Case: Sunil Poddar  Vs. Union Bank Of India

3. To appreciate the controversy raised in the present appeal, few relevant facts may be stated. It is the case of the appellant that Adhunik Detergent Ltd. (Defendant No. 1 in Suit No. 44A of 1993 instituted by respondent-Union Bank of India) was incorporated as Company under the Indian Companies Act, 1956. There was another Company also known as Adhunik Synthetics Ltd. which was floated by the Directors of Adhunik Detergent Ltd. According to the appellants, initially, Adhunik Detergent Ltd. had seven Directors, namely, (1) Satyanarayan Jalan, (2) Krishna Jalan, (3) Chakrapani Jalan, (4) K.K. Jalan, (5)Sunil Poddar, (6) Sushil Kumar Kanodia and (7) Radhey Shyam Poddar. Adhunik Detergent Ltd. had taken loan from the respondent-Bank. The appellants herein as Directors of Adhunik Detergent Ltd. at the relevant time became guarantors for repayment of loan and executed certain documents in favour of the respondent-Bank. It is the say of the appellants that there was division of business among the Directors of Adhunik Detergent Ltd. and Adhunik Synthetics Ltd. Consequent upon the division, the appellants herein, who were Directors 5, 6 and 7 had resigned as Directors from Adhunik Detergent Ltd. on August 18, 1989 and they got exclusive control over Adhunik Synthetics Ltd. From that date onwards, the appellants no more remained as Directors of Adhunik Detergent Ltd.4. It was alleged by the respondent-Bank that since Adhunik Detergent Ltd. did not repay the loan amount, a civil suit came to be filed by the Bank in the Court of District Judge, Raipur, Madhya Pradesh for recovery of Rs. 1,07,17,177.60 p. In the said suit, over and above the Company, all the Directors were also joined as defendants. A prayer was made in the plaint to hold all the defendants jointly and severely liable to pay the amount claimed by the plaintiff-Bank along with interest, costs and other expenses. Summonses were issued by the Court and the defendants appeared. So far as the present appellants are concerned, they were not served with the summonses but when they came to know about the filing of the suit, they appeared and filed written statement on March 9, 1995 contending inter alia that they had resigned from the Directorship of the Company (Adhunik Detergent Ltd.) with effect from August 18, 1989 and the Bank was intimated about such resignation. It was, therefore, contended that they were not responsible for repayment of loan amount and suit against them was not maintainable. The appellants, therefore, prayed that they may be deleted from the array of parties. On March 14, 1995, the appellants also filed an application by raising preliminary objection as to maintainability of civil suit against them. It was stated in the said application that preliminary objections were raised in the written statement by the appellants (defendant Nos. 7, 8 and 9) that no suit against them would lie. It was stated that the preliminary objection raised by them was fundamental in nature and went to very root of the jurisdiction of the Court. It was, therefore, prayed that an issue as to maintainability of suit against defendant Nos. 7 to 9 be framed and decided as preliminary issue before trying the suit on merits. Another application was also made in November, 1995 raising a similar objection contending that the suit was not instituted in accordance with law. The plaint which was filed was not signed by a person authorized to do so and on that count also, the suit was not tenable. It was further stated that suit against defendant Nos. 7 to 9 was not maintainable. A prayer was made to frame two issues under Order XIV, Rule 1 of the Code of Civil Procedure, 1908for short) as preliminary issues and to decide them as such.5. It may, however, be stated that during the pendency of the suit before the Civil Court, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as) came into force and in 1998 the suit filed by the respondent-Bank came to be transferred to the Debt Recovery Tribunal, Jabalpurfor short). The appellants had no knowledge about the transfer of the suit to DRT nor summonses were issued by DRT to the appellants at the new address. In the circumstances, nobody appeared before the DRT and the DRT vide its ex parte judgment and order dated December 15, 2000 decreed the suit filed by the plaintiff-Bank holding that the Bank was entitled to recover 1,07,17,177/- with interest and cost from the defendant Nos. 1-9 jointly and severely. The defendants were also restrained from transferring, alienating or otherwise dealing with or disposing off the hypothecated/mortgaged properties without the prior permission of DRT.6. It is asserted by the appellants that they were not aware of the proceedings before the DRT and no summonses were served upon them. In the circumstances, they could not remain present before the DRT. It was on December 16, 2000 when Mr. G. Karmakar, who was working for the appellants, happened to visit the office of M.P. Audyogik Vikas Nigam Ltd. at Bhopal for some official work that the officials of the Nigam informed him that a suit pending in the Civil Court, Raipur was transferred to DRT, Jabalpur and an ex-parte decree had been passed against the appellants. Immediately on December 18, 2000, Mr. Karmakar went to DRT, Jabalpur for getting requisite information and came to know that notice was sent to the appellants at the old address though new address was available. An advertisement was also published in a Hindi daily. He also came to know that since nobody appeared on behalf of the appellants, ex-parte decree had been passed. In the circumstances, the appellants herein made an application under Section 22(2)(g) of the Act on January 10, 2001 for setting aside an ex-parte order passed by the DRT. The DRT, however, on December 20, 2001 dismissed the application. The appellants appealed against the order passed by the DRT, but the Debt Recovery Appellate Tribunal, Allahabadfor short) also dismissed the appeal. A writ petition filed against the order of DRAT also met with the same fate. The High Court dismissed the writ petition. All these orders have been challenged by the appellants in the present appeal.7. Notice was issued by this Court on March 6, 2006. After hearing the parties, execution proceedings were stayed and the matter was ordered to be posted for final hearing. That is how the matter has been placed before us.

Reasoning:
11. Having heard the learned counsel for the parties, in our opinion, the appellants have not made out any ground on the basis of which the order passed by the DRT, confirmed by the DRAT and by the High Court can be set aside. From the record, it is clearly established that the suit was instituted by the plaintiff-Bank as early as in August, 1993. The appellants who were defendant Nos. 7 to 9 were aware of the proceedings before the Civil Court. They appeared before the Court, engaged an advocate and filed a written statement. They raised preliminary objections as also objections on merits. They filed applications requesting the Court to raise certain issues and try them as preliminary issues. It was, therefore, obligatory on their part to appear before the DRT, Jabalpur when the matter was transferred under the Act. The appellants, however, failed to do so. We are not impressed by the argument of the learned counsel for the appellants that they were not aware of the proceedings before the DRT and summonses could not be said to have been duly served. As is clear, summonses were issued earlier and on the same address, summonses were sought to be served again after the case was transferred to DRT. There is substance in the submission of the learned counsel for the respondent-Bank that the appellants had avoided service of summons as they wanted to delay the proceedings. We are also inclined to uphold the argument of learned counsel for the Bank that in view of the fact that the appellants were appearing before the Civil Court, it was not necessary for the Bank to get summonses published in a newspaper after the matter was transferred in accordance with law to the DRT, Jabalpur. But even that step was taken by the respondent-Bank. In, a Hindi newspaper having wide circulation in Bombay and Raipur, summonses were published. It cannot be argued successfully that the appellants were not the subscribers of the said newspaper and were not readingdi Edition. But even otherwise, such contention is wholly irrelevant. As to bills said to have been produced from the newspaper agent, to us, both the Tribunals were right in observing that such a bill can be obtained at any time and no implicit reliance can be placed on that evidence. It is immaterial whether appellants were subscribers of the said newspaper and whether they were reading it. Once a summons is published in a newspaper having wide circulation in the locality, it does not lie in the mouth of the person sought to be served that he was not aware of such publication as he was not reading the said newspaper. That ground also, therefore, does not impress us and was rightly rejected by the Tribunals.But the fundamental objection which had been raised by the respondent-Bank and upheld by the Tribunals is legally well-founded. In the application filed by the appellants before the DRT, Jabalpur under Section 22(2)(g) of the Act, there is no murmur that the applicants were defendants in the suit instituted in Civil Court; they were served and they appeared through an advocate and also filed a written statement and other applications requesting the Court to try certain issues as preliminary issues. It was expected of the appellants to disclose all those facts. Apart from suppression of fact as to service of summons and appearance of defendants before the Court, even on legal ground, it was not obligatory that the appellants should have been served once again.It is, therefore, clear that the legal position under the amended Code is not whether the defendant was actually served with the summons in accordance with the procedure laid down and in the manner prescribed in Order V of the Code, but whether (i) he had notice of the date of hearing of the suit; and (ii) whether he had sufficient time to appear and answer the claim of the plaintiff. Once these two conditions are satisfied, an ex parte decree cannot be set aside even if it is established that there was irregularity in service of summons. If the Court is convinced that the defendant had otherwise knowledge of the proceedings and he could have appeared and answered theclaim, he cannot put forward a ground of non service of summons for setting aside ex parte decree passed against him by invoking Rule 13 of Order IX of the Code. Since the said provision applies to Debt Recovery Tribunals and Appellate Tribunals under the Act in view of Section 22(2)(g) of the Act, both the Tribunals were right in observing that the ground raised by the appellants could not be upheld. It is not even contended by the appellants that though they had knowledge of the proceedings before the DRT, they had no sufficient time to appear and answer the claim of the plaintiff-bank and on that ground, ex parte order deserves to be set aside.20. In our opinion, the Tribunals were also right in commenting on the conduct of the appellants/defendants that they were appearing before Civil Court through an advocate, had filed written statement as also applications requesting the Court to treat and try certain issues as preliminary issues. All those facts were material facts. It was, therefore, incumbent upon the appellants to disclose such facts in an application under Section 22(2)(g) of the Act when they requested the DRT to set aside ex parte order passed against them. The appellants deliberately and intentionally concealed those facts. There was no whisper in the said application indicating that before the Civil Court they were present and were also represented by an advocate. An impression was sought to be created by the defendants/appellants as if for the first time they came to know in December, 2000 that an ex parte order had been passed against them and immediately thereafter they had approached the DRT. The Debt Recovery Tribunal, Jabalpur, therefore, in our opinion was right in dismissing the said application. In an appeal against the said order, the DRAT observed that the appellants hadsuppressed the fact that they were not in the know of the proceedings when the same was proceeding in the CivilThe DRAT correctly stated that even if it is taken to be true that the appellants did not receive notice from the DRT, it was their duty to make necessary inquiry in the proceedings when the case had been transferred to the DRT.The High Court, in our judgment, was equally right in dismissing the petition confirming the finding of the DRAT that the appellant hadsuppressed material fact and no interference was called for.22. Finally, we are exercising discretionary and equitable jurisdiction under Article 136 of the Constitution. From the facts and circumstances of the case in their entirety, we do not feel that there is miscarriage of justice. On the contrary, we are convinced that the appellants had not come forward with clean hands. They wanted to delay the proceedings. Though they were aware of the proceedings pending against them, had appeared before the Civil Court, but then did not care to inquire into the matter. Even after ex-parte order was passed, in an application for setting aside the order, they had not candidly disclosed all the facts that they were aware of such proceedings and were represented by a counsel. In the light of all these facts and keeping in view the provisions of Section 22 (2)(g) of the Act read with Rule 13 of Order IX of the Code, if the Debt Recovery Tribunal dismissed the application and the said order was confirmed by the Debt Recovery Appellate Tribunal and by the High Court, it cannot be held that those orders were wrong and ex parte order should be quashed.