2007 (10) TMI 408 - HC - Companies Law

Request of the applicants for cross-examination of the Bank Manager declined - Held that - Based on non-production of documents, contradictory stand of the Bank, the documents being not supportive of each other and the controversy raised in the pleadings between the parties, It was a fit case where the request should have been allowed to completely and fully determine and decide the claim of the Bank and the counter claim of the borrower. Thus, in the Interest of justice and to fully and finally adjudicate the disputes between the parties, the application should have been allowed by the Tribunal. In the present case, no hesitation in coming to the conclusion that the Tribunal has erred in law in declining the request of the applicants for cross-examination of the Bank Manager. In the result, the impugned orders dated 25th August, 2006 and 5th December, 2006 are quashed and set aside and the petitioners are granted liberty to cross-examine the Bank Manager in accordance with law.

Issues Involved:
1. Recovery of debt by the Bank.
2. Counterclaim by the petitioners.
3. Application for production of documents.
4. Application for cross-examination of Bank officers.
5. Rejection of applications by Debt Recovery Tribunal.
6. Appeal to Debt Recovery Appellate Tribunal.
7. Right to cross-examination under Rule 12(6) and (7) of The Debts Recovery Tribunal (Procedure) Rules, 1993.
8. Interpretation of procedural law and its application by the Tribunal.

Detailed Analysis:

1. Recovery of Debt by the Bank:
Punjab National Bank filed an application before the Debts Recovery Tribunal (DRT) for recovery of Rs. 85,63,486/- with future interest at the rate of 18.5% per annum with quarterly rest till realization against the borrowers (petitioners) and other parties.

2. Counterclaim by the Petitioners:
The petitioners contested the Bank's claim and filed a counterclaim against the Bank. They alleged that the Bank, in violation of terms and conditions, re-imported goods to Mumbai, which were neither released nor re-exported, causing them significant loss.

3. Application for Production of Documents:
During the proceedings, the petitioners filed an application for the production of documents, which was contested by the Bank. The Bank claimed that they had already produced all available documents and did not possess any additional documents.

4. Application for Cross-examination of Bank Officers:
The petitioners filed an application for cross-examination of two Bank officers who had signed and affirmed the written statement to the counterclaim and the reply to the application for production of documents. The Bank opposed this application, and the DRT rejected it.

5. Rejection of Applications by Debt Recovery Tribunal:
The DRT rejected both the applications for production of documents and cross-examination of Bank officers. The petitioners were allowed to withdraw their applications with liberty to file fresh ones, but the fresh applications were also rejected by the DRT.

6. Appeal to Debt Recovery Appellate Tