State Bank Of India vs M/s Nutrionex Manufacturers Limited & Ors.

The appellant bank has filed an Original Application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993('Act of 1993' in short) against the respondents- defendants 1 - 6 for recovery of over nine hundred crores before the DRT-II, Delhi and the same is pending adjudication. After service of summons upon the respondents-defendants 1 - 6 they filed their joint written statement-cum-counter claim. Counter claim was for a sum of Rs. 1943.63 crores. The appellant bank filed two applications before the DRT in its O.A. under Order VII Rule 11 CPC one of which was for taking off the record the written statement-cum-counter claim because the same had been filed beyond the period of thirty days from the date of service of summons prescribed under Section 19(5) of the Act of 1993 for filing of written statement as well as counter claim by a defendant. The second application, which was also under Order VII Rule 11 CPC, was for rejecting the counter claim primarily on the ground that it did not in any case disclose any cause of action against the appellant bank for the claim of damages/compensation for loss of business etc. allegedly suffered by the borrower Company which at one time was known as M/s Shri Lal Mahal Ltd. because of illegal freezing of their accounts by the consortium of banks pursuant to the directions of Directorate of Revenue Intelligence(DRI) and which direction had ultimately been quashed by the Hon'ble Delhi High Court in a writ petition which was filed by the respondent borrower Company. It was also claimed in that application that except for the borrower Company which alone was claiming to have suffered huge losses due to illegal freezing of its accounts by consortium of banks the other private defendants/guarantors could not in any event maintain any counter claim against the appellant bank.

The appellant bank's O.A. was taken up by the DRT first time on 15.07.2019 when one advocate appeared for defendant no.1 borrower Company (subsequently on 15.10.2019 same advocate appeared for the remaining five private defendants also all of whom are members of one family). On 15.07.2019 the learned DRT restrained the private defendants in the O.A. from alienating the mortgaged properties mentioned in the O.A. and they were also directed to file an affidavit of their movable as well as immovable assets within ten days. Notice of the O.A. was directed to be issued to remaining defendants returnable on 27.08.2019 before the Registrar with a direction to the defendants to file their written statement within 30 days of receipt of summons. On 27.08.2019 an affidavit of service was filed on behalf of O.A. applicant alongwith proof of service of summons on the defendants before the Registrar. Defendant no.2 Smt. Anita Garg and her husband, defendant no.3, Prem Chand Garg were reported to have refused to accept summons. Defendant no. 4 Smt. Pushpa Gupta and defendant no. Smt. Anju Goel were shown to have been served on 14.08.2019 while defendant no.5 Smt. Radha Gupta was shown to have been served on 19.08.2019. However, on 27.08.2019 only defendant no.1 borrower Company was represented by the same counsel who had appeared for defendant no.1 on the first date i.e. 15.07.2019. On that date the Registrar after taking on record the affidavit of service filed on behalf of the bank simply asked the bank's counsel to give legible copy of the O.A. to the counsel for borrower Company. No fresh order was passed for service of any other defendant, all of whom, as per the affidavit of service filed by bank, stood served, as noticed above. The matter was adjourned to 16.09.2019 for being placed before the Presiding Officer for directions. On 16.09.2019 the learned Presiding Officer without making any reference to the affidavit of service which already was on record directed fresh notice to defendant no.2 Anita Garg and her husband Prem Chand Garg, defendant no.4, both of whom had as per the affidavit of service, refused to accept summons. Those summons were returnable after five days only for 21.09.2019. On 21.09.2019 the same counsel for defendant no.1 borrower Company appeared and informed the DRT that he had filed an application under Order VII Rule 11 CPC for rejection of the O.A. That application was registered as I.A. No. 1608/2019 and it was later on dismissed vide common order dated 10.02.2020 in respect of three IAs filed by the bank two of which, as noticed already, were under Order VII Rule 11 CPC for rejection of the counter claim and taking off the record the written statement-cum-counter claim which had been filed by defendants 1- 6 on 14.10.2019.

The order dated 10.02.2020 passed by the DRT dismissing its application no. 2690/2020 for taking off the written statement- counter claim of defendants 1 to 6 and with which the appellant Bank is seriously aggrieved reads as under:-

"IA No. 2690 of 2019 (filed by the Applicant Bank)

The applicant bank herein has filed the present application under Section 19(25) of the RDDBFI Act seeking struck off Written Statement and counter claim etc. filed by the defendants 1 to 6. Applicant further submits that Section 19(5)(1) of the RDDBFI Act mandates that defendants shall file their WS including their Counter Claim within 30 days from the date of service, however, the said period of 30 days in exceptional circumstances for the reasons recorded in writing can be extended by further period of 15 days. Applicant further submits that D-1 has put his appearance on 15.07.2019 at the time of admission hearing, however, service of summon with copies of OA and documents were duly affected upon counter claim on different dates:

Defendant No.

