State Bank Of India vs Anita Garg And Ors.

This appeal is against the order dated 21.01.2020 of the Tribunal below(DRT-II, Delhi) passed in appellant bank's Original Application(O.A.) No.1156/2018 filed under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993( 'Act of 1993') for recovery of Rs.306,86,83,742.44, which undisputedly is public money, against its borrower Company by the name of M/s Kanu Aditya(India) Limited and the respondents herein. By the impugned order the DRT has turned down the prayer of the appellant bank for not accepting the written statement and counter claim filed by the respondents-defendants for the reason that the same had been filed beyond the mandatory period of 30 days from the date of receipt of summons. As far as the corporate borrower is concerned the bank has already taken it to NCLT where resolution professional stands appointed in respect of the borrower Company so no proceedings against it can continue.

It is not in dispute that the respondents-defendants in the O.A. were served with the summons on 03.10.2018, as per the affidavit of service filed by the bank before the DRT and which affidavit and contents thereof have remained unrefuted from the side of respondents-defendants. As per the provisions of Section 19(5) of the Act of 1993 they were required to show cause within a period of thirty days from the receipt of summons by filing a written statement as to why the reliefs claimed by the bank be not granted to it and they were also required to file their written statements within thirty days from the date of receipt of the summons. They, however, did not show cause and not filed any written statement within the mandatory period of thirty days. A division bench of Madhya Pradesh High Court (Jabalpur Bench) in the case of "Crest Steel and Power Pvt. Ltd. and Ors. Vs Punjab National Bank" decided on 10.05.2018 and reported as MANU/MP/0823/2018 has held that the provision of 19(5) of the Act of 1993 prescribing period of thirty days for filing of written statement by a defendant is mandatory and in tune with the object of the said Act which is expeditious disposal of bank recovery cases and that period can be extended only for fifteen days for exceptional reasons to be recorded by the DRT. Thus the maximum period within which a defendant can present his written statement to the claim of a bank is forty five days and once that period expires and written statement is not filed by a defendant within that period the right to file the written statement by the concerned defendant gets extinguished. The said judgment of the Madhya Pradesh High Court was though challenged before the Hon'ble Supreme Court but the same was not entertained and so the judgment of the High Court has attained finality and is binding on this Tribunal in the absence of any contrary judgment by any of the jurisdictional High Courts of this Tribunal having been brought to the notice of this tribunal during the course of arguments.

The impugned order dated 21.01.2020 of the DRT declining to take off the record the belatedly filed written statement and counter claim of the respondents-defendants is re-produced below:-

"I.A. no.1912 of 2019 has been filed by applicant bank seeking struck off the written statement, counter claim, rejoinder to the reply of counter claim etc. filed by D-2 to D-6 on the ground that summons were served on D-1 to D-6 on 03.12.2018 and the Advocate appearing for defendants sought legible copy of the OA and limitation of 30 days for filing written statement as provided under Section 19(5) of RDDBFI Act, 1993 was expired on 02.01.2019 and no extension of time sought by any of the defendants and last opportunity granted to D-2 to D-6 to file WS on 18.06.2019 and even if the period computed from 18.06.2019, the 30 days expired on 18.07.2019. Further, no WS was filed and matter was placed before the ld. Registrar on 05.08.2019 and Registrar recorded that no WS filed by D-2 to D-6 despite last opportunity and placed the record before Tribunal and it is submitted that D-2 to D-6y filed WS and counter claim belatedly on 30.08.2019 and the same was recorded on 06.09.2019 and limitation for filing WS and Counter Claim expired and due to expiry of period right for filing WS and counter claim stood closed and as such the WS filed by the defendants, counter claim, rejoinder to the reply of counter claim shall not be taken on record as the same is not filed within the statutory period and the same are not liable to be rejected, hence the application.

