that the ex parte final order should have been set aside, in the circumstances of the case, as prayed by the appellant-defendant.
12. In support of his contention the learned Counsel for the appellant-defendant relies upon the Full Bench decision of the Hon'ble Andhra Pradesh High Court in Shanmukhi v. Venkatarami Reddi, AIR 1957 Andhra Pradesh i wherein it has been held as follows :
"It is seen that in the case of substituted service, there are two conditions prescribed before it can be resorted to, viz., that the Court must be satisfied either (1) that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or (2) that for any other reason the summons cannot be served in the ordinary way. The satisfaction of the Court in each of these cases is brought about by representations of the plaintiff usually made by an affidavit. If, of course, the defendant has been deliberately keeping out of the way and substituted service is ordered in such a case, it certainly would be 'due' service.
A party cannot close his eyes and complain that he is unable to see. But, if on the other hand the defendant is not really keeping out of the way at all and the Court is only induced to believe that he is, by the one-sided representation of the plaintiff, it is clear that the service that is then substituted cannot be regarded as 'due' service. Therefore, when the question arises as to whether in a particular case, substituted service obtained from the Court is or is not 'due' service, it will have to be determined by ascertaining whether the representations made to the Court by the plaintiff were not true, that is to say, whether the defendant could be presumed in the circumstances, to have or had actual knowledge."
13. In this regard, he also relies upon the decision in Teharoonchand v. Surajmull Nagarmull, AIR 1984 Calcutta 82, wherein it has been held as follows :
"It is true that under the law service of summons under Order 5, Rule 20 of the Code shall be as effectual as if it had been made on the defendant personally. Before issuing summons under Order 5 Rule 20 of the Code, the Court is to be satisfied that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason summons cannot be served in the ordinary way. Before such satisfaction, the Court has to consider the case carefully having regard to the nature of the earlier attempts made for the service of summons. Mere assertion of the plaintiff in this respect to attract the provisions of Order 5 Rule 20 of the Code will not be enough. Only when the Court is satisfied from the materials on record that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason summons cannot be served in the ordinary way, the Court will be entitled to order service of summons under Order 5, Rule 20 of the Code."
14. These decisions, though rendered with reference to the provisions of the Code of Civil Procedure, it is evident that the provisions of the Code of Civil Procedure in this regard are based upon principles of natural justice that no one should be condemned unheard. Therefore, these directions will be applicable to a case under this 'Act' as well, since as per Section 22 of the Act, the DRT is to be guided by the principles of natural justice in dealing with matters before it. Therefore, these decisions clearly go to support the contention of the learned Counsel for the appellant-defendant. In the case on our hands, we find from the record that on 21.1.2000 when substituted service was ordered, the 1st respondent-Bank had not placed before the DRT any material to show that the appellant-defendant was avoiding service or could not be served by ordinary process. The order dated 21.1.2000 does not even show that the affidavit regarding service was filed by the 1st respondent-Bank or perused by the DRT before ordering substituted service. It does not even show that the DRT was satisfied that the appellant-defendant was avoiding service or could not be served by ordinary process. For the mere asking of the learned Counsel for the 1st respondent-Bank substituted service has been ordered. Principles of natural justice recquired that the appellant-defendant should have been served with the summons before any order is passed against the defendant. The purpose of serving a notice on the defendant is to put the defendant on notice as to what is the claim against him/her, so that the defendant can meet the claim. It is not an empty formality. Therefore, before ordering substituted service, the DRT had to satisfy itself that the defendant was either avoiding service or could not be served by ordinary process. If no material at all has been placed before the DRT to arrive at such a conclusion, then, the grant of the request for ordering substituted service for the mere asking will render the service by substituted service as invalid and not merely irregular, since the very right of the defendant to be served by the ordinary process either in person or by Registered Post is defeated by such an order.