Date of Service of OA

1

16.08.2019

2

Refused to accept on 14.08.2019

3

Refused to accept on 14.08.2019

4

14.08.2019

5

19.08.2019

6

14.08.2019

It is relevant that none of the defendants raised any objection regarding alleged illegible copies being served upon them, as such the period of 30 days started running from the respective dates as mentioned above. Further, even If the period of 30 days is computed from 19.08.2019, the date when the service of summons was affected upon defendant no. 5, the WS including WS/counter claim ought to have been filed within 30 days I.e. 18.09.2019, however, the WS and counter claim were filed only on 14.10.2019.

Now the point for consideration is whether the applicant is entitled for struck of WS and Counter Claim filed by the Defendants from the record, as prayed for under Section 19(25) of the RDDBFI Act.

Since the Ld. Counsel for the applicant during the arguments himself admitted that the legible copies of documents furnished by him on 12.09.2019 and the counter claim/WS for the claim within 45 days of the said date, the contention of the Ld. Counsel that the Counter claim/WS is to be struck off is untenable and there are no merits in the present application and the same is accordingly dismissed."

Very elaborate submissions were made from the side of the appellant bank initially by Mr. Bharat Gupta, learned advocate and then by learned senior counsel Mr. Ramji Srinivasan and from the side of respondents 1 - 6 Mr. Sanjeev Bhandari, learned counsel argued. Both sides also filed written submissions.

I have given my thoughtful consideration to the rival submissions, oral as well as written, and have also minutely examined the voluminous record of the appeal as also of the O.A., scanned copies of which were made available to me digitally since because of continuous spread of Corona Virus all over I am hearing the appeals through video conferencing from my residential office.

It was not disputed from the side of respondents/borrowers during the course of arguments by their learned counsel that in the proceedings initiated by a bank under Section 19 of the Act of 1993 for recovery of its dues from its defaulting borrower/guarantor the period prescribed for filing of written statement is only thirty days from the date of service of summons. However, for some strong reasons the DRT can grant additional time of fifteen days only . Same is the time limit for filing of counter claim by a defendant. This is so provided under Section 19(5) of the Act of 1993 which reads as under:-

(i) the defendant shall within a period of thirty days from the date of service of summons, present a written statement of his defence including claim for set-off under sub-section (6) or a counter-claim under sub-section (8), if any, and such written statement shall be accompanied with original documents or true copies thereof with the leave of the Tribunal, relied on by the defendant in his defence:

Provided that where the defendant fails to file the written statement within the said period of thirty days, the Presiding Officer may, in exceptional cases and in special circumstances to be recorded in writing, extend the said period by such further period not exceeding fifteen days to file the written statement of his defence;

In the present case, as noticed already by me and as has been noticed by the learned DRT also in the impugned order the appellant bank had given in the affidavit of service different dates on which defendants 1 to 6 were claimed to have been served. The Registrar of the DRT had not doubted the dates of service of summons by the defendant when the matter had come up before him on 27.08.2019 nor any fresh direction was given for service of any of the defendants. Borrower Company, defendant no.1 in the O.A., was being represented before him on 27.08.2019 and who had earlier also on 15.07.2019 appeared before the learned Presiding Officer for the borrower Company. Other private defendants did not enter appearance in the matter nor had they presented any written statement/counter claim within the period of thirty days from the dates of service upon them as were given in the affidavit of service filed by the applicant bank and which dates of service remained unchallenged by the respondents-defendants 1 to 6. The learned Presiding Officer of the DRT in his one para conclusion while dismissing the application no. 2690/2019, which has been re- produced by me already, simply observed that since the counsel for the bank(SBI) himself had claimed during the course of arguments that 'legible copies of documents' had been supplied to the defendants on 12.09.2019 the written statement-cum-counter claim(filed on 14.10.2019) were within the prescribed period of 45 days and, therefore, the same could not be taken off the record.

Accordingly the application under Order VII Rule 11 CPC came to be dismissed. That shows that as far as the dates of service of summons are concerned the same stood accepted by the defendants 1 to 6 as was being claimed by the applicant bank. The defendants 1 to 6 had not filed written statement within the period of thirty days from the date of service of summons upom them. The learned DRT has erroneously observed that written statement had been filed within 45 days ignoring the legal position that written statemenjt/counter is to be filed within 30 days from service of summons. Further period of 15 days maximum can be granted for strong reasons for filing of written statement/counter claim if sought by the defendants. In the present case, none of the defendants 1 to 6 had sought extension beyond thirty days on any ground but despite that the learned Presiding Officer treated the filing of written statement/counter claim on 14.10.2019 to be within the prescribed period. That is a wholly untenable view. Whenever written statement is not filed within the period of thirty days and extension is sought and granted the right of filing of written statement/counter claim has to be treated as having been automatically forfeited. I n any case, counsel for the bank had simply stated before the learned Presiding Officer on 21.09.2019 that he had already supplied copy of the O.A. to counsel for defendant no.1 and not that copy of O.A. was given to counsel for defendant no.1 on 21.09.2019 as has been observed by the learned Presiding Officer.

Though the respondents 1 to 6 have not raised any objection against the observation of the learned Presiding Officer in the impugned order that he was treating the written statement/counter claim as having filed within time for the reason(erroneous though) that counsel for SBI had himself claimed that he had supplied copy of O.A. on 12.09.2019 but during the course of arguments elaborate submissions were advanced by the learned counsel for respondents 1 to 6 that there was never a proper service of summons on any of the defendants for the reason that legible copies of material apers were not furnished at the time of service of summons and some of them had been supplied only after bank was directed by the DRT. The respondents/defendants 1 to 6 have also claimed that in even though they had presented their written statement-cum-counter claim on 14.10.2019 but that with the rider to file additional pleas upon being furnished full set of legible/missing papers. In my view this submission made only at the time of arguments before this Tribunal cannot be accepted for the reason whatever objections the defendants had regarding non-supply of legible documents etc. could be raised only in the written statement which was required to be filed within 30 days. Within that period thirty days none of these defendants had come forward before the DRT with such a grievance of non-supply of legible documents etc. due to which they were handicapped in filing of present their defence effectively.The learned Presiding Officer had also been casually issuing directions for supply of copies of O.A. etc. after the period of filing of written statement/counter claim stood expired. In fact, the learned Presiding Officer never took the trouble of even noticing as to when the defendants had been served and when the period of filing of written statement had expired.

In fact, the plead raised that written statement could not be prepared and filed within the prescribed period due to non-supply of legible papers etc. is totally a false stand taken by them before the DRT as well as before this Tribunal. There has been an attempt to mislead the Tribunal below as well as this Tribunal and as far as the DRT is concerned the defendant-borrowers had succeeded in misleading it. However, they have failed in that attempt before this Tribunal. Sometimes falsity of a plead taken by any litigant in any judicial/quasi judicial proceedings can become apparent to the Court/tribunal from certain circumstance(s) appearing on the record of the case even though not highlighted by anyone. That exactly has happened in the present case. Let me now refer to those circumstances in this case. As noticed already, on the first date in the O.A. before the DRT one advocate had appeared before the DRT to represent only the borrower Company which appears to be owned and run by members of one family. Same counsel appeared again before the Registrar of DRT ON 27.08.2019 and that day also he represented only the borrower Company. OThen on 21.09.2019 same counsel appeared before the Presiding Officer and informed that he had moved an application under Order VII Rule 11 CPC. That I.A. NO.1608/2019 was subsequently rejected vide order dated 10.02.2020. Copy of that I.A. No.1608, running into over fifty pages, is available on record of this appeal. A perusal of the verification of that application has shocked this Tribunal that litigants plead falsities to such an extent. The verification para of that application shows that that para was actually not to be there for that application but for the written statement which defendants 1 to 6(respondents 1 to 6 herein) had intended to file. The date of verification is mentioned as '20.08.2019' which shows that by that time they had already prepared their written statement and signed also. However, then they appear to have decided to defer filing of written statement in order to prolong the O.A. proceedings in which the SBI was claiming recovery certificate for over nine hundred cores of public money. They decided to file an application under Order VII Rule 11 CPC with mala fide intention of delaying the proceedings. But the defendants 1 to 6 attached with that application the page which had the verification para meant to be part of the written statement which they had intended to file since their counsel had already appeared before the DRT though only on behalf of one defendant. That thus was certainly a game plan conceived of by the family members(Gargs) to stretch the proceedings for as much time as they could stretch. The application no. 1608/2019 demolishes and totally falsified the stand now taken by the defendants 1 to 6 that the period of filing of written statement/counter claim never started on the dates as claimed by the O.A. applicant bank. It is shocking that the defendants though belonging to one family asked their advocate who till the end represented all of them to appear for only borrower Company in the initial stages of the O.A. and not all of them and suddenly same counsel appears in the matter on 21.09.2019 to inform that he had filed application under VII Rule 11 CPC which application was on behalf of all the six contesting defendants. It is surprising that how could such a lengthy application be prepared when full set of O.A. was not available with the defendants. Unfortunately the DRT did not take notice of any of these circumstances and permitted the defendants to take the stand that the period of filing of written statement/counter claim started on 21.09.2019 only. The respondents/defendants clearly have misled the DRT into accepting on record their written statement/counter claim. In fact, it can also be said that they played fraud upon DRT. Thus the same cannot be permitted to remain on record of the O.A. even for a moment and have to be taken off. Just because now written statement/counter claim have remained on record for some time that will not legalise the gross illegality committed by the learned DRT in taking on record the same which the DRT was not empowered to do in law.

In view of aforesaid view of mine, I need not go into the question as to whether the counter claim of the defendants 1 to 6 in any event discloses no cause of action against the State Bank of India, as the same is now being removed from the record of O.A.

The impugned order of the DRT rejecting the appellant's application no. 2690/2019 under Order VII Rule 11 CPC is accordingly set aside and the written statement-cum-counter claim of respondents/defendants 1 to 6 will stand taken off the record and the DRT will now proceed to decide the O.A. without considering the written statement and the counter-claim.