Debt Recovery Appellate Tribunal - Madras
Poonachi Estate And Anr. vs Indian Bank And Anr. on 17 May, 2005
Equivalent citations: III(2005)BC137
ORDER
K. Gnanaprakasam, J. (Chairperson).
1. The appellants are the defendants in O. S. No. 295 of 1995 on the file of Sub-Court, Udumalpet, which suit was filed by the respondent-bank for recovery of the amount due to the bank and the appellants remained ex parte. As against the ex parte decree, the appellants herein have filed I. A. No. 817 of 1996 to set aside the ex parte decree before the Sub-Court, Udumalpet. During the pendency of the said application, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, came to be passed. Proceedings were taken before the DRT, Chennai, for the issuance of recovery certificate on the basis of the ex parte decree. Before the DRT, Chennai, the appellants represented the matter and also apprised about the pendency of the application I. A. No. 817 of 1996, and requested to set aside the ex parte decree, but, the DRT took a view that the decree passed by the civil court, cannot be set aside by the DRT and it could be done only by the civil court. By holding so, the DRT, Chennai, issued a recovery certificate. Aggrieved by the order of the DRT dated January 5, 2000, the appellants preferred CRP No. 943 of 2000, under Article 227 of the Constitution of India before the High Court, Madras, and the High Court by its order dated December 3, 2001, has held that the DRT itself is competent to decide the suit or any proceedings inclusive of any application and if any person is aggrieved by the orders passed by the DRT, he may prefer appeal to the Appellate Tribunal under Section 20 of the Act. By holding so, the High Court returned the papers to the appellants to avail of the alternative remedy, which is available under the Recovery of Debts Due to Banks and Financial Institutions Act, to prefer an appeal and two weeks time was granted for presentation of the papers before the proper forum. As the DRAT was not functional at that time for want of Chairperson in office, the appellants were constrained to approach the High Court once again and filed writ petitions in W. P. No. 20787 of 2001 and W. P. No. 24497 of 2001, to avert the auction sale of the mortgaged property and the W. M. P. No. 30693 of 2001 in W. P. No. 20787 of 2001, was dismissed on November 9, 2001.
2. On the orders passed in W. M. P. No. 30693 of 2001 in W. P. No. 20787 of 2001, dated November 9, 2001, the appellant preferred Writ Appeal No. 2826 of 2001. That appeal was taken along with W. P. No. 20787 of 2001 and W. P. No. 24497 of 2001, and the Division Bench of the High Court at Madras, passed the following order on January 24, 2005 :
"Heard learned counsel for the parties. As against the impugned order in W. P. No. 24497 of 2001, effectively, there is a right of appeal before the Debt Recovery Appellate Tribunal. There was some controversy as to whether there was a judge in that Appellate Tribunal at the relevant time and it is for this reason that the said writ petition was filed and entertained. However, there is no controversy now that at present there is a judge in that Appellate Tribunal and hence now there is no dispute that the petitioners can approach the Debt Recovery Appellate Tribunal. Hence, W. P. No. 24497 of 2001 is dismissed on the ground of alternative remedy. However, if the appeal is filed within two weeks from today, the same will be decided on merits very expeditiously thereafter. The parties can take all points, which they wish to take, before the Appellate Tribunal". Based on the above said orders, the appellants have preferred this appeal, on January 31, 2005, within the time.
3. Heard the learned advocate for the appellants and the respondent-bank, and the auction purchaser.
4. The point for consideration is whether the appeal filed by the appellant is maintainable and whether it is in time ?
5. Thiru R. Muthukumaraswamy, senior advocate appearing for the appellants submits that due to the non-filing of the written statement, the appellants were set ex parte and an ex parte decree was passed on July 5, 1996. The appellants have filed an application on July 9, 1996, under Order 9, Rule 13 of the Civil Procedure Code before the Sub-Court, Udumalpet, to set aside the ex parte decree, which is within time. During the pendency of the said petition before the Sub-Court, Udumalpet, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (in short, RDDB&FI Act), came to be passed and it came into force on June 24, 1993. By virtue of Section 31, Sub-section (1) of the said Act, "Every suit or other proceeding pending before any court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceedings, the cause of action where on it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on the date of such Tribunal". Based upon the said section, the respondent-bank filed an application before DRT, Chennai, for the issuance of recovery certificate and it was taken on file as Transferred Application No. 918 of 1997. Before the DRT, Chennai, the appellants have submitted that as against the ex parte decree passed against them on July 5, 1996, the application filed by them in I. A. No. 817 of 1996 to set aside the ex parte decree is pending and prayed that the said application may be taken up. But, however, the DRT, Chennai, rejected the contention of the appellants on the ground that the DRT has no power to set aside the ex parte decree passed by the civil court, i.e., Sub-Court, and issued a recovery certificate. This culminated in filing of the writ petitions and writ appeals by the appellants. Ultimately, the Division Bench of the High Court, Madras, by its order dated January 24, 2005, provided an opportunity to the appellants to file an appeal within two weeks from the date of order and the appeal if filed, the same will be decided on the merits. It is, therefore, argued on behalf of the appellants that pursuant to the said order only, this appeal has been filed which is in time.
6. The learned advocate for the appellants has further submitted that the appellants have borrowed only a sum of Rs. 3 lakhs and odd for which they have given security of their coffee estate measuring an extent of 100 acres and the respondents filed a suit for recovery of the sum of Rs. 13,08,286.75 and also got a decree for a sum of Rs. 16,58,787.65 and the claim of the respondent-bank is six times the principal amount and the interest charged is also exorbitant and excessive and the appellants have to be heard before passing of the decree, and the ex parte decree passed against them is not valid as the same is also against the principles of natural justice.
7. On the contrary, Mr. J.B. Dolia, advocate appearing for the respondent-bank submitted that the appeal is not maintainable on two grounds. The first ground is that the decree was passed on July 5, 1996, and they have preferred appeal only in 2005 and, therefore, the appeal is out of time and the appellants have not filed an application to condone the delay in filing the appeal and, therefore, the appeal is not maintainable. The second objection of the respondent-bank is that the appellants had enough knowledge about the decree passed by the Sub-Court, Udumalpet, and based upon the same, the DRT has issued the recovery certificate, if at all the appellants were aggrieved, they should have preferred an appeal before the DRAT as provided under Section 20 of the Act, and instead, they have filed writ petition before the High Court and wantonly delayed the proceedings. It is further argued that even on the merits, the appellants cannot sustain their defence.
8. The learned advocate Mr. Palani Selvaraj, appearing for the auction purchaser has submitted that in pursuance of the recovery certificate issued by the DRT, the Recovery Officer brought the property to sale in public auction and he was declared a purchaser in the pubic auction held on December 7, 2001, and the sale has been duly confirmed by certificate of sale issued on February 8, 2005. It is submitted that the auction purchaser had already paid the auction amount and pursuant to the same, the sale deed was also registered in his favour and if for any reason, the appeal is allowed, the sale will be set aside, in which case the auction purchaser will be put to inconvenience and loss.