15. But, learned Counsel for the 1st respondent-Bank contends that it is only for the DRT to be satisfied whether substituted service has to be ordered or not, and not for the appellate Court to consider and decide whether the Trial Court's order for substitute service was on sufficient or in-sufficient grounds. He contends that the Appellate Court in an appeal against the order under Order IX Rule 13, Code of Civil Procedure, has only to see whether the summons was duly served and whether the defendant was prevented by sufficient cause from appearing before it. In this connection, he relies upon the decision in Doraiswami Ayyar v. Balasundaram Ayyar, AIR 1927 Madras 507. But this decision of the Madras High Court has been rendered by a Hon'ble Single Judge, whereas, the decision in AIR 1957 Andhra Pradesh 1 referred to supra has been rendered by a Full Bench and that in AIR 1984 Calcutta 80 referred to supra by a Division Bench and, therefore, this Tribunal will have to follow the decisions of the Full Bench and the Division Bench. Therefore, the decision of the Madras High Court will be of no help to the 1st respondent-Bank.
16. Of course, the learned Counsel for the appellant-Bank points out from the records of the DRT a letter dated 31.1.2000 sent by the Registry for publishing the notice for the hearing dated 13.3.2000, and also to send a copy of the same to the defendants. But, as pointed out already, the affidavit regarding service dated 30.11.1999 filed by Mukesh Srivastava does not speak the appellant-defendant at all. Therefore, the DRT could not have satisfied itself about the need to serve the appellant-defendant by substituted service from that affidavit. Therefore, the mere fact that a letter was written from the Registry of the DRT for making publication of the notice cannot cure these defects which render the service of notice by publication invalid.
17. In the circumstances pointed out above, I am of the view that there was no valid or justifiable ground for ordering substituted service on the appellant-defendant and therefore, the publication of the notice in the newspaper with regard to the appellant-defendant cannot be stated to be legal or due or valid service on the appellant-defendant.
18. The learned Counsel for the 1st respondent-Bank of course contends that in the application under Section 22(2)(g) filed by the appellant-defendant before the DRT for setting aside the exp arte final order, the appellant-defendant has merely stated that the 1st respondent-Bank had obtained the order for substituted of service by misrepresentation and has not stated that order for substituted service is not valid, and, therefore, the appellant-defendant cannot now take the plea before this Tribunal that the substituted service is not valid. This contention cannot be accepted at all. On facts, the appellant-defendant has been able to show from the records of the DRT itself that there were no valid ground for ordering the substituted service on appellant-defendant, and these facts coupled with the averment that the order was obtained by misrepresentation certainly go to show that there is no valid service. Therefore, this argument of the 1st respondent-Bank will not be of any avail.
19. The learned Counsel for the 1st respondent-Bank next contends that in the application before the DRT the appellant-defendant had merely stated that he came to know about the issuance of the recovery certificate on 17.9.2001, but had not stated as to how he came to know of the same, whereas only in paragraph 5.20 of the memorandum of appeal, the appellant-defendant has stated that on 17.9.2001, he came across a notice dated 21.8.2001 purportedly issued by the Recovery Officer in relation to a recovery case. He, therefore, contends that this is a new plea taken by the appellant-defendant, and cannot be allowed to be put forward for the first time in the appeal. This contention of the 1st respondent-Bank cannot also be accepted. Both in the application before the DRT and in paragraph 5.20 of the memorandum of appeal, the appellant-defendant has stated that he came to know of the proceedings on 17.9.2001. With regard to this aspect, there is no change or inconsistency. The appellant-defendant has only elaborated in the memorandum of appeal by stating that on that date he came across the notice dated 21.8.2001 purportedly issued by the Recovery Officer. Therefore, it cannot be stated that the appellant-defendant has taken a new plea or that he should not be allowed to do so.
20. Yet another contention put forward by the learned Counsel for the 1st respondent-Bank is that the application filed before the DRT to set aside the ex parte final order was barred by time, since, the ex parte final order was passed on 22.1.2001 whereas, the application to set aside the same was filed on 16.10.2001. But the learned Counsel for the appellant-defendant contends that the appellant-defendant came to know of the proceedings only on 17.9.2001 and, therefore, the application filed on 16.10.2001, i.e. within 30 days of his knowledge, is in time. I agree with the learned Counsel for the appellant-defendant in this respect. The application to set aside the ex parte final order is supported by the affidavit of O.P. Aggarwal, the appellant-defendant. There is no material to show that the appellant had knowledge of the proceedings on any other date. The learned Counsel for the appellant-defendant contends that the appellants was not even served with a copy of the ex parte final order. The learned Counsel for the 1st respondent-Bank has not been able to point out any material to show that a copy of this order was served upon appellant-defendant. In this case, where the appellant-defendant had neither been served with the notice in O.A. nor with a copy of the final order, the appellant-defendant could file the application to set aside the ex parte final order only when he comes to know of the same. Therefore, it cannot be said that the application is barred by time.
