M/S Continental Construction ... vs State Bank Of India
2014 Latest Caselaw 6077 Del

$~5, 6 & 96
*       IN THE HIGH COURT OF DELHI AT NEW DELHI
+       WRIT PETITION (CIVIL) Nos. 8075/2014 & 8077/2014
                                                 Date of decision: 24th November, 2014


        M/S CONTINENTAL CONSTRUCTION LTD. ..... Petitioner
                                   Through Mr. V.P. Singh, Sr. Advocate with Mr.
                                   Vinay Sharma, Advocate.

                                   versus

        STATE BANK OF INDIA                     ..... Respondent

Through Mr. S.L. Gupta & Mr. J.P. Gupta, Advocates.

                     WRIT PETITION (CIVIL) No. 8138/2014
        M.S. BASI                                                    ..... Petitioner
                                   Through Mr. H.L. Tiku, Sr. Advocate with Mr.
                                   Bhowmik Nayyar & Mr. Amit Dhupar,
                                   Advocate.

                                   versus

        STATE BANK OF INDIA & ORS.             ..... Respondents
                    Through Mr. S.L. Gupta & Mr. J.P. Gupta,
                    Advocates for SBI.

        CORAM:
        HON'BLE MR. JUSTICE SANJIV KHANNA
        HON'BLE MR. JUSTICE V. KAMESWAR RAO

SANJIV KHANNA, J. (ORAL):

Counsel for the petitioners have been informed that wife of one of us

(Sanjiv Khanna, J.) is holder of some shares of the State Bank of India.

Counsel for the petitioners state that they have no objection to the present

Bench hearing these writ petitions.

2. The only issue and contention raised in the present writ petitions is

whether the petitioners should be given liberty to cross-examine witnesses

of the respondent bank in the original applications filed under the Recovery

of Debts Due To Banks and Financial Institutions Act, 1993. These

original applications are listed for final hearing before the DRT.

3. These writ petitions arise out of a common order passed by the Debt

Recovery Appellate Tribunal (DRAT, for short) dated 10 th October, 2014

disposing of Miscellaneous Appeal No. 380/2014 titled M.S. Basi versus

State Bank of India and Others and Miscellaneous Appeal Nos. 379/2014

and 378/2014 titled M/s Continental Construction Limited versus State

Bank of India. These appeals arose from orders passed by Debt Recovery

Tribunal (DRT, for short) on applications filed by the petitioners in OA

Nos. 37/98, 38/98 and 39/98.

4. Respondent bank-State Bank of India had filed the aforementioned

Original Applications way back in 1998, for recovery of Rs. 89, 21,25,119,

Rs. 3,90,00,956 and Rs. 77,35,911, with pendente lite and future interest

from M/s Continental Construction Limited i.e. the principal borrower, and

others. M.S. Basi , as a guarantor, has been impleaded in OA No. 38/98,

but he is not a party/defendant in OA Nos. 37/98 and 39/98.

5. The respondent bank had filed evidence by way of affidavit in OA

No. 39/1998 way back in 2002 and the petitioner M/s Continental

Construction Ltd. i.e. the principal borrower had filed the evidence by way

of affidavits in April, 2004. In OA No. 37/1998, evidence by way of

affidavit was filed by the respondent bank in March, 2012 and by the

petitioner, M/s Continental Construction Ltd., and others in May, 2012. In

OA No. 38/98, evidence way of affidavit was filed by the respondent bank

in September, 2011 and thereafter, evidence was filed by the principal

borrower M/s Continental Construction Ltd. and the guarantor M.S. Basi in

February, 2012 (See order dated 15th September, 2014, passed in W.P(C)

No.6090/2014).

6. Apparently, when OA No. 38/98 was fixed for final arguments, M.S.

Basi filed an application in March, 2012 for cross-examination of the

deponents who have filed affidavits in support of the claim for recovery by

the respondent bank.

7. Subsequently, an application was filed by M.S. Basi for

consolidation of three OAs in 2014. Certain orders passed thereafter,

became subject matter of Writ Petition (Civil) No. 6090/2014 decided by

this Bench on 15th September, 2014 holding that the three OAs could be

taken up for hearing separately. This order also notices the earlier

directions given by the High Court in Writ Petition (Civil) No. 7758/2010

vide order dated 5.9.2011 that the parties should lead evidence before the

DRT and OA No. 38/1998 would be disposed of within six months. The

said direction was passed with consent. Thereafter the DRAT had passed

order in an appeal arising from OA No. 37/1998 to a similar effect.