Though defendants did not file any reply, they opposed the application and vehemently contended that the defendants though made their appearance on 22.10.2018, the ld. Registrar directed to supply legible copy of the OA paper book to defendants and again on 03.12.2018, before Registrar, D-1 to D-3 submit that OA paper book and documents are not legible. Hence the matter placed before P.O. on 23.01.2019. Again this Tribunal directed to supply missing pages of OA and documents to D-2 and 3 and posted the case to 28.02.2019 on 28.02.2019, it was endorsed that OA bank supply copy of OA paper book to D-2 and again on 05.04.2019, issues pertaining to legible copies being supplied to D-1 to D-6 have not been sorted out despite directions of Hon'ble P.O. Order dated 23.01.2019. The ld. Counsel for the applicant bank submitted that the copies available with them have already been supplied. The ld. Counsel for the defendants states that statement of account provided to them from the period 2015 whereas they requested from the period of 2009 onwards. The ld. Counsel for the applicant bank submitted that since merger taken place in the intervening period statement of account could not be supplied and matter placed before the P.O. for further direction on 16.04.2019.

On 16.04.2019, P.O. was on leave and matter posted to 24.04.2019. On 24.04.2019, the order sheet revealed that it is submitted that Written statement cum counter claim filed by D-1. Counsel for the bank requested time to file rejoinder to the WS and reply to the counter claim. The ld. Counsel for the bank directed to supply legible copies of the documents to all the contesting defendants including D-1 within two weeks and matter posted to 13.05.2019. On 07.05.2019, IA No. 968/2019 was filed and for reply of the same matter posted to 13.05.2019, the ld. Counsel for the applicant bank submits that he will supply copy of the documents with legible copies to all contesting defendants and matter posted to 22.05.2019. On 22.05.2019, on the request of the ld. Counsel for the bank time granted for filing reply and rejoinder to WS to the counter claim till 18.06.2019 and also for filing reply to IA. On 18.06.2019, it was reported by the ld. Counsel for the bank that D-1 was admitted before ld. NCLT and IRP was appointed and accordingly final opportunity granted to other defendants to file WS and in the meanwhile it seems that other defendants filed counter claim. On 11.09.2019, the ld. Counsel for the applicant bank requested time for filing reply to counter claim and again on 22.10.2019, the defendants exhibited their documents.

At this stage, the present application is filed for rejection of written statement, counter claim, rejoinder to the reply of counter claim filed by D-2 to D-6. As seen from the record, there is negligence on the part of the applicant bank also in supplying the legible copies of the OA paper book to the other side. Even the order sheet dated 13.05.2019, revealed that the ld. Counsel for the applicant bank submits that he will supply copy of the documents with legible copies to all contesting defendants. There is no evidence filed by the applicant bank when they supplied the copy of documents with legible copies to the defendants as undertaken on 13.05.2019, then it would be proper for this Tribunal to allow the claim of the applicant bank for rejection of written statement, counter claim, rejoinder to the reply of counter claim filed by the D-2 to D-6. In the absence of the same, I see no merit in the present application filed by the applicant bank. Moreover, having accepted the filing of the written statement and counter claim, the applicant bank on 11.09.2019, submitted that he will file reply on the counter claim. Again on 22.10.2019, the ld. Counsel for the applicant submitted that he will file the written statement to counter claim and rejoinder to by tomorrow. Thus, the present application filed by the applicant bank for rejection of written statement, counter claim, rejoinder to the reply of counter claim filed by D-2 to D-6 is untenable in the facts and circumstances of the present case and accordingly, the same is dismissed. No order as to cost.

Matter be listed on 18.0.2019 for further proceedings."(highlighting is by me)

Feeling aggrieved, the O.A. applicant bank(SBI) filed the present appeal.

Mr. Sanjeev Bhandari, learned counsel for the respondents- defendants while not disputing the legal position that written statement by a defendant in an O.A. filed by a bank for recovery of its outstanding loan dues from its defaulting borrower and guarantors is supposed to be filed within thirty days from the date of receipt of summons and in case the DRT extends the period by fifteen days, which is the maximum period of extension which can be granted by the DRT, had submitted heavily relying upon the portions of the impugned order which have been highlighted by me, that in the present case the period of thirty days started to run only when complete and legible set of paper book was supplied to the defendants as directed firstly by the Registrar on 22.10.2018 and then by the learned Presiding Officer of DRT on subsequent dates and, therefore, the written statement and counter claim filed by the respondents- defendants after the expiry of initial period of thirty days from the date of receipt of summons by the defendants, which as per the affidavit of service filed on behalf of the bank was 3.10.1028,could not be directed to be taken off the record and the DRT has rightly rejected that prayer of the bank by the impugned order.

I, however, do not find any force in the opposition to this appeal. As noticed above, it is undisputed fact that the respondents were served with the summons on 03.10.2018. On 22.10.2018 some advocates appeared before the Registrar of the DRT without vakalatnamas. The Registrar of DRT on that date directed the counsel for the bank to supply legible copies of O.A. paperbook to the defendants on or before the next date and the respondents-defendants were asked to file their written statement within thirty days. The case then adjourned to 03.12.2018. The submission of the learned counsel for the respondents was that the since the Registrar of the DRT himself gave time to the defendants for filing of written statement within thirty days from the date of supply of legible copy of the O.A. to them by the bank the period of thirty days as provided under Section 19(5) of the Act of 1993 did not start to run from 03.10.2018 when the defendants were served with the summons with illegible copies of the O.A. paperbooks. In my view the Registrar of DRT had no authority in law to give time to the defendants to file written statements within thirty days from the date of supply to them legible copies of the O.A. That liberty appears to have been given toi the defendants by the Registrar in total ignorance of the leal position that the defendants were required to show cause as to why the bank's claim should not be allowed within thirty days from the date of receipt of summons by them. During that period the defendants could have raised any objection in response to the show cause notice but without filing written statement or reply to the show cause notice within time they could not have been given time and too by the Registrar. The proceedings from 22.10.2018 onwards became open ended thereby the mandatory provision of Section 19(5) of the Act of 1993 stood bye-passed and in fact thrown to the wind by the Registrar. His order of 22.10.2018 was thus without jurisdiction and the defendants could not take shelter under that illegal order passed by the Registrar. Since the period of thirty days had not expired on 22.10.2018 all that the Registrar could do on that date was to simply adjourn the matter for some days to enable the defendants to respond to the show cause notice and file written statements before the expiry of mandatory period of thirty days. Registrars of DRTs have no powers to pass orders in the teeth of statutory provisions which are mandatory in nature. Even Presiding Officers have no such powers but still such like orders are passed the same are simply without jurisdiction.

After 22.10.2018 the respondents-defendants had been demanding paper books and sometimes missing papers and the bank has been claiming that everything had been supplied to the defendants. Without recording any k8nd of satisfaction as to the genuineness of the demand of the defendants the learned Presiding Officer of the DRT has also been directing the bank to supply the demanded papers in a mechanical way without recording any reasons. The defendants had been representing to the DRT that without the demanded documents/papers they were not in a position to file written statement. Since the written statement had to be filed within thirty days from the date of receipt of summons by them as also the response to the show cause notice the DRT was not justified in keeping the proceedings pending awaiting the filing of written statements by the defendants. Though the DRT had no power to await the filing of written statements by the defendants beyond the period of thirty days but still it was not passing order to the effect that their defence stood struck off after the expiry of thirty days period. Another astonishing feature of the case is that even though the respondents-defendants had been demanding documents from the bank to file written statement there is nothing on the file of the DRT which would show that when their demand had been met and they had informed the learned Presiding Office that since they had got the required papers/documents they will be filing their written statements. Then suddenly on 30.08.2019 they filed common written statement running into over two thousand pages and a separate counter claim also running into over seven hundred pages. How that could be done if they had not received the documents which they had demanded from the appellant bank and which the DRT had directed it supply of a number of dates. That shows that the respondents-defendants had simply been trying to gain time and delay the proceedings and the learned Presiding Officer as well as his Registrar had been mechanically directing the bank to supply some documents/papers to them ignoring the mandatory provision of law to the effect that no written statement or counter claim can be taken on record after the expiry of thirty days or after the extended period of fifteen days if at all extension of time is granted.

