Debt Recovery Appellate Tribunal - Delhi
Kailash Chand Nagpal And Anr. vs Corporation Bank And Ors. on 26 February, 2003
Equivalent citations: II(2004)BC1
JUDGMENT
K.S. Kumaran, Chairperson
1. Appellants are defendants 2 and 1 in O.A. 174/97 before the Debts Recovery Tribunal-I, Delhi (hereinafter referred to as 'the DRT'). The 1st respondent-plaintiff-Corporation Bank (hereinafter referred to as 'the respondent-Bank') filed the said O.A. for the recovery of a sum of Rs. 44,19,991/- with interest thereon @ 21.75% per annum against the defendants/appellants and defendants 3 and 4. 2nd appellant is the company, of which the 1st appellant and defendants 3 and 4 are stated to be the Directors. The respondent-Bank also prayed that the 5th defendant should pay a part of this amount. The learned Presiding Officer of the DRT, by his ex parte final order dated 7.12.2000 directed the defendants 1 to 4 to jointly pay the abovesaid sum with interest and costs. The 5th defendant was also saddled with the liability to pay the part of the abovesaid amount.
2. Aggrieved, an application for setting aside the ex parte final order was filed. An application under Section 5 of the Limitation Act to condone the delay in filing the said application was also filed later. The applications were opposed by the respondent-Bank.
3. The learned Presiding Officer of the DRT, by the impugned order dated 3.5.2002, dismissed the application for setting aside the ex parte final order observing that he did not wish to delve much regarding the application for condonation of delay as he was of the view that on merits also, the CDs have no case and their application was liable to be dismissed. He found that the defendants were grossly negligent in pursuing the matter (in spite of their being educated persons, and being businessmen) that despite service of the notice on 12.7.1997 they did not participate in the proceedings for more than one year, that they were set ex parte on 10.9.1998, and it was thereafter i.e. on 27.10.1998 that they filed an application to set aside that order, He also observed that even after filing that application, they did not contact their lawyer for about three years, and that they cannot be allowed to succeed in their designs to get the ex parte final order set aside by shifting the whole burden on their lawyer.
4. It is against this order that the 2nd defendant, who is the Director, and the 1st appellant, Which is the company, have preferred this appeal. The respondent-Bank has filed a suitable reply opposing the appeal. The appellants have filed a rejoinder also.
5. I have heard the learned Counsels for both the sides, and perused the records.
6. Of course the learned Counsel for the respondent-Bank contends that the appellants have not complied with the provisions of Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as 'the Act'), and have not deposited 75% of the amount decreed by the DRT which is a pre-condition for entertaining the appeal and, therefore, the appeal should not be entertained and heard. But, the learned Counsel for the appellants, on the other hand, relies upon a decision of this Tribunal in Miscellaneous Application 292/2002 in Miscellaneous Appeal 256/2001--Almania Foods and Ors. v. Catholic Syrian Bank decided on 26.2.2002 wherein this Tribunal, after elaborately discussing the matter, and considering the need to comply with the provisions of Section 21 of the Act, has held that in appeals of this sort, where the questions for determination are, whether there has been no service of notice and whether there was sufficient reason for the absence of the defendant and not on merits as to the determination of the debt, 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 respondent-Bank cannot be accepted.
7. Therefore, I will now consider the respective contentions raised in this appeal. The learned Counsel for the appellants points out that on 9.5.1997, the DRT directed fresh summons to the defendants by Registered and ordinary post directing them to file written statements by 11.7.1997. He also points out that the summons/notices were prepared on 18.6.1997, and were actually issued on 2.7.1997. The appellants have also produced a copy of the notices/summons in support of the contention that 30 days' time was not left to file the written statements. This apart, he also contends that the summons were actually served on the defendants only on 12.7.1997 i.e. a day after the date of the hearing.
8. The learned Counsel for the appellants also points out from the copy of the order dated 11.7.1997 passed by the DRT that the Counsel for the respondent-Bank had stated that the defendants were avoiding service, and prayed that they be served through publication, that the learned Presiding Officer also allowed service of notice by Publication for the hearing dated 20.8.1997 by observing that he was satisfied that the defendants cannot be served by ordinary process. The learned Counsel for the appellants contends that this request was made by the learned Counsel for the respondent-Bank orally without an application in the nature of one under Order 5 Rule 20, CPC, and without even placing material before the DRT that the defendants were actually avoiding service or that they could not be served by ordinary modes.