8. M/s Continental Construction Ltd., in year 2014, filed applications

for cross-examination of the deponents who had filed evidence by way of

affidavits in support of claim of the respondent bank, in OA Nos. 37/98

and 39/98.

9. The DRT by their order dated 22.9.2014, rejected these applications

observing that there was no reason that necessitates or requires cross

examination of bank's witnesses and applications had been filed to delay

the disposal of the OAs. Petitioners then approached the DRAT, but the

prayer for cross-examination stands rejected by the impugned order dated

10.10.2014.

10. We have examined the applications, filed by M/s Continental

Construction Ltd. in OAs 37/1998 and 39/1998 which are almost identical.

The said applications make reference to three written statements setting out

defences, and aver that there are substantial defences against the claim of

recovery. It is urged and claimed that the documents in support of

defences have been filed by M/s Continental Construction Ltd. The

defence, it is asserted, is fully established by the evidence on record. M/s

Continental Constructions Ltd. somewhat irreconcilably prayed that it was

necessary to cross-examine the deponents who had filed evidence by way

of affidavit in support of the claim of recovery. The relevant portion of the

application is reproduced below:-

"4. As stated, the Defendant No.1 has raised substantial defences in the Written Statement and besides dealing with the said specific averments in the parawise reply has also shown /established inter alia to the effect that the alleged facility in the present O.A. cannot be segregated from the alleged Overdraft facility at U.K. which was in fact a financial help extended by the Applicant Bank to the Government of Iraq at the behest and instance of the Government of India by virtue of the Unilateral Deferred Payment Agreements entered into between the Government of India and the Government of Iraq; the Defendant was merely a conduit; the amounts to be recovered, if any, were to be .recovered by the Applicant Bank from the receivables under the said Deferred Payment Agreements; the Defendant was put under commercial duress and coercion and undue influence for the purposes of routing the said financial assistance through it; the said Deferred Payment Agreements and the illegal and arbitrary acts of the Applicant Bank caused grave losses to the Defendant which the Defendant is entitled to recover jointly and severally from the Applicant Bank, the EXIM Bank and ECGC and the Government of India; the alleged conversion of the alleged foreign exchange borrowing to Rupee denominated amounts was unilateral and illegal; the Applicant Bank and EXIM Bank acting in concert with each other exercised commercial duress, coercion and undue influence to get the alleged Deferred Payment facility signed from the Defendant and therefore, the said alleged documents are null and void and that the Applicant-Bank and EXIM Bank were not entitled to charge any interest above LIBOR and were in any event entitled to recover the amounts only from the project receivables under the Deferred Payment Agreements. The alleged statement of account has also been denied and a relief of set off has also been sought in the alternative.

5. That the documents in support of the aforesaid defences have also been filed by Defendant No.1. The defences raised have neither been met with in the Affidavit of evidence nor any Replication has been filed by the bank."

11. In the application filed by M.S. Basi in OA No. 38/1998, it is

claimed that the said defendant was under commercial duress and coercion

and due to undue influence was made to execute some documents. It was

claimed that the guarantees given by M.S. Basi stand discharged.

12. The petitioners before us submit that the facts relating to commercial

duress, coercion and undue influence raised by M.S. Basi in OA No.

38/1998, which the petitioners wish to prove, can only be so established by

cross-examination of the bank's witnesses. The deferred payment

agreements were arbitrary and illegal and therefore null and void.

Petitioners contended that the alleged financial facility was not obtained by

them voluntarily but was extended by the respondent bank to Government

of Iraq at instance of the Government of India in terms of unilateral

deferred payment agreement. M/s Continental Construction ltd. was merely

acting as a conduit, so the amount, if any, payable should have been

recovered from the receivables under the deferred payment agreement and

not from the petitioners.

13. The DRAT, while dismissing the appeals, has referred to Rule 12(7)

and 12(6) of the Debts Recovery Tribunal (Procedures) Rules, 1993 and

observed that Rule 12(7) provides that when a defendant denies his liability

to pay the claim, the Tribunal can rely upon the affidavits of the

defendant/person acquainted with the facts. The said rule nowhere provides

for oral examination of a witness. Rule 12(6) provides that the tribunal can

at any time for sufficient reason order that any particular fact may be

proved by way of affidavit. Proviso to this sub-rule makes reference to

cross-examination of a witness. Tribunals do have the power to summon

and enforce the attendance of any witness and examine him on oath, but no

provision makes it mandatory that the witness should be examined orally

or cross-examined on oath. Good and sufficient cause must be shown

before a request for cross examination of a witness could be allowed.

14. The DRAT then referred to the ratio expounded by the Supreme

Court in Union of India and Another versus Delhi High Court Bar

Association and Others, (2002) 4 SCC 275, and has quoted the following

paragraph:-

"23. In other words, the Tribunal has the power to require any particular fact to be proved by affidavit, or it may order that the affidavit of any witness may be read at the hearing. While passing such an order, it must record sufficient reasons for the same. The proviso to Rule 12(6) would certainly apply only where the Tribunal chooses to issue a direction on its own, for any particular fact to be proved by affidavit or the affidavit of a witness being read at the hearing. The said proviso refers to the desire of an applicant or a defendant for the production of a witness for cross-examination. In the setting in which the said proviso occurs, it would appear to us that once the parties have filed affidavits in support of their respective cases, it is only thereafter that the desire for a witness to be cross-examined can legitimately arise. It is at that time, if it appears to the Tribunal, that such a witness can be produced and it is necessary to do so and there is no desire to prolong the case that it shall require the witness to be present for cross- examination and in the event of his not appearing, then the affidavit shall not be taken into evidence. When the High Courts and the Supreme Court in exercise of their jurisdiction under Article 226 and Article 32 can decide questions of fact as well as law merely on the basis of documents and affidavits filed before them ordinarily, there should be no reason as to why a Tribunal, likewise, should not be able to decide the case merely on the basis of documents and affidavits before it. It is common knowledge that hardly any transaction with the bank would be oral and without proper documentation, whether in the form of letters or formal agreements. In such an event the bona fide need for the oral examination of a witness should rarely arise. There has to be a very good reason to hold that affidavits, in such a case, would not be sufficient."

15. The DRAT, elucidating and on examining the contentions observed

that cross-examination of bank's witnesses would be of no help to the

petitioners to bring on record the aspects which they want to establish. The

petitioners have full liberty to prove any of their contentions, by leading

their own evidence. Petitioners have not been able to show in any manner

that there were sufficient reasons or cause for summoning the bank's

witnesses for cross-examination.

16. We are in agreement with the findings recorded by the DRT and

DRAT on the issue of cross-examination of the witnesses of the respondent

bank. We do not think any ground or reason has been shown or made out

to permit such cross-examination. The decision of the Supreme Court in

Delhi High Court Bar Association (supra) in categorical terms holds that

the desire of cross-examination has to be legitimate and for justification

and cause shown. No valid justification or cause has been shown. We

have also already noted that the applications were filed at a stage when the

cases were fixed for final hearing and disposal.

17. Counsel for the petitioners have submitted that certain letters were

exchanged between the petitioners and the respondent bank due to situation

in Iraq. It is further submitted that certain payments have not been duly

accounted for. On behalf of M/s Continental Construction Limited, it is

submitted that certain documents, including bank guarantees are not on

record.

18. Learned counsel appearing for the respondent bank who is present

on advance notice states that full credit has been given for the payments

made and there is no discrepancy. He denies other allegations and

contentions. He states that copy of the Original Applications filed as an

annexure to the writ petitions, are incomplete.

19. We have considered the said contentions, but do not find any ground

or justification to interfere with the impugned order in exercise of writ

jurisdiction under Articles 226 and 227 of the Constitution of India. The

subject matter before the DRAT was rather limited and confined to

whether the petitioners herein should be given right to cross-examine the

bank's officers, who had submitted affidavits. The primary contention

raised before the DRAT was that due to economic and financial

compulsions certain consents were given, but these cannot be treated and

regarded as valid consents. Request for cross-examination on the said

ground has been rightly rejected. The question of amount due and payable

and whether credits have been given for all the payments made is a matter

of details and merits. The said aspects need not be examined in these writ

petitions. The petitioner can always rely upon their affidavits, documents

etc. filed by them in support.

20. We clarify that the observations made by the DRAT in the order

dated 10th October, 2014 were for the purpose of disposal of the application

for right to cross-examination and these should not be construed as

conclusive and binding findings when the DRT finally examines and

decides/adjudicates the case of the bank and the petitioners on merits. The

aforesaid observations will equally apply to the orders passed by the DRT

while disposing of the applications for cross-examination. Learned counsel

for the respondent bank has referred to the judgment dated 26th September,

2014 in Writ Petition (Civil) No. 7122/2012 tilted State Bank of India

versus M/s Continental Construction Limited and Others. The effect and

the ratio of the said judgment can be examined by the DRT.

21. The writ petitions are accordingly disposed of.

SANJIV KHANNA, J.

V. KAMESWAR RAO, J.

NOVEMBER 24, 2014 VKR/KKB