21. Of course, the learned Counsel for the 1st respondent-Bank also contends that since the appellant-defendant was served by substituted service, the date from which the period of limitation started running is the date of the final order and not the dale on which the appellant-defendant allegedly gained knowledge about the same. In this connection, learned Counsel for the 1st respondent-Bank relics upon the decision in Krishna v. Vinayakaswamiar, AIR 1930 Madras 222, wherein it has been held as follows :
"I accordingly hold that even in the case of substituted service, if the summons was duly served, the terminus a quo under Article 164 is the date of the above decree and not the date when it first comes to the knowledge of the defendant".
But in this very same decision it has also been held as follows :
"Then comes the question, in the case of substituted service, when is the defendant 'duly served: and when not' ? It is contended for the respondent that the Court cannot examine the propriety of the order directing substituted service, for, it is said that under the article, the only point which the Court can consider is, whether the summons was duly served, that is whether the order directing substituted service was duly carried out. The order may be right or wrong; it may be or may not have been made on sufficient material; the Judge when, ordering substituted service may have acted with grave irregularity; still it is contended that the Court under Article 164 is not concerned with the regularity of the propriety of the order and that its duty is confined to enquiring whether this wrong order was rightly carried out. I cannot accept this construction. What in the case of substituted service the article intends to lay down is, when the order is rightly made and the service directed by the order is properly effected, knowledge of the defendant is immaterial and time runs from the date of the decree. This is the natural and reasonable meaning of the section. This view is implied in the decision in Narasimha Chettiar v. Balarkishna Chetty, which is cited with approval in the case already referred to AIR 1928 Madras 815. The Lahore High Court has taken the same view in Ramrkirshna v. Mula".
In the same decision it has further been held as follows :
"In that affidavit, these facts were not properly mentioned. The statements made were misleading and the Judge thereupon made an order for substituted service. In my opinion the order was improperly obtained, it was made on insufficient material and cannot be sustained. I therefore hold that the summons was not duly served within the meaning of Article 164, and the time accordingly runs not from the date of the decree but from the date when it first came to the knowledge of the defendant."
22. Therefore, we find that even in the decision relied upon by the learned Counsel for the 1st respondent-Bank, it has been held that only when the order is rightly made and the service directed by the order is properly effected, the time will run from the date of the decree. The circumstances pointed out by me show that the order for substituted service has not been made in the case on our hand, rightly and legally. Therefore, this decision far from helping the 1st respondent-Bank goes only to support the contention of the appellant-defendant that the order for service on the appellant-defendant by the mode of publication is neither legal nor valid and, therefore, the ex parte final order has to be set aside, I find that the application cannot also be dismissed on the ground that it is barred by time.
23. However, the learned Counsel for the respondent-Bank contends that the appeal itself is not maintainable inasmuch as the appellant has not complied with the provisions of Section 21 of the Act. Section 21 of the Act read as follows :
"Deposit of amount of debt due, on filing appeal Where an appeal is preferred by any person from whom the amount of debt is due to a Bank or a financial institution or a consortium of Banks or financial institutions, such appeal shall not be entertained by the appellate Tribunal unless such person has deposited with the appellate Tribunal seventy-five per cent of the amount of debt so due from him as determined by the Tribunal under Section 19:
Provided that the appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section."
