Moin Leather Wear Exports and Others vs Oriental Bank of Commerce

K.K. Sasidharan, J.—The onerous condition imposed by the Debts Recovery Tribunal, Chennai to set aside the ex parte order passed due to default in filing written statement and the confirmation of the said order with certain modification by the Debts Recovery Appellate Tribunal, compelled the petitioners to file this Civil Revision Petition.

Facts in nutshell:

The petitioners availed financial assistance from the respondent-Oriental Bank of Commerce and on account of their failure to repay the loan amount, the Bank initiated proceedings in O.A. No. 631/1999 before the Debts Recovery Tribunal, Chennai. The petitioners entered appearance and the matter was adjourned periodically for the purpose of filing written statement, The Tribunal adjourned the matter time and again and an ultimatum was given to file the written statement on or before 20th June, 2000. Since written statement was not filed even on the adjourned date, the Tribunal was pleased to declare the petitioners ex parte. Thereafter, the petitioners filed an application before the Debts Recovery Tribunal in LA. No. 2327/2000 to set aside the ex parte order and to receive the written statement.

The Debts Recovery Tribunal considered the said application and a conditional order was passed directing the petitioners to deposit a sum of Rs. 35 lakh within a period of eight weeks without prejudice to their contentions. Since it was a conditional order, the petitioners filed an appeal before the Debts Recovery Appellate Tribunal. The Appellate Tribunal by modifying the condition directed the petitioners to deposit a sum of Rs. 5 lakh, failing which it was indicated that the application would be dismissed. Feeling aggrieved by the said order, the petitioners have filed this Civil Revision Petition.

We have heard the learned Counsel appearing for the petitioners and the Bank.

The proceeding in question was filed on 14th June, 1999 by the Bank before the Debts Recovery Tribunal. The petitioners appeared before the Tribunal and took time to file written statement. The Tribunal finally adjourned the matter to 20th June, 2000 and having found that even on the said date, the written statement was not filed, declared the petitioners ex parte and proceeded to take up the matter.

The petitioners filed an application before the Tribunal to set aside the ex parte order.

In the Affidavit filed in support of the application in LA. No. 2327/2000, the petitioners contended that their Counsel noted the date as 26th June, 2000 and that was the reason for their failure to file the written statement on 20th June, 2000. In any case, the application was filed without delay on 25th July, 2000 with a prayer to set aside the ex parte order. The Tribunal instead of considering the application on merits, imposed an onerous condition directing the petitioners to pay a sum of Rs. 35 lakh within eight weeks to set aside the ex parte order. The petitioners were in fact directed to pay nearly 30% of the suit claim without considering the merits of the claim made by the Bank.

The Authorities:

In Vijay Kumar Madan and Others Vs. R.N. Gupta Technical Education Society and Others, , the Supreme Court deprecated the practice of imposing onerous conditions for the purpose of setting aside the ex parte decree.

The Supreme Court said:

Power in the Court to impose costs, and to put the defendant - applicant on terms is spelt out from the expression ''upon such terms as the Court directs as to costs or otherwise''. It is settled with the decision of this Court in Arjun Singh v. Mohindre Kumar that on an adjourned hearing, in spite of the Court having proceeded ex parte earlier, the defendant is entitled to appear and participate in the subsequent proceedings as of right. An application under Rule 7 is required to be made only if the defendant wishes the proceedings to be reflected back and reopen the proceedings from the date where from they became ex parte so as to convert the ex parte hearings into bi parte. While exercising power of putting the defendant on terms under Rule 7 the Court cannot pass an order which would have the effect of placing the defendant in a situation more worse off than what he would have been in if he had not applied under Rule 7. So also the conditions for taking benefit of the order should not be such as would have the effect of decreeing the Suit itself. Similarly the Court may not in the garb of exercising power of placing upon terms make an order which probably the Court may not have made in the Suit itself. As pointed out in Arjun Singh, the purpose of Rule 7 in its essence is to ensure the orderly conduct of the proceedings by penalizing improper dilatoriness calculated merely to prolong the litigation.

In Tea Auction Ltd. Vs. Grace Hill Tea Industry and Another, the Supreme Court observed that while setting aside a decree, conditions can be imposed but such conditions should not be unreasonable or harshly excessive.

It is true that the Debts Recovery Tribunal was entitled to pass discretionary orders as a condition precedent to set aside the ex parte order. However, such condition should not be onerous. It is not as if the petitioners have filed the application belatedly to set aside the ex parte order, within the statutory period. Under the guise of setting aside the ex parte order, Debts Recovery Tribunal made an attempt to recover the amount without taking up the matter on merits. The Debts Recovery Appellate Tribunal also committed the very same illegality by confirming the order, of course, with modification in respect of amount. The hypertechnical attitude taken by the Debts Recovery Tribunal and the Appellate Tribunal made the petitioners to approach this Court on account of this and the very proceeding before the Debts Recovery Tribunal is still pending. We are, therefore, of the considered opinion that the order impugned in the Civil Revision Petition deserves to be set aside.

In the result, the order dated 13th August, 2003 in M.A. No. 280 of 2002 on the file of the Debts Recovery Appellate Tribunal, Chennai, modifying the order passed in I. A. No. 2327/2000 in O.A. No. 631 of 1999 on the file of the Debts Recovery Tribunal, Chennai, is set aside. The application in LA. No. 2327/2000 is allowed subject to payment of a sum of Rs. 250/- [Rupees two hundred and fifty only] as cost. The cost shall be deposited before the Bank within a period of one week from the date of receipt of a copy of this order.

The learned Counsel for the Bank made a request to give a direction to the Debts Recovery Tribunal to dispose of the matter at the earliest.

Therefore, considering the pendency of the proceeding from 1999, we direct the Debts Recovery Tribunal, Chennai, to give preference to this matter and dispose of the same as expeditiously as possible and preferably within a period of two months. The Civil Revision Petition is allowed as indicated above. No costs. C.M.P. No. 4512 of 2004 is closed.