It was rightly submitted by the learned counsel for the appellant bank that the proceedings in the O.A. show that the decision of the learned DRT to accept the written statement and counter claim filed by the respondents herein on 30.08.2019 when the Presiding Officer was on leave cannot be sustained at all. He pointed out that last time demand of some documents etc. was made before the DRT by the respondents-defend ants was on 13.05.2019 and on that date matter was adjourned to 22.05.2029 for hearing on some miscellaneous application. On 22.05.2019 counsel for the defendants did not raise any grievance that required documents had still not been supplied to them by the bank and for hearing arguments on the miscellaneous application case was adjourned to 18.06.2019 on which date also no demand for any documents was made by the counsel for the defendants and since written statement had not been filed the learned Presiding Officer was still kind enough to grant final opportunity to the respondents-defendants for filing of written statements with the observation that in case written statements were still not filed their right to file the same will stand closed. The matter was then dire3cted to be listed before the Registrar on05.08.2019. On that date the Registrar noticed that despite the Presiding Officer having given last opportunity to the defendants for filing of written statements vide order dated 16.06.2019 no written statements had been filed. The matter was then directed to be placed before the learned Presiding Officer on 30.08.2019 for further directions. Since the learned Presiding Officer had already on 18.06.2019 directed that in case the defendants fail to file written statement for which last opportunity was being given their right to file the same would stand closed that right automatically stood closed on 05.08.2019. However, taking advantage of the fact that the learned Presiding Officer was on leave on 30.08.2019 the defendants without any permission submitted in the Registry written statement and a counter claim. On 06.09.2019 the Registrar simply noticed that written statement and counter claim had been filed without observing that the right of filing of written statement stood already closed by respondents-defendants listed the matter before the Presiding Officer on 11.09.2019 on which date the matter was adjourned for filing of written statement to the counter claim which on subsequent date was filed also and because of that the learned Presiding Officer observed in the impugned order that since time had been sought for filing of rejoinder to the written statement of defendants and written statement to the counter claim their prayer to reject the written statement and counter claim could not be accepted. That view is certainly an erroneous view. Since the written statement and counter claim had not been filed within the prescribed period initially and even after grant of final opportunity on 18.06.2019 the bank could not be said be stopped from telling to the Presiding Officer to reject the belatedly filed written statement and counter claim. The acceptance of written statement and counter filed on 30.08.2019 was certainly without jurisdiction and respondents-defendants cannot take any shelter under that illegal decision of the DRT. The learned Presiding Officer was not justified in ignoring his own order dated 18.06.2019 when he had ordered that the right of the defendants to file written statement would stand closed if it was not filed even after grant of final opportunity which opportunity also, though could not have been given, was also not availed of by the defendants, respondents herein. That way the respondents-defendants due to the illegalities committed by the learned Presiding Officer and also by his Registrar the respondents-defendants had been successful in dragging on the proceedings which were supposed to be wrapped up in a time of 180 days as provided under Section 19(24) of the Act of 1993.

This appeal thus succeeds and consequently the written statement as well as the counter claim filed by the respondents-defendants will now stand taken off the record. The DRT shall proceed with the O.A. as if there is neither any written statement nor any counter claim of the defendants in the O.A.

It has been observed by this Tribunal in many cases that provision of Section 19(5) is not being strictly followed and in fact is simply ignored by the DRTs thereby causing in unnecessary delay in the disposal of O.A.s filed for the recoveries of public monies. Therefore, for the guidance of the Registrars and Presiding Officers a copy of this order shall be circulated amongst all the DRTs under the jurisdiction of this DRAT for strict compliance so that at least they do not defeat the very purpose of establishment of DRTs and litigants do not get an opportunity to say that the delays in disposal of the O.A.s is due to non compliance of the mandatory provisions of law by the DRTs themselves..