Bombay High Court
Narendra Plastic Private Limited ... vs Dbs Bank Limited on 28 February, 2017
Bench: R.M. Borde
1 /17 os-wp-1338-16 and 2046-16.doc
Ladda
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION No. 1338 of 2016
1) Narendra Plastic Private Limited, A ]
company incorporated under the ]
Companies Act, 1956, having its ]
registered office at 714-725 Corporate ]
Avenue, Sonawala Cross Road, Goregaon ]
(West), Mumbai 400 063. ]
]
2) Neemit Punamiya, ] PETITIONERS.
an adult, Indian Inhabitant, having its ]
office at Block No.D, Himachal CHSL, ]
Opp. Sunder Nagar, S.V. Road, ]
Malad (West), Mumbai ]
]
VERSUS.
DBS Bank Limited, ] RESPONDENT.
A body Corporate incorporated in ]
Singapore, 12, Marine Boulevard, Marina ]
Bay Financial Center Tower 3, Singapore ]
018982 and having its branch office inter ]
alia at Fort House, 3rd Floor, 221, Dr. D.N. ]
Road, Fort, Mumbai 400 001 through its ]
constituted attorney, Mr. Pankaj Jain. ]
ALONG WITH
WRIT PETITION No. 2046 of 2016.
DBS Bank Limited, ] PETITIONER.
A body Corporate incorporated in ]
Singapore, 12, Marine Boulevard, Marina ]
Bay Financial Center Tower 3, Singapore ]
018982 and having its branch office inter ]
alia at Fort House, 3rd Floor, 221, Dr. D.N. ]
Road, Fort, Mumbai 400 001 through its ]
constituted attorney, Mr. Pankaj Jain. ]
::: Uploaded on - 02/03/2017 ::: Downloaded on - 03/03/2017 00:51:27 :::
2 /17 os-wp-1338-16 and 2046-16.doc
VERSUS.
1] M/s. Narendra Plastics Limited, A ] RESPONDENTS.
company incorporated under the ]
provisions of Companies Act, and having ]
its registered office at 714-725 Corporate ]
Avenue, Sonawala Cross Road, Goregaon ]
(West), Mumbai-400 063. ]
]
2] Mr. Neemit Punamiya, ] .
an adult, Indian Inhabitant, having its ]
addrss at Block No.D, Himachal CHS Ltd., ]
Opp. Sunder Nagar, S.V. Road, ]
Malad (West), Mumbai 400-064. ]
]
Appearances:-
Mr. Gaurav Joshi, Senior Counsel a/with Mr. Piyus Jhaveri
and Mr. Vinod Kothari i/by M/s. Apex Law Partners for the
petitioner in Writ Petition No. 1338 of 2016 and for the
respondent in Writ Petition No.2046/2016.
Mr. Zubin Behramkamdin, Counsel a/with Ms. Vidya Naik,
Mr. Huzefa Nasikwala, Mr. Raman Misra, Ms. Nikita
Mahadik, Mr. Ganesh Narkhede i/by Nasikwala Law Office
for Respondent in Writ Petition No.1338/2016 and for
petitioner in Writ Petition No.2046/2016.
CORAM : R.M. BORDE &
A.S.GADKARI, JJ.
RESERVED ON :- 14 th February, 2017.
PRONOUNCED ON: 28 th February,2017.
::: Uploaded on - 02/03/2017 ::: Downloaded on - 03/03/2017 00:51:27 :::
3 /17 os-wp-1338-16 and 2046-16.doc
JUDGMENT (PER: R.M. BORDE,J)
1) Heard.
2) Rule. Rule is made returnable forthwith. By consent of
parties, both the petitions are taken up together for final hearing at
the admission stage.
3) Both these petitions are presented objecting to the order
passed by the Debt Recovery Appellate Tribunal, at Mumbai in
Appeal No. 203 of 2015 Misc. Application (M.A.) No.520 of 2015.
The Appeal No. 203 of 2015 has been presented by the petitioners
in Writ Petition No.1338 of 2016 (i.e. original defendants in
O.A.No.32 of 2014) for setting aside the order passed in Original
Application as well as Misc. Application No.24 of 2014. M.A.No.520
of 2015 is presented in the appeal claiming exemption from making
pre-deposit of the amount.
4) The original applicant-DBS Bank Ltd., before the Debt
Recovery Tribunal-I, Mumbai (for short, DRT-I) presented
proceedings i.e. Original Application No.32 of 2014 against the
petitioners- original defendants) (the parties are referred to as per
the status in Writ Petition No. 1338 of 2016). According to the
respondent-bank, the petitioners-Company applied for sanction of
multi line financial facilities comprising of working capital facility,
4 /17 os-wp-1338-16 and 2046-16.doc
sales bill/invoice as well as discounting facility of Rs.100 Million
for Working Capital requirement and by issuing sanction letter
dated 31st August, 2009, the financial assistance of Rs.100 Million
has been sanctioned to petitioner No.1 herein (original defendant
no.1) for which the petitioner No.2 (original defendant no.2)
executed all necessary documents in favour of the respondent-bank
(original applicant). At the request of petitioner (defendant no.1
Company) the respondent-bank (original applicant) sanctioned
additional multi line credit facilities of Rs.100 Million vide sanction
letter dated 2nd November, 2011.
5) Since the petitioners-Company herein failed to deposit
the amount, the proceedings came to be presented for issuance of
Recovery Certificate for an amount of Rs. 22,91,83,737/- together
with interest at contractual rate from the date of presentation of
original application till the payment and realization of the entire
amount. On presentation of the Original Application, the
Respondent-bank herein tried to serve the notices on the
petitioners, however, those were returned back with postal
endorsement as "Unclaimed". The service was deemed to be a good
service. According to law, the Original Application No. 32 of 2014
was proceeded ex parte and the Debt Recovery Tribunal-I, Mumbai
(DRT-I) allowed the original application directing the petitioners
5 /17 os-wp-1338-16 and 2046-16.doc
(original defendant Nos. 1 and 2) herein, jointly and severally, to
pay to the respondent-bank a sum of Rs.22,91,83,737/- (Twenty
Two Crores, Ninety One Lakhs, Eighty Three Thousand, Seven
Hundred and Thirty Seven Rupees) with subsequent simple
interest at the rate of Rs.10% per annum from the date of
application till realization. It is also declared that the repayment
under Recovery Certificate amount is duly secured by valid and
subsisting First pari passu hypothecation and charge on the
present and future current assets, as, more particularly, described
in Exhibit-J in Schedule-I of the Original Application No.32 of 2014.
The petitioners herein aggrieved by the decision in the Original
Application presented an application to the Tribunal itself
requesting for recall of the ex parte order dated 27th June, 2014.
The application was registered as Miscellaneous Application No. 24
of 2014.
6) It is contended in the application by the petitioners that
there was no proper service of summons, the door number of the
registered office address of petitioner No.1-Company (defendant
No.1) is mentioned as 712-725 instead of 714-725 and that the
bank has purposefully mentioned the wrong door number so as to
obtain ex parte recovery certificate / order. It is claimed that there
was no service of notice on the petitioners and as such the ex-parte
6 /17 os-wp-1338-16 and 2046-16.doc
recovery certificate deserves to be set aside. The application
tendered by the petitioners herein being Miscellaneous Application
No.24 of 2014 came to be dismissed by the Presiding Officer of DRT
by an order dated 17th March, 2015.
7) Being aggrieved by the decision rendered by the DRT-I,
Mumbai in Misc. Application No.24 of 2014, dated 17 th March,
2015 the petitioners preferred Appeal bearing No.203 of 2015 to
the Debt Recovery Appellate Tribunal, at Mumbai (for short, the
Appellate Forum/Tribunal). Along with the appeal, the petitioners
also tendered Misc. Application No.520 of 2015 seeking exemption
from pre-deposit of the amount as mandated by Section 30A of the
Recovery of Debts Act, 1993 (for short, "R.D.B. Act"). The appeal
came to be disposed of by the Appellate Forum by an order dated
5th January, 2016.
