B.K. Modi vs State Bank Of Bikaner & Jaipur And Ors.

Ranjit Singh, J

Appellants Mr. B.K. Modi and Mr. V.K. Modi were impleaded as Defendant No. 3 and Defendant No. 2 in Original Application No. 25/2012 filed by the five different Banks, namely, State Bank of Bikaner and Jaipur, State of Bank of India, State of Bank of Patiala, Canara Bank and Punjab National Bank. When the case had reached the stage of final hearing in the year 2007, it had to be adjourned on a few occasions as regular Presiding Officer was not available. The appellants had even filed written submissions before the Tribunal. Subsequently, however, the appellants had moved various applications containing different prayers. The appellant B.K. Modi has moved four different applications i.e. I.As. Nos. 13/2014, 14/2014, 15/2014 making a prayer to reject the affidavit dated 20th October, 2013 through which additional documents were filed by State Bank of Bikaner and Jaipur with a further prayer to direct the Bank to place on record the complete statement of record in terms of the order passed on 22nd November, 2012. I.A. Nos. 14 and 15 both of 2014 were filed seeking direction to Punjab National Bank and State Bank of Patiala respectively to produce the original ledger pertaining to the transaction involved in the O.A. and to hold that the statement of account filed was not in compliance with the provisions of the Bankers' Book Evidence Act.

The said appellant had earlier filed I.A.No. 24/2010 seeking permission to cross-examine the witness of the Bank whereas appellant V.K. Modi had filed I.A. No. 340/2010 praying same relief of cross-examination of Banks' witnesses. Appellant V.K. Modi like the other appellant has also filed LA. No. 16/2014 seeking direction to State Bank of India to produce original ledger and to hold that statement of account filed is not in consonance with the provisions of the Banker's Books Evidence Act. Said appellant has filed I.A. Nos. 320/14, 321/14, 322/2014 and 323/2014 for issuing direction to State Bank of India. Punjab National Bank, State Bank of Patiala and State Bank of Bikaner and Jaipur to produce original in relation to the accounts.

The Tribunal below has taken up all the above noted I. As. Filed by the appellants and has disposed of these applications by a common order dated 14th July, 2014 against which the present two Appeals (Nos. 301/2014 and 302/2014) have been filed by both the appellants referred to above respectively. Kotak Mahindra Bank, an assignee of State Bank of Patiala, had also filed an application (I.A. No. 120/14) praying for grant of permission to cross-examination the witnesses produced by the appellants. Though all the three application (two filed by the appellants and one by Kotak Mahindra Bank) seeking permission to cross-examine the witnesses have been dismissed by the Tribunal, but KMB has not filed any Appeal in this regard whereas the appellant have filed the Appeals to impugn that part of the order as well.

It appears that when the cases were ripe for final disposal and so was fixed in the year 2007-08, but an order came to be passed by the Tribunal below requiring the Banks to file revised statement of account in terms of the judgment passed by the Hon'ble Supreme Court in the case of Central Bank of India v. Ravindra, I (2002) BC 150 (SC) = VII (2001) SLT 400 = IV (2001) CLT 127 (SC) = AIR 2001 SC 3095. This order was passed on 22nd November, 2012 and that is how the issue which was ripe for decision in the O.A. has been reopened and all the above noted applications were filed. The end result is that the O.A. which was filed on 12th February, 2002 against Modi Stone Limited, which is the principal borrower, is still pending adjudication.

This is a case where members of consortium had advanced credit facilities to Modi Stone Ltd. and O.A. was filed for recovery of Rs. 38,89,20,229.05 with interest and cost against all the defendants including the appellants who are guarantors. The company statedly is under liquidation.

The Tribunal below has considered the prayer made on behalf of the appellants and has rejected the prayer for cross-examination of the witnesses and has also dismissed other I.As. noticed above. The Counsel for the appellants, therefore has made submission in detail to contest the finding recorded by the Tribunal below.