9. The suit filed by the respondent-bank before the Sub-ordinate Judge, Udumalpet, was decreed ex parte on July 5, 1996, and the appellants herein filed an application on July 9, 1996, before the very same court to set aside the ex parte decree, are not in dispute. Though the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, was passed in the year 1993, and came into force on June 24, 1993, no Tribunal was constituted in Tamil Nadu, in 1993. On verification, it is found that the DRT at Chennai, was constituted only on October 31, 1996. Consequent to the constitution of the Tribunal, every suit or proceedings taken for recovery of the amount due to banks and financial institutions and the value of the same is more than Rs. 10 lakhs, stood transferred to the Tribunal, under Section 31 of the Act. That therefore, the respondent-bank filed transfer application in T. A. No. 918 of 1997, before the DRT, Chennai, for issuance of the recovery certificate. The appellants/defendants resisted the said application on several grounds including the validity of the documents said to have been executed by them and also apprised the Tribunal about the pendency of the application filed to set aside the ex parte decree. The Tribunal based upon the ruling in Arbind Kumar v. State Bank of India [1999] 98 Comp Cas 34 (Patna), came to the conclusion, "that the petition to set aside the ex parte decree cannot be transferred to the DRT and the DRT has to set aside only the orders passed by it and not the orders passed by the civil courts or other authorities". But our High Court in the matter of M. Vasanthalakshmi v. Indian Bank [2001] 106 Comp Cas 360 (Mad), after considering the case of State Bank of Bikaner and Jaipur v. Ballabh Das and Co. [1999] 98 Comp Cas 219 (SC) ; [1999] 3 CTC 345 and the case of National Rubber Industries v. State Bank of India, AIR 2000 Patna 203; [2001] 105 Comp Cas 498, has held that, "An application under Order 9, Rule 13 of the Civil Procedure Code for setting aside an ex parte decree is a proceeding in terms of Section 31 of the Recovery of Debts Due to Banks and Financial Institutions Act, and an application filed in a matter pending before the court which is liable to be transferred to the Tribunal under Section 31 of the Act and the Tribunal has got every right to enquire into the said application and dispose of the same on the merits". Now it is settled law that after passing of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, even if the decree has been passed by the civil court before the Act came into being, it could be set aside by the DRT concerned and not by the civil court. Section 22(2)(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, states, "setting aside any order of dismissal of any application for default or any order passed by it ex parte". As such, the DRT has got power to set aside the ex parte order passed by the civil court. In fact, this question arose before the Kerala High Court and the Full Bench of the Kerala High Court in C. M. A. No. 28 of 2002 in the case of C. J. Glenny v. Catholic Syrian Bank Ltd. [2003] 117 Comp Cas 227 respondent, has held that (page 234) :
"It is undoubtedly true that under the general law, the court, which passes an ex parte decree alone can set it aside. However, it deserves notice that under Section 17(1) of the Act, whenever the amount in dispute is Rs. 10 lakhs or more, the Tribunal alone has the jurisdiction 'to entertain and decide' it. Still further, under Section 18, the jurisdiction of the civil court has been completely barred. The Act specifically provides that from the appointed day no court or authority shall be entitled to exercise any jurisdiction in relation to the recovery of debts due to banks and financial institutions. The power of the Supreme Court and the High Courts alone has been preserved. The effect is that the civil court cannot entertain any application, which directly or indirectly relates to the recovery of a debt of Rs. 10 lakhs or more. This is a clear pointer towards the legislative intent. Clearly, the ouster of the jurisdiction of the civil court is complete and comprehensive."
10. The prayers in the appeal are to set aside the order passed by the DRT on January 5, 2000 in T. A. No. 918 of 1997 and to restore T. A. No. 918 of 1997, to consider it on the merits. The appellant is the defendant in the suit O. S. No. 295 of 1995, and that they had taken a defence that the amount claimed by the respondent-bank is not correct, that the interest and other amounts claimed are six times the principal amount, that the defendants have not signed or executed any documents after November 3, 1980, in favour of the respondent-bank and the revival letters are fabricated to save limitation etc. As the defendants have raised some valuable defence, which requires consideration by the court, naturally they must be given an opportunity to set forth their defence and also to contest the matter on the merits. In fact, the appellants/defendants were given an opportunity by the High Court to present the appeal, which they got after a battle and, therefore, I do feel that the appellants must be given an opportunity to contest the matter on the merits. By doing so, I am conscious of the fact that the entire orders passed by the DRT including the issuance of the recovery certificate and the sale, said to have taken place, would be set at naught, for which we are helpless. As the application filed by the defendant to set aside the ex parte decree was not adjudged, it is the fault of the court in not having heard the said application filed by the appellants and, therefore, no man should suffer because of the mistake of the court (actus curiae neminem gravabit).
11. The petition filed by the appellants to set aside the ex parte decree before the Sub-Court, Udumalpet, was in time. The appeal has been filed as per the orders of the High Court, within the time prescribed by the High Court and hence it is also in time. Even otherwise, the appellant has been prosecuting his case in good faith, and hence the time taken in preferring this appeal, would get excluded as per Section 14 of the Limitation Act. That apart, we are not in a position to exclude the situation that the auction purchaser was not aware of the pending proceedings between the appellants and the respondent-bank. If a person ventures to purchase property being fully aware of the controversy between the decree holder and the judgment-debtor, it is difficult to regard him as a bona fide purchaser. If there is any evidence which indicates that the auction purchaser has no knowledge, he would be entitled to be protected as a bona fide purchaser for a valuable consideration. But as on date, no records have been placed before this court to come to such a conclusion. On going through the sale certificate issued by the Recovery Officer, it is made out that the public auction was held on December 7, 2001, but whereas the sale certificate was issued only on February 8, 2005, after passing of the order by High Court. Even in the said sale certificate, it is stated that, "As no petition has been received for setting aside the sale under Rules 60 to 62 of Schedule II to the Income-tax Act, 1961, read with Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the said sale has been duly confirmed by the undersigned and becomes absolute", and the same is not correct. It is not known why the Recovery Officer has taken four years for the confirmation of the sale and the issuance of the sale certificate. Most probably, the respondent-bank and the auction purchaser were waiting for the result of the writ petitions filed by the appellants herein, which writ petitions were filed in the year 2001 itself. In fact, the auction purchaser namely, Mr. A. Ravichandran, was impleaded in the writ appeal in W. A. No. 2826 of 2001, by order dated April 17, 2002, and he was a party. The writ appeal was disposed of on January 24, 2005, with a direction to the appellants herein to file the appeal within two weeks. That only thereafter, the sale certificate was issued on February 8, 2005, confirming the sale in favour of the third party auction purchaser. As such, the auction purchaser is not a bona fide purchaser and therefore, there is no option but to set aside the sale said to have been held on December 7, 2001.
12. Before ever disposing of I. A. No. 817 of 1996 filed by the appellants to set aside the ex parte decree, the DRT issued a sale certificate in T. A. No. 918 of 1997, in spite of the objections made by the appellants and thereafter, the orders passed by the DRT, Chennai, on January 5, 2000 in T. A. No. 918 of 1997, is liable to be set aside and accordingly it is set aside.
13. Then remains the only application filed by the appellants in I. A. No. 817 of 1996. In fact, this application has got to be dealt with only by the DRT. But by taking into consideration that already much time has been consumed in deciding the matter in this case and that the appellants have raised some valuable defence, and that the application to set aside the ex parte decree was filed in time, the natural justice requires that the appellants must be given an opportunity to contest the suit/petition on the merits, and by exercising my power under Section 17A of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, I am inclined to allow the said I. A. No. 817 of 1996, here itself, to avoid further delay in this matter.
14. In the result, the appeal is allowed and the order by the DRT in T. A. No. 918 of 1997, is set aside and I. A. No. 817 of 1996 filed by the appellant to set aside the ex parte decree is allowed and the appellants are hereby directed to file the reply statement on or before June 6, 2005, and the matter is sent to the DRT-II, Chennai, which shall take up the matter in the same T. A. No. 918 of 1997 and dispose of the same on the merits, after affording opportunities to both the sides, as expeditiously as possible.
15. Before parting with the appeal, I also wish to state that as the auction in favour of the auction purchaser has been set aside, he is at liberty to with-draw the sale amount deposited by him with accrued interest, if any.