8) The Appellate Forum observed in the judgment that
even though it is a technical objection raised in respect of service of
summons but the Tribunal is of the opinion that proper opportunity
has not been given to the party concerned. It is further observed
that if the summons has not been served, the duty of the Court is
to invoke the powers under Order V Rule 20 of the Code of Civil
Procedure of issuing paper publication. The Appellate Tribunal held
that the summons has not been served on the defendants. The
7 /17 os-wp-1338-16 and 2046-16.doc
Appellate Tribunal observed that the dues as on June, 2014 is to
the extent of 22 Crores (Rupees Twenty Two Crores). However, in
order to demonstrate the bona fides the petitioners were directed to
deposit Rs.1.00 Crore (Rupees One Crore) before the Trial Court
within one month from the date of receipt of copy of the order. The
petitioners were further directed to file written statement within
two months before the DRT-I, Mumbai and the DRT-I,Mumbai was
directed to decide the matter on consideration of merits.
9) The order passed by the Appellate Tribunal is
challenged by the debtor as well as creditor. The petitioners herein
objects to the condition in respect of deposit of Rupees One Crore
contending that since the summons were not served it was not
justifiable to direct the petitioners to make pre-deposit of amount
before the DRT. On the contrary, the respondent herein (original
applicant) objected to entertainment of the appeal itself by the
Appellate Forum for want of compliance of the provision in respect
of pre-deposit of the amount as required under Section 30A of the
R.D.B. Act. It is contended that as per the provisions prevailing on
the date of presentation of the appeal, it was mandatory to direct
the petitioners to deposit 75% of the amount, before the Appellate
Court proceeds to decide the appeal. It is contended that the appeal
ought not to have been entertained at all before making pre-deposit
8 /17 os-wp-1338-16 and 2046-16.doc
amount. It is further contended that the conclusion reached by the
Appellate Forum that the summonses were not duly served, is
erroneous and against the facts brought on record. The petitioner
No.1/borrower who has admittedly borrowed sum of Rupees Two
Hundred Million from the respondent-DBS bank and has not repaid
the amount cannot be permitted to go scot-free and defeat the claim
of the bank.
10) It is pointed out that the petitioner No.1
herein/borrower has not at all disputed the claim of recovery of
amount nor has stated that it has not borrowed the amount at all
and that the bank is not entitled to recover the amount. It is
contended that in order to demonstrate the bona fides the
petitioners herein ought to have been directed to deposit the
amount at least as provided under the Amended Act. It is further
contended on behalf of the bank that the principles governing
setting aside the ex parte decree in the Code of Civil Procedure and
more specifically Order IX Rule 13 proviso mandates that no court
shall set aside a decree passed ex parte merely on the ground that
there has been an irregularity in the service of summons, if it is
satisfied that the defendant had notice of the date of hearing and
had sufficient time to appear and answer the plaintiff's claim, ought
to have been considered by the Appellate Tribunal.
9 /17 os-wp-1338-16 and 2046-16.doc
11) The petitioners contend that the envelope containing the
notice is issued to the petitioner no.1 Private Limited Co. on the
address at 712-725, Corporate Avenue Sonawala Cross Road.
Whereas the registered office of the petitioner no.1 is situate at
714-725 Corporate Avenue,Sonawala Cross Road, Goregaon (West),
Mumbai. It is contended that flat number has been intentionally
and wrongly recorded with intent to obtain the ex parte decree. It
is further contended that petitioner No.2 who is the Director of the
Company has also not been served since the envelope sent to him
by post has been returned "unclaimed". The address of the Director
is not the one which is address of the Company. The contention
raised by the petitioners does not appear to be acceptable for the
reason that the registered office of the Company is admittedly
situate at Block No.714-725 Corporate Avenue, Sonawala Cross
Road, Goregaon (West), Mumbai.Whereas the postal address
recorded on the envelope is 712 to 725 which includes Block No.
714 to 725. The objection raised is hyper-technical one and the
petitioner cannot succeed on the basis of such hyper-technical
objection. So far as the service on petitioner no.2 is concerned,
admittedly, he has also not claimed the postal envelope. In the
memo of writ petition, it is categorically recorded in ground "LL"
that petitioner No.2 was a party to the proceedings in his own name
and had been served with the summons. In ground "MM" also it
10 /17 os-wp-1338-16 and 2046-16.doc
has been recorded that petitioner No.2 had been served with the
summons in his name and had not been served with the summons
issued in the name of petitioner no.1 Company. Admittedly,
petitioner No.2 is a Director of the Company and the service on the
Director of the Company is a good service. Petitioner No.2 who
represents the Company is, admittedly, served and as such he
cannot make any grievance in respect of service of notice even on
the Company.