24. Pointing out this provision, the learned Counsel for the respondent-Bank contends that in this case on hand, the debt has been determined as due from the appellant to the respondent-Bank, and, therefore, the appeal cannot be entertained unless the appellant deposits 75% of the amount found due, or the Tribunal waives the pre-deposit either in whole or in part. But, the learned Counsel for the appellant, on the other hand, contends that this is not an appeal where the appellant challenges the final order passed by the DRT, determining the amount allegedly due from the appellant, but this is only an appeal against the order declining the request of the appellant to set aside the ex parte final order, where the question for consideration is whether the appellant has not been served with any notice/ summons or whether the appellant had been prevented by sufficient cause from appearing before the Tribunal. In this connection, he relies upon the decision of this Tribunal Almania Foods and Ors. v. Catholic Syrian Bank decided on 26.6.2002 (Miscellaneous Application No. 292/2002 in Miscellaneous Appeal No. 256/2001). This decision clearly supports the appellant. This Tribunal, after taking into consideration and analysing various provisions of the Act, has held that in an appeal of this sort, the question for consideration is as to whether there was service of summons/notice on the appellant or not or whether the appellant was prevented by sufficient cause from appearing before the Tribunal, and not on the merits of the claim in the O.A. or as to the amount determined as payable and, therefore, there is no need to comply with the provisions of Section 21 of the Act. Therefore, I am of the view that this contention put forward by the learned Counsel for the respondent-Bank cannot be accepted.
25. The learned Counsel for the respondent-Bank next contends that against the order passed by the DRT rejecting the request of the Bank to appoint a Receiver, the Bank filed Miscellaneous Appeal 232/2000 before the Debts Recovery Appellate Tribunal, in which, even the appellant had entered appearance through Mr. Sanjay Kumar Ghosh and, therefore, the appellant had knowledge of the proceedings even at the time. In paragraph (1) of the reply to the appeal, the respondent-Bank has stated as follows :
"That an appeal was filed against the order dated 10th October, 2000 passed by Tribunal, refusing to appoint Receiver. The appeal was registered as Miscellaneous Appeal No. 232/2000. The respondents (including the appellant herein) were represented by Mr. Sanjay Kumar Ghosh, Official Liquidator. This Hon'ble Appellate Tribunal vide its order dated 12.12.2000 observed as under:
'Since the Official Liquidator for respondent Nos. 1 to 4 is represented today, it could be at the option of Official Liquidator to be present before the Tribunal below.' It is thus clear that the appellant had the knowledge about the original application, he was also given the option to appeal (mistake for appear) before the Tribunal on 18.12.2001 but he himself failed to appear and avail the option for contesting the original application. Thus, the appellant is estopped from challenging the order whereby the learned Tribunal had proceeded ex parte."
26. But, the learned Counsel for the appellant contends that the appellant was not served with any notice even in the said appeal. The order dated 12.12.2000 of the Debts Recovery Appellate Tribunal extracted above states that the Official Liquidator for respondents 1 to 4 is represented and it could be the option of the Official Liquidator to be present before the Tribunal. But, the Official Liquidator could have been representing the companies only. There is no material before this Tribunal to show that the appellant herein was served with any notice in Miscellaneous Appeal 232/2000 or that he was represented by any Counsel, except the abovesaid averment made in the reply, which will not be sufficient to impute the appellant with the knowledge of the proceedings before the DRT even at the time i.e. in December, 2000. Therefore, this contention put forward by the respondent-Bank cannot be accepted and, on this basis, it cannot be said that the application filed before the DRT to set aside the ex parte final order is barred by time or otherwise.
27. Therefore taking into consideration all these aspects, I find that this appeal has to succeed.
28. Accordingly, this appeal is allowed and impugned order dated 17.10.2001 passed by the learned Presiding Officer of the DRT is set aside.
29. The Miscellaneous Application filed by the appellant-defendant before the DRT to set aside the ex parte final order will stand allowed.
The learned Presiding Officer of the DRT concerned will take back O.A. 454 of 1999 on file insofar as it relates to the appellant 2nd defendant, give opportunity to the 1st respondent-Bank and the appellant 2nd defendant to put forth their case in accordance with law and then dispose of the O.A. in accordance with law.
For this purpose, the 1st respondent-Bank and the appellant-defendant are directed to appear before the concerned DRT on 2.6.2003 and take further directions in this matter from the said DRT, without awaiting for any further notice in this regard from the said DRT.
Copy of this order be furnished to the appellant and the 1st respondent-Bank.
Copy be also forwarded to the DRT concerned, with the records of the DRT immediately.