As per the Counsel for the appellants, the applicant Banks would be under obligation to file all the documents necessary in terms of Rule 9(1) of the Debts Recovery Tribunal (Procedure) Rules, 1993 (for short, the Rules) and as such the application under Section 19 of the RDDBFI Act has to be accompanied by a statement showing details of the debt due from the Defendant and the circumstances under which such debt has become due. The application under Section 19 of the RDDBFI Act is also to accompany all the documents relied upon by the Applicant and those mentioned in the application. The Counsel would thus contend that not only there was an order passed by the Tribunal below requiring the Bank to file statement of account, but it is obligation under the rule that the Banks place on record the documents as required under Rule 9 of the Rules.

The Counsel thereafter has made detailed reference to the facts and documents on record to emphasis the need for cross-examination of the witnesses produced by the Bank. The Counsel has highlighted that State Bank of Bikaner and Jaipur, which is the lead Bank and has filed this O.A., through Ms. Kumud Sharma who was principal officer and Chief Manager of the Bank and had so filed this application stating that she is competent to institute the O.A. and is well-conversant with the facts and circumstances of the case. The Counsel would also refer to the verification of the affidavit where said Ms. Kumud Sharma has stated that contents of Paras 1 to 11 are true and correct to her personal knowledge and belief derived from official records. The Bank, however, has filed the evidence through another person, namely, Mr. Sanjeev Lal, who was working as Chief Manager, claiming that he was also well-conversant with the facts and circumstances of the present case. In the affidavit of evidence Mr. Sanjeev Lal has also deposed that Original Application was filed by Ms. Kumud Sharma who was also competent to institute the said Application. The Counsel would thus plead that he would wish to test all these aspects by way of cross-examination to show that the evidence given by the witnesses is a hearsay evidence.

The Counsel would then refer to the Written statement filed by the appellant wherein it was mentioned that authorization letter in favour of Ms. Kumud Sharma even has not been placed on record. It is also pleaded that certain documents have either intentionally not been provided which is mentioned in the pleadings. The Counsel would also point to certain difference is the statement of account to press the need for cross-examination as this can be so clarified by way of cross-examination only.

In this regard, the Counsel for the appellant would also refer to the application making prayer for grant of permission for cross-examination. The reason advanced in this application is that the cross-examination is necessitated in peculiar facts and circumstances and is also necessary for complete adjudication of the actual controversy. The plea also is that the examination-in-chief by means of affidavit or oral viva voice cannot be accepted unless it is proved at the touch stone of cross-examination. Counsel further submits that the controversy is identical to the controversy arising in O.A. 159/2001 where the permission for cross-examination of the witnesses produced by the Financial Institution was allowed.

The Counsel for the Bank, however, would oppose the prayer and would submit that the Tribunal below has given justified reason to decline this request.

To press his plea for other applications the Counsel would make reference to the voluminous documents now placed on record by State Bank of Bikaner and Jaipur, which runs into 200 pages, and would allege that it is to circumvent the requirement of placing on record the recasted statement of account. The perusal of the affidavit now filed by State Bank of Bikaner and Jaipur would show that the consortium Banks are seeking to a total sum of Rs. 6147.00 lacs for which the appellants had executed personal guarantees. The Bank has now dug up the record to place on record various loan documents from time-to-time and details of these documents now produced with the affidavit have accordingly been listed therein. The documents pertain to the years 1977, 1984, 1990, 1991, 1992 going up to 1997. Some of these documents are photocopies whereas some are original while others are only certified copies. These documents perhaps have been placed on record to meet the objection raised by the Counsel for the appellants before the Tribunal below and which is pressed here before me as well that the statement of account which has been filed or recasted statement of account do not contain the details as to how the opening balance as shown has been arrived at. It is also stated in this affidavit that earlier the Counsel for the Bank did not choose to file the documents prior to 9th October, 1997 as the O.A. was filed on the basis of documents dated 9th October, 1997. The reasons advanced by the Bank to adopt this method of filing documents is that the Bank could not succeed in its attempt to locate the statement of account prior to the said period, it being a oldest record. It is explained that lender branch could not trace out the old statement of account due to change over from the manual ledgers to the computerized accounting system.

Counsel for the appellants thus would not only contest the action of the Bank in not filing recasted statement in compliance to the order passed by the Tribunal, but would object to the mode and method adopted by the Bank in placing on record these voluminous documents taking the appellant by surprise. The Counsel has thus pressed this Appeal which, according to him, in a way would be the responsibility of the Tribunal, as the Bank has not complied by the order to file recasted statement as directed by the Tribunal.

I have considered the submission made before me. The Tribunal below while rejecting the prayer or cross-examination of the Bank's witnesses apparently has considered the delay on the part of the appellants to make this approach. The case which was fixed for final disposal in the year 2007 and where even written submissions were made before the Tribunal has yet to reach the stage of conclusion. The appellants have not made any prayer for all these years to seek cross-examination of the witnesses, but has made this approach when directions were issued for filing on record the recasted statement of accounts. The Counsel for the Bank would state that they had place on record the recasted statement of accounts whereas the appellants would pray for rejecting the same as it is not in accordance with the Banker's Books Evidence Act. Even if it is taken that the Banks have failed to placed on record the recasted statement of account despite the direction by the Tribunal, the Tribunal has to consider and decide the effect thereof while deciding the case finally. If the Tribunal at that stage finds that the Bank has not complied with any of its directions, the Tribunal would be well within its competence to take appropriate view taking into consideration the effect of its non-compliance. This is what the Tribunal has observed when it recorded in the impugned order that "At the outset it is to be made clear that if a piece of evidence adduced is not in accordance with any law governing with the documents that matter is to be decided at the final stage and there cannot be a piecemeal adjudication on the documents produced by either side".

Having so observed rightly, the Tribunal thereafter has gone on to consider the request of the appellants to produce the original ledger. While doing so, the Tribunal has considered in detail the defence projected by the appellants in their Written Statement and after making reference to the same, the Tribunal has decided to reject said request. It is noticed by the Tribunal that the stand of the appellants in the Written Statement is that the statement of account produced by the respondent Bank is false and no decree could be passed on that basis. The ground advanced by the appellants to state that the statement of account was false is that the same does not tally with the statement of account provided to the appellants by the Bank. The Tribunal has then observed that if that be so, the appellants could produce the same on record and has further observed that if they choose not to do so, then adverse inference can also be drawn against them.

The approach adopted by the Tribunal to make such observation may not be appropriate, especially so, when the Tribunal in one part of the order itself had earlier observed that the prayer as such cannot be decided in piecemeal manner and this would be adjudicated on the basis of documents by either side. Making such observation to draw adverse inference or to give an indication of some determination of the issue at that stage certainly may not be appropriate.

The Counsel has even made reference to the written arguments to now attack the statement of account. As per the Counsel for the appellants, the Tribunal has failed to appreciate that it had issued direction to file the recasted statement. It was for the Tribunal to ensure the compliance thereof. The Tribunal has rightly observed that the issue would be decided while doing the final adjudication of the O.A., but still have made certain observations which may indicate that the Tribunal has finally decided some issues. It is also worth appreciation that the Bank has now filed numerous documents as substitute for statement of account which have concededly been taken on record but no opportunity has been offered to the appellants to counter the said pleas or to respond thereto. Taking into consideration all these documents without affording opportunity to the appellants to rebut the same may be in violation of the principle of natural justice. If the recasted statement of account had been filed, obviously, the appellants would have been in a position to counter the same and certainly such an opportunity cannot be denied to them when the Bank has chosen to rely upon and place on record such voluminous documents.

The Tribunal below seems to have accepted the submission made on behalf of the Bank that it has switched over to computerized accounting system and the original ledgers have not been preserved and they are not traceable. The Tribunal apparently has accepted this line of submission made by the Bank by observing that such an objection should have been raised immediately on filing of the O.A. which was so filed 12 years ago. The Tribunal thereafter has even held that the appellants did not take objection in regard to any specific entry and the copies of statement of account gives out the figure then the contention of the appellants can never be accepted. Such adjudication should have been done only after the parties had availed all the opportunities and at the time of final decision rather than recording some observations at the interim stage. The Tribunal has even made reference to some admission made by the appellants before BIFR. This has been taken as added ground to reject the prayer for production of original ledger. While the prayer made by the appellants to take the additional evidence off the record may not sound appropriate as the evidence led before the Court or Tribunal cannot be taken off, but has to be considered on the basis of the fact whether such evidence is admissible or not. Some observations have been made by the Tribunal on the basis of pleadings while rejecting the prayer to discard the additional affidavit. The Tribunal, however, has observed that this was at the said stage.

Similarly, the Tribunal has also rejected the prayer for cross-examination of the witnesses on detailed grounds noticed by it, which was only for the purpose of questioning the statement of account. The reason for which the appellants had made a prayer for cross-examination of the witnesses of the Bank has already been noticed by me. All these aspects for which the prayer for cross-examination is being pressed can very well be led in evidence and indeed has been so pleaded by the appellant before the Tribunal below. I have not been able to persuade myself if there is any need to permit the cross-examination of Bank's witnesses on the ground pleaded and pressed before me.

In any event, so far as the request for cross-examination is concerned, the same has to be decided in the light of the law laid by the Hon'ble Supreme Court in the case of Union of India v. Delhi High Court Bar Association, II (2002) BC 194 (SC) = II (2002) SLT 556=96 (2002) DLT 726 (SC) = (2002) 4 SCC 275. The law in regard to the right to cross-examine in a proceeding under the RDDBFI Act has been settled by the Hon'ble Supreme Court. As is observed by the Court, on the basis of Rule 12(7) of the Debts Recovery Tribunal (Procedure) Rules (for short, the Rules) if the Defendant denies his liability to pay the claim made by the Applicant, the Tribunal may act upon the affidavit of the Applicant who is acquainted with the facts of the case. In this rule, there is no reference to the examination of the witness. As observed by the Court, this rule refers only to the affidavit of applicant. Rule 12(6) of the said Rules, on the other hand, provides that the Tribunal may at any time for sufficient reason order that any particular fact or facts may be proved by affidavit on such conditions as the Tribunal thinks reasonable. It is in the proviso to this sub-rule that reference is made to cross-examination of the witnesses. The Hon'ble Supreme Court though may have observed that this rule is not happily worded, but still has considered the reasons for which these Tribunals were established, it being to expedite the disposal of the claims by the Bank. As noticed by the Supreme Court, the Parliament thought it proper only to require the principles of natural justice to be the guiding factor for the Tribunals in deciding the applications as is evident from Section 22 of the RDDBFI Act. It is noticed that the Tribunal no doubt has been given power of summoning and enforcing attendance of any witness and examining him on oath, but the Act does not contain any provision which makes it mandatory for the witness to be examined, if such a witness could be produced. The Court has accordingly held that Rule 12(6) of the Rules has to be read harmoniously with other provisions of the RDDBFI Act and the Rules. By noticing Rule 12(7), which gives the Tribunal the power to act upon affidavit of the Applicant where Defendant denies his liability to pay the claim, the Court went on to paraphrase Rule 12(6) as under:

"1. The Tribunal may at anytime for sufficient reason order that any particular fact or facts may be proved by affidavit .... on such conditions as the Tribunal thinks reasonable:

The Tribunal may at any time for sufficient reason order that the affidavit of any witness may be read at the hearing, on such conditions as the Tribunal thinks reasonable."

Having done so, the Court has held as under:

"23. In other words, the Tribunal has the power to require any particular fact to be proved by affidavit, or it may order that the affidavit of any witness may be read at the hearing. While passing such an order, it must record sufficient reasons for the same. The proviso to Rule 12(6), would certainly apply only where the Tribunal chooses to issue a direction, on its own, for any particular fact to be proved by affidavit or the affidavit of a witness being read at the hearing. The said proviso refers to the desire of an Applicant or Defendant for the production of a witness for cross-examination. In the setting in which the said proviso occurs, it would appear to us that once the parties have filed affidavits in support of their respective cases, it is only thereafter that the desire for a witness to be cross-examined can legitimately arise. It is at that time, if it appears to the Tribunal, that such a witness can be produced and it is necessary to do so and there is no desire to prolong the case that it shall require the witness to be present for cross-examination and in the event of his not appearing, then the affidavit shall not be taken into evidence. When the High Courts and the Supreme Court in exercise of their jurisdiction under Article 226 and Article 32 can decide questions of fact as well as law merely on the basis of documents and affidavit filed before it ordinarily, there should be no reason as to why a Tribunal, likewise, should not be able to decide the case merely on the basis of documents and affidavits before it. It is common knowledge that hardly any transaction with the Bank would be oral and without proper documentation, whether in the form of letters or formal agreements. In such an even the bona fide need for the oral examination of a witness should rarely arise. There has to be very good reason to hold that affidavit, in such a case, would not be sufficient."

Whether there is any desire to prolong the case is thus one of the essential considerations to keep in view. The discretion is with the Tribunal and when it appears to it that such a witness can be produced and it is necessary to do so it has also to see if there is no desire to prolong the case. Another significant observation is that bona fide need for the oral examination of a witness should rarely arise and there has to be a very good reason to hold that affidavits in a particular case would not be sufficient.

It may be that in a given case, depending on the facts and circumstances of a particular case, permission to cross-examine can be considered and granted, if any legal necessity is felt in this regard, but as held by the Hon'ble Supreme Court such request cannot be allowed in routine and has to be in a rare case as otherwise the very purpose of the setting up the Tribunal may get frustrated.

As already considered the ground urged by the appellant to seek cross-examination can otherwise be established and, therefore, the request for cross-examination of Bank's witnesses need not be allowed when their desire to prolong the case is apparently writ large in this case. I have not been able to find any bona fide need for cross-examination, which, according to the Hon'bel Supreme Court should rarely arise and has to be for good reason.

However, the plea by the appellants that the Tribunal below has permitted the Bank to place on record numerous documents, some of which are even photocopies, without taking into account the legal aspect which would arise and being in violation of principle of natural justice apparently has some substance. The Bank has placed all these documents on record without seeking any permission from the Tribunal and has even not accounted for some of the originals, photocopies of which have been placed on record. Since all these documents have already been taken on record, the Tribunal may be required to take into consideration the legal effect of the same. The appellants, however, in my view, would deserve right to respond to these documents which would be essential to ensure compliance of the principle of natural justice. The appellants in my view, cannot be denied a right to file a response to these documents on the grounds that may be considered relevant. Accordingly, appellants are hereby granted one opportunity to file their response to these documents within two weeks of the receipt of this order. The observation by the Tribunal below containing an indication of final adjudication of the issue which arise in this case may have to be kept open and one ought to be deciding while finally adjudicating the O.A. It would, therefore, be necessary to observe that any view expressed inadvertently or otherwise by the Tribunal in its order may not unduly influence the Tribunal in any manner as all such observations recorded in the impugned order apparently are tentative in nature.

Accordingly, no case for 'interference in the impugned order declining the request of the appellant for cross-examination of Bank's witnesses is made out. The Appeals filed by the appellants are disposed of in the light of the directions issued above.

The parties through their Counsel are directed to appear before the Tribunal below on 15th December, 2014. The appellants will have one opportunity to file their response to the documents filed by the respondent Bank on or before the date fixed, i.e. 15th December, 2014. The Tribunal, thereafter, will proceed to decide the Original Application after hearing the parties and if any further pleading is to be made the opportunity for the same shall be given in some time-bound manner. In this background, the Tribunal shall make an endeavour to decide the Original Application by end of January, 2015 by fixing dates of hearing accordingly.