12) So far as the endorsement appearing on an envelope
containing the summons transmitted back by post as "Not claimed"
is concerned, it is the contention of the petitioners that not claiming
the postal envelope cannot be considered to be a good service.
Reliance is placed on the judgment in the matter of the New India
Assurance Co. Ltd. Vs. Smt. Nasibunnisa Mohd.Israr Khan
& Ors in C.A. No.1979/2011 in First Appeal Stamp
No.13185/2011 delivered by a Single Judge of this Court on 14 th
October, 2011. The learned Single Judge of this Court has taken a
view that though the subsisting Rule 9 of Order V of the Code of
Civil Procedure expressly provides that if a postal article
containing the summons is received back with an endorsement of
refusal, the same shall be treated as good service, there is no such
provision made in a case where summons or notice issued by
11 /17 os-wp-1338-16 and 2046-16.doc
Registered Post A.D. is returned with a remark "intimation posted"
and "not claimed" or "unclaimed". Therefore, in such a case the
service of summons or Court notice cannot be treated as a good
service.
13) Reliance is also placed on the judgment in the matter of
Sushil Kumar Sabharwal Vs. Gurpreet Singh & Ors,
reported in (2002) 5 SCC 377 to contend that the Court before
exercising its discretion of passing ex parte decree must be
satisfied that due service of summons was "proved". A reliance is
also placed on a judgment of the Division Bench in the matter of
Lucy Ayline Jacinto vs. Union Bank of India & Ors
reported in 2011 (3) Mh.L.J.480. In the reported matter, as is
evident from the judgment, it is observed in paragraph 14 that the
Court cannot be unmindful of the circumstance that a fraud is
alleged to have been perpetrated upon the first respondent by its
then DGM Tawadia, who was at the material time, the Manager at
the M.S.Marg Branch. The fraud pertains to the discounting of bills
in favour of a proprietary concern. It was also observed by the
Court that the address of the petitioner was totally different as such
court proceeded to direct setting aside the ex parte decree. In the
instant matter, it is observed that there was a proper service on
defendant No.2 and that defendant No.2 has admitted the
12 /17 os-wp-1338-16 and 2046-16.doc
correctness of the address and has not disputed the service of
summons on him. Defendant No.2 is the Director of the Company
though he has not claimed the postal envelope since the address on
the postal envelope is correct it has to be presumed that he has
received the notice. The Counsel appearing for the respondent
vehemently contends, placing reliance on the judgment in the
matter of C.C. Alavi Haji vs. Palapetty Muhammed & Anr
reported in (2007) 6 SCC 555 that Section 27 of the General
Clauses Act, 1897 gives rise to a presumption that service of notice
has been effected when it is sent to correct address by registered
post. The respondent has placed reliance on the judgment in the
matter of Sunil Poddar v. Union Bank of India reported in
AIR 2008 SC 1006. In paragraph 18 of the judgment the Apex
Court observed thus :-
18. 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
13 /17 os-wp-1338-16 and 2046-16.doc
defendant had otherwise knowledge of the
proceedings and he could have appeared and
answered the plaintiff's claim, 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."
14) So far as the proceedings under the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993 (for short, the
"R.D.D.B.F.I. Act") and the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(for short, the "SARFAESI Act"), are concerned, in exercise of the
powers conferred under sub-section (1) of Section 22 of the
R.D.D.B.F.I. Act, Regulations have been framed, called as Regulation
of Practice, 2010 of the Debts Recovery Tribunals for the States of
Maharashtra, Gujarat, Goa and the Union Territories of Dadra and
Nagar Haveli, Daman and Diu. Regulation 19 relates to service of
summons or notice. Sub-regulation (3) of Regulation 19 reads thus :
14 /17 os-wp-1338-16 and 2046-16.doc
19.(3) Summons or Notice shall ordinarily be
served by R.P.A.D. Or Speed Post. It may also be
served by e-mail, Fax or courier with the leave of
the Registrar who shall ensure due service of the
Paper Book on or before the date of first
appearance. The Registrar may allow the Summons
or Notice to be served by the party filing the
Application or the Appeal. Service Affidavit along
with proof of service shall be filed by the person
effecting such service."
In view of sub-regulation (4) of Regulation 19 where the summons
or notice is in respect of a claim against the Corporation or
Partnership Firm, if it is served on the Secretary or the Director or
other principal officer of the Corporation or the Partner of the
Partnership Firm at its registered office or on the address of the
Partnership Firm, it shall be good service.
15) In the instant matter, petitioner no.2 has not disputed
his address and has in fact admitted the service of notice on him, in
the memo of writ petition. A finding has been also recorded by the
DRT while rejecting the application tendered by the petitioners for
setting aside ex parte decree that the petitioner no.2 has not
disputed service of notice to him. What has been disputed by
respondent no.2 is that there is no service of notice sent to him on
the registered address of the Company. The objection raised is
15 /17 os-wp-1338-16 and 2046-16.doc
required to be rejected, since, admittedly, petitioner No.2 has not
disputed receipt of the notice. Admittedly, petitioner No.2 is the
Director of the Company. Apart from this, notice transmitted on the
address of the company if not claimed shall also be termed as a
good service. Sub-regulation (6) of Regulation 19 provides
specifically that where the Summons or Notice is returned with
postal remarks such as 'refused', 'unclaimed', 'not claimed',
'intimated' or 'intimation given' it may be declared that the
Summons or Notice is served.
16) In the instant matter, the Summons or the Notice has
not been claimed by both the petitioners though sent on the address
of the Company and includes Director. Therefore, it must be
presumed that there is proper service of notice and the finding
recorded by the Appellate Forum as regards the deficiency in
service of notice is not correct and deserves to be set aside. As has
been correctly argued by the Counsel appearing for the respondent-
bank that applying the principle of Rule 13 of Order IX of the C.P.C.,
the decree passed ex parte shall not be set aside merely on account
of defect in service when the parties have posted with the
knowledge of the proceedings.
17) The another argument that needs to be considered is the
failure of the Debt Recovery Appellate Tribunal to observe the
16 /17 os-wp-1338-16 and 2046-16.doc
mandate of Section 30A of the R.D.B. Act of ensuring pre-deposit of
the amount before entertaining an appeal. The amendment
enforced by Act No. 44 of 2016 mandates depositing of 50% of the
amount. As per the provisions existing prior to the Amendment, it
was incumbent upon the appellant to make deposit of 75% of the
amount. In the instant matter, in order to test the bona fides of the
petitioners it was ascertained as to whether the petitioner is willing
to deposit at least 25% of the amount. However, the petitioners
have specifically expressed their inability to deposit the amount.
The dues payable to the bank by the petitioners on the date of
presentation of the proceedings before the DRT were more than
Rs.22 Crores. The petitioners have not denied the factum of
advancement of loan by the bank to them. The petitioners did not
have any intention to make payment of loan amount advanced by
the bank. The petitioners are admittedly defaulters and do not have
intention to repay the amount. In such situation, this Court need
not exercise extraordinary jurisdiction under Article 226 of the
Constitution of India in favour of such petitioner who is a unwilling
to deposit any amount and to show his bona fides.
18) For the reasons recorded above, the decision rendered
by the Appellate Forum allowing the appeal presented by the
petitioners is unsustainable and deserves to be quashed and set
17 /17 os-wp-1338-16 and 2046-16.doc
aside and same is accordingly quashed and set aside. The Writ
Petition No.1338 of 2016 is dismissed. Rule is discharged. Ad-
interim relief, if any, stands vacated.
19) Whereas, Writ Petition No. 2046 of 2016 presented by
the bank is allowed. Rule is made absolute to the extent as specified
above in the aforesaid writ petition. In the facts and circumstances
of the case, there shall be no order as to costs.
(A.S. GADKARI,J) (R.M. BORDE, J.)
