Mr. Jangam Gopi vs D.S.R.K Saibaba & Anr.

Oral Judgment: Justice Sharad Kumar Sharma, Member (Judicial): The Appellant in this Company Appeal, being the Ex-Director & Promoter of M/s. GJS Infratech Private Limited, the Corporate Debtor (CD) puts a challenge to the order that, was passed in CP No.257/7/HDB/2023, being the proceedings, which were drawn by the Financial Creditor by invoking the provisions contained under Section 7 of the I & B Code, 2016. Consequent to the culmination of the proceedings under Section 7 of the I & B Code, Corporate Insolvency Resolution Process (CIRP) Proceedings was initiated as against M/s. GJS Infratech Private Limited, the Corporate Debtor herein by passing of the Impugned Order.

The Learned Counsel for the Appellant questions the propriety of the Impugned Order on the limited ground that, there had been no effective service of notice of the proceedings upon him, and hence there was a deprivation of an opportunity, and that he could not avail the opportunity to effectively participate in the proceedings before the Learned Tribunal. In context there to, the Learned Counsel for the Appellant, has particularly referred to the Rules pertaining to the Indian Postal Rules 1933, particularly Rule 208 Sub-Rule (1), wherein it contemplates the manner in which undelivered postal articles, if it is sent to the addressee and if addressee is not found or left the given address are to be dealt with, that the same would be kept in the branch office for period of 1 week. Rule 208 Sub-Rule (1) is extracted hereunder: -

He submits that, owing to the fact that, Rule 208(1) of the Indian Postal Rules, 1933, was not adhered to, it will be deemed that he was not served with the notice. He further draws the attention of this Tribunal of the Order passed in the Company Petition, pertaining to the processes of effecting services upon him by the registered post, and he has also referred to by drawing the attention of this Tribunal to the various orders passed in the proceedings before the NCLT, Hyderabad Bench, for making endeavours to effect upon the service of the notice on the Appellant.

We are of the view that in so far as the argument extended by the Learned Counsel for the Appellant, in the context of the provisions contained under Rule 208(1) of the Postal Services Rules 1933 is concerned, it may not have much bearing in the instant case, for the reason being that, the implications of the said rule, will have certain relevance in the context of service of the notice, in case the same has been claimed to have been served by virtue of a registered post, which was reported to be returned undelivered due to non-availability of the Appellant at the given address. However perusal of the order sheets and particularly, that of the Order of 05.01.2024 of the Learned Tribunal, which happened on a subsequent date reflects that notices were directed to be effected upon the Appellant by publication, that is, by substituted mode of service as contemplated under Order V Rule 20 of the CPC.

It is further seen after the service by publication was ordered by the order of 05.01.2024, the affidavit of service was filed and the proof of service was noted to have been perused by the Learned Tribunal, as per order sheet of 09.02.2024, after going through the affidavit filed in support thereto and holding that the service of notice has been completed.

The Learned Counsel for the Appellant has tried to derive the benefit from the observations that was made in the order of 09.02.2024 before the Learned Adjudicating Authority, contending thereof that, had the Tribunal taken the Affidavit of Service as to be an effective proof of service by virtue of a publication, which was directed to be carried by an order of 05.01.2024, in that eventuality, there was no occasion for the Tribunal to have passed an order for the issuance of the fresh notice by registered post as directed by an order of 09.02.2024.

As far as this contention of the Learned Counsel for the Appellant is concerned, it may not have much bearing for the reason being that, even if the Tribunal directed the issuance of a fresh notice by a registered post, that itself will not dilute the implications of Order V Rule 20(2) for effecting services by way of a substituted mode of service, where there will be a deeming presumption under Order V Rule 20(2) of CPC that, when the process of service of notice is carried by a publication and when the factum of the Affidavit of Service having been filed and the direction having been issued for carrying the publication are facts which is not denied by the Appellant, the notice is deemed to have been served on the Appellant, Accordingly the order of 23.02.2024, where the Tribunal has directed to proceed the matter exparte as against the present Appellant, is an order which will sustain in the eyes of law, particularly when no attempt was ever made by the Appellant to seek the recall of the order directing to proceed exparte. The reference made to the orders passed prior to the order that has been referred to for effecting service to have been passed in 2024, it cannot relegate the status of the Appellant of being an unserved party to the proceedings, as per the observation, which has been made in the orders passed by the Learned Tribunal in 2023.

The Learned Counsel for the Respondent has submitted that much credence cannot be placed upon the argument that has been extended by the Learned Counsel for the Appellant, particularly in the context of the grounds, that has been taken by the Appellant in the Memorandum of Appeal that he was not aware of the proceedings because the Appellant himself had made an efforts for the settlement of the dispute and in these circumstances, the presumption would be that, the Appellant did have the knowledge of proceedings as it was carried before the Learned Adjudicating Authority.

Learned Counsel for Appellant has contended that there were settlement talks and suddenly Section 7 proceedings was initiated without any notice and therefore he could not defend his case. Pendency of a settlement proceedings, as it has been sought to be pressed upon by the Learned Counsel for the Appellant in the context of the ground taken in ground (L) in Memorandum of Appeal, would yet again have no bearing, as the factum of knowledge can be clearly attributed to the Appellant, owing to the fact that he has the knowledge, has acted upon it and has participated in the DRT proceedings, and in that view, and particularly in the context of the pleading raised in para 6 in the counter affidavit, the knowledge of the DRT proceeding was very well attributed to the Appellant which cannot be denied at the state of Section 7 proceedings on the ground of alleged non-service of notice.

Since there was an effective service and since there was effective knowledge, we don’t find any merit in the argument extended by the Learned Counsel for the Appellant in the context that, he was not given an opportunity to defend his case because of non-compliance of the provision contained under Indian Postal Rule of 1933, as contained in Rule 208(1), because even after the notice was served by paper publication, Learned Tribunal ordered for service of notice by RPAD again and because Section 7 proceedings were initiated at his back even though settlement talks were going on and he never expected that the application under Section 7 of the code will be filed.

Owing to the aforesaid fact, since there would be a deeming presumption that the Appellant has been effectively served with the notice, since the factum of service by publication is not a factum, which is denied, and since the Affidavit of service is on record, coupled with the fact that, the matter was already directed to be proceeded exparte against the Appellant, on account of his non-appearance despite of service of notice by substituted mode, it will be too late in a day for the Appellant to argue that the proceedings were held exparte against him, denying him fair opportunity to defend his case. Owing to the aforesaid reasons, we don’t find any merit in the Company Appeal; the same would stand dismissed.