9. The learned Counsel for the appellants also points out from the order dated 20.8.1997 that the publication had been produced, that the defendants were found to be absent, and that it had been observed that they had been duly served. He also points out that the matter was adjourned to 30.9.1997, and from that date to 24.11.1997, but, the matter was taken up by the learned Presiding Officer of the DRT on 3.2.1998. The learned Counsel for the appellants points out from the order dated 3.2.1998 passed by the learned Presiding Officer of the DRT that the defendants were set ex parte, and the matter was adjourned for ex parte evidence on affidavit for 26.2.1998.
10. The learned Counsel for the appellants points out from the copies of the day-to-day orders passed by the learned Presiding Officer of the DRT that the matter was taken up and adjourned on 9.9.1998, 10.9.1998, 21.9.1998 and 30.9.1998 for various reasons like the request of the Counsel for the respondent-Bank, and that the advocates were not attending Court. He also points out that on 30.9.1998, the respondent-Bank was given a last opportunity to file the affidavit of evidence with a direction to list the case on 7.10.1998, from which date also it was adjourned to 9.11.1998.
11. According to the learned Counsel for the appellants, in the meanwhile i.e. on 17.9.1998, the appellants filed an application in the nature of one under Order 9 Rule 7, CPC for setting aside the order dated 3.12.1998 by which the defendants were set ex parte. He also points out from the order of the DRT dated 9.11.1998, that this application was adjourned to 8.12.1998 for consideration, and from 8.12.1998 to 28.12.1998 for reply and arguments on this application.
12. The learned Counsel for the appellants points out from the various orders that the matter was adjourned from 28.12.1998 to 16.2.1999, then to 5.4.1999, 6.5.1999, 28.6.1999, 8.7.1999, 4.10.1999, 1.2.2000 and 27.4.2000, for reasons like the learned Presiding Officer was on leave, that there were more than 40 to 50 cases and that there was no learned Presiding Officer and, therefore, contends that there was no effective hearing from 28.12.1998 to 26.4.2000. He also points out from the order dated 27.4.2000 passed by the learned Presiding Officer of the DRT that the learned Presiding Officer of the DRT, after noticing this fact that there was no effective hearing, and that there was none present on behalf of the defendants, had ordered to issue notice to the Counsel for the defendants to appear on 8.9.2000 for arguments. The learned Counsel for the appellants also points out from the order dated 8.9.2000 passed by the DRT that the Counsel for the respondent-Bank had presented the copy of the served notice on the Counsel for the defendants, that the learned Presiding Officer, after observing that the Counsel for the defendants had been served, but finding that neither the defendants were nor their Counsel was present, dismissed the miscellaneous application (for setting aside the order by which the defendants were set ex parte) for want of prosecution. He also points out that the learned Presiding Officer, at the request of the Counsel for the respondent-Bank, directed him to file the affidavits along with documents, and fixed the matter for final order on 7.12.2000. It was on 7.12.2000, the ex parte final order was passed by the learned Presiding Officer of the DRT.
13. The learned Counsel for the appellants contends that on 5.1.2001, an envelope containing the ex parte final order passed by the DRT was received after which the appellants contacted their Counsel Mr. O.P. Khadaria, who said that nothing adverse would happen. He also contends that an application to set aside the ex parte final order was then filed on 30.1.2001, and an application under Section 5 of the Limitation Act to condone the delay in filing the former application was also filed. The learned Counsel for the appellants also contends that Mr. O.P. Khadaria, the erstwhile Counsel for the defendants, did not appear before the DRT, and that the defendants were neither informed of the date of hearing nor about the progress of the case and, therefore, the defendants could not be punished for the lapse on the part of their Counsel.
14. According to the learned Counsel for the appellants, evidence by way of affidavit was also filed in support of the application under Order 9 Rule 13 giving the details, but no counter-affidavit was filed by the respondent-Bank, and there was no cross-examination of the deponent by the respondent-Bank. He, therefore, contends that the contents of the affidavit must be deemed to have been admitted.
15. The learned Counsel for the appellants points out from the evidence by way of affidavit filed by the 1st appellant that he had been regularly contacting his Advocate who had informed that the stage of filing the defence had not arisen that he had also handed over about 13 files to his erstwhile Counsel during the course of several visits, that the erstwhile Advocate had informed him that the matter had been adjourned as the learned Presiding Officer was not holding Court or that the matter was not being taken up. The learned Counsel for the appellants also points out from the affidavit that the deponent has stated therein that his Advocate informed him that he was taking care of the matter and attending the Tribunal, that he will inform him if there was any need for his (deponent's) appearance before the Tribunal, that he had not informed about the said need at all, but, later, it transpired that his erstwhile Advocate Mr. O.P. Khadaria had been misrepresenting to him about the proceedings, whereas, in fact, he was not attending the Tribunal at all.
16. The learned Counsel for the appellants also points out from the affidavit that the deponent had stated therein that in the second week of September, 1998, he was called to the office of the abovesaid Advocate, who informed him that some application was required to be filed, that he signed the affidavit without doubting the Counsel, and that he was told by his Advocate that he need not be present personally before the Tribunal unless called upon to do so. Deponent had further stated in his affidavit that it later on transpired that the said application was one for setting aside the order dated 3.2.1998 by which the defendants were set ex parte.
17. The learned Counsel for the appellants points out from the affidavit that the deponent has stated therein that the matter was being adjourned from time-to-time, but after receiving the final order on 5.1.2001, the deponent had gone to the Advocate on 6.1.2001, and questioned him, that the Counsel Mr. O.P. Khadaria told that nothing adverse would happen, that the case file is not traceable, that it was his son who was looking after the case with whom he had strained relations, that thereafter the deponent went and met Mr. Deepak Khadaria, Advocate (the son of Mr. O.P. Khadaria), who informed that his brother was looking after the matter as he was not in practice, and also stated that he had probably burnt the files. :
18. The learned Counsel for the appellants points out from the affidavit wherein the deponent has stated that he again went to Mr. O.P. Khadaria, Advocate, who expressed his helplessness staring that his son was not in his control, but assured that he will appear before the DRT and state about the files having been either burnt or misplaced. The learned Counsel for the appellants further points out that the deponent has further staled that in spite of letters, Mr. O.P. Khadaria did not respond.
19. The learned Counsel for the appellants also points out that the appellants have produced the copy of the two letters dated 16.2.2002 and 18.3.2002 addressed by the 1st appellant to Mr. O.P. Khadaria in this behalf. He also points out that Mr. O.P. Khadaria has also filed an affidavit before the DRT, stating that he lost track of the case, and could not be present before the DRT on 4.10.1999 or 27.4.2000, that he wanted to inform his clients, but could not contact them, that there was no communication from the defendants and, therefore, he had presumed that they might have engaged some other lawyer, that he had not received any notice from the DRT to appear on 8.9.2000, but he was contacted by the defendants in January, 2001 along with copy of the final order. The learned Counsel for the appellants also points out from the affidavit of Mr. O.P. Khadaria that the case files, which were with him from August, 1997, were misplaced during the intervening period of three and half years.
20. Pointing out these aspects, the learned Counsel for the appellants contends that though the affidavit filed by Mr. O.P. Khadaria is worded cautiously, and is self-defensive in nature, it shows that Mr. O.P. Khadaria had not acted diligently, but had acted negligently and, therefore, the learned Presiding Officer of the DRT was not justified in dismissing the application to set aside the ex parte final order by stating that the defendants were grossly negligent, that they had not contacted their lawyer for three years, and that they had not taken any immediate steps to participate in the proceedings. He also contends that the evidence by way of affidavit of the 1st appellant was not at all considered by the learned Presiding Officer while deciding that application though it was filed with the leave of the Tribunal. He also points out that there was no effective hearing for two years after the application in the nature of one under Order 9 Rule 7, CPC was filed and, therefore, no negligence can be attributed to the appellants for that period.
21. The learned Counsel for the respondent-Bank, on the other hand, contends that the final order was passed on 7.12.2000, but the application to set aside the same was filed on 30.1.2001 i.e. after more than 30 days, that there is no explanation for the delay except stating that the order was received on 5.1.2001. He further contends that this is a case where the appellants/defendants cannot contend that they can file the application to set aside the ex parte final order within 30 days from the date on which they received the copy of the order, and that even if it is taken that they came to know of the final order on 5.1.2001, they should have filed the application to set aside the order within 30 days i.e. by 4.2.2001. The learned Counsel for the respondent-Bank contends that since there are no reasons for condoning the delay, the application under Section 5 of the Limitation Act is liable to be dismissed, and consequently the application to set aside the ex parte final order has been rightly dismissed.
22. So far as the evidence by way of affidavit on the application to set aside the ex parte final order is concerned, the learned Counsel for the respondent-Bank contends that there was no such procedure to file such affidavit, that the affidavit was filed by the 1st appellant on his own, but not with the leave of the Court, that no order was passed by the learned Presiding Officer of the DRT for taking that affidavit on file, and that no opportunity was also given to the respondent-Bank to reply to this affidavit. He, therefore, contends that this affidavit cannot be relied upon.
23. On the merits of the application under Order 9 Rule 13, CPC, the learned Counsel for the appellants points out that Mr. O.P. Khadaria, who had been served with the default notice, had not appeared before the DRT, that the appellants themselves had a duty to appear before the Tribunal on all the dates, that if there was a breach of contract between the Counsel and the defendants, the respondent-Bank cannot be made to suffer, and that even the affidavit of Mr. O.P. Khadaria states that there was no communication from the appellants.
24. The learned Counsel for the respondent-Bank points out that even according to the appellants, they were served with the show-cause notice in the O.A. on 12.7.1997 itself, yet they did not enter appearance immediately, but waited for 15 months to file the application in the nature of Order 9 Rule 7, CPC. He points out that this application was filed only in September, 1998. He further contends that this cannot be the natural conduct of the person who had been set ex parte in a claim for more than Rs. 40 lakhs. According to him, in such circumstances, the appellants should have been extra vigilant. The learned Counsel for the respondent-Bank also points out that the appellants had been throughout watching the proceedings and taking advantage of the adjournments, chose to file the application to set aside the order setting them ex parte when they realised that the matter was about to reach the final stage, and then once again finding that the matter was being adjourned, waited till the final order was passed, and then filed this application to set aside the ex parte final order. He, therefore, contends that the appellants who had been watching the progress of the case, and who knew as to what was happening, had chosen to appear as and when it suited them with the sole purpose of delaying the matter. He, therefore, contends that there was no reason for setting aside the final order, that the application filed in that behalf was barred by time and, therefore, the appeal should also fail.
25. After considering the rival contentions of both the sides, and after perusing the records, I am of the view that this is a fit matter where the impugned order dated 3.5.2002 passed by the DRT-I, Delhi should be set aside, and the matter should be remitted back to the said DRT for fresh disposal in accordance with law, and in the light of the observations made herein. The reasons for doing so are as follows:
26. First of all, I find from the impugned order that the learned Presiding Officer of the DRT has not decided the application for condoning the delay in filing the application to set aside the ex parte final order. He has merely observed that he did not wish to delve much regarding the application for condonation of delay as he was of the view that on merits also the defendants have no case and their application is liable to be dismissed. Such an approach cannot be sustained in law. The appellants/defendants have themselves filed an application for condoning the delay and, therefore, whenever the application to set aside the ex parte final order is taken up for consideration, the learned Presiding Officer should have considered this application under Section 5 of the Limitation Act for condoning the delay, and passed appropriate orders. If only he had decided to condone the delay, then he could have considered the application for setting aside the final order on merits. He has also not decided that he was condoning the delay. The learned Counsel for the respondent-Bank contends that no valid reason was given for condoning the delay and, therefore, it should have been dismissed. He has urged certain reasons in support of his contention. But, since I am remanding the matter back to the DRT for consideration, I am not discussing these contentions raised by the respondent-Bank on merits. Suffice it to say, that the objections of the respondent-Bank have to be considered before deciding the plea regarding limitation. But, still, I have to point out one factor. The reason given for the delay is that the appellants did not know about the passing of the final order, and that they had come to know of the same when they received an envelope on 5.1.2001 containing the ex parte final order. At least this factor should have been established, and the defendants should have proved that they came to know of the order only on 5.1.2001. But, the learned Counsel for the appellants concedes that this envelope, which contained the ex parte final order, had not even been produced. The defendants ought to have produced the same in support of their plea for condoning the delay. Then the respondent-Bank would have an opportunity to put forward its contention in this behalf.
27. Therefore, in my view, the application under Section 5 of the Limitation Act should have been first considered and decided before taking up the application to set aside the ex parte final order, and that not having been done, the matter has to be remitted back to the DRT for deciding the same. This is especially so when the learned Counsel for the respondent-Bank contends that there are no grounds for condoning the delay for the reasons mentioned by him.
28. Further, the learned Counsel for the appellants contends that in support of the application to set aside the ex parte final order, the 1st appellant/2nd defendant had filed an affidavit giving in detail the various factors which, according to him, will show that the appellants were not negligent, but it was their Counsel who was negligent, and that the ex parte final order should be set aside. He also contends that this affidavit was filed with the leave of the learned Presiding Officer of the DRT. But, the learned Counsel for the respondent-Bank, on the other hand, contends that this affidavit was not filed with the leave of the learned Presiding Officer, but was filed by the 2nd defendant/appellant on his own, that there was no order by the learned Presiding Officer for taking the affidavit on record, that there was no procedure to file such an affidavit, and that no opportunity was given to the respondent-Bank to file a reply to the same. The learned Counsel for the appellants has not been able to show that the affidavit was filed with the leave of the Court or that it was taken on record or that any opportunity was given to the respondent-Bank to file a reply to the same. Therefore, interests of justice require that the appellants should first seek the leave of the Court to take the affidavit on record, and if and when that is taken on record, then the respondent-Bank should be given an opportunity to reply. Therefore, for this purpose also, the matter has to be remitted back to the DRT for passing appropriate orders in this regard.
29. But, the order remitting the matter back to the DRT is subject to the following conditions:
The O.A. is of the year 1997, but the defendants have not filed their written statements though they say that they have a meritorious case in defence. The Suit claim is for more than Rs. 44 lakhs. Even in the affidavit of evidence (on the application to set aside the ex parte final order), the defendants have stated that the claim is inflated and highly exaggerated. They have also stated that they are not liable to pay any amount, and that even assuming that they are required to pay some legitimate amount, that amount cannot exceed Rs. 3 to 4 lakhs. We are now in the year 2003, and the matter is being remitted back to the DRT for fresh disposal of the application under Section 5 of the Limitation Act, and the application to set aside the ex parte final order. In these circumstances, I am of the view that the appellants should deposit Rs. 5 lakhs into the respondent-Bank. This sum of Rs. 5 lakhs should be kept in a separate interest bearing account subject to the final order to be passed by the DRT. This amount shall be deposited within a period of six weeks from the date of this order. The appellants are also directed to pay the respondent-Bank a sum of Rs. 15,000/- as costs for the unnecessary inconvenience and expenses to which it has been put.
30. Accordingly, this appeal is allowed, setting aside the impugned order dated 3.5.2002, and the matter is remitted back to the DRT-I, Delhi for disposal of the application under Section 5 of the Limitation Act, and for fresh disposal of the application for setting aside the ex parte final order in accordance with the law, and in the light of the observations, and the conditions contained hereinabove.
31. The learned Presiding Officer of the DRT will take back on his file to the original number the application under Section 5 of the Limitation Act to condone the delay, and decide the same, after giving opportunity to both sides to put forward their case. If the delay is condoned, then the application to set aside the ex parte final order should be taken up and decided in accordance with law after giving opportunity to both the sides to put forward their case.
32. However, this is subject to the condition that the appellants herein should deposit a sum of Rs. 5 lakhs into the respondent-Bank within a period of six weeks from this date. The appellants shall also pay the respondent-Bank Rs. 15,000/- as costs.
33. The appellants and the respondent-Bank will appear before the concerned DRT on 23.4.2003 for taking further orders in this matter from the said DRT without awaiting any further notice from the said DRT.
34. The copy of this order be furnished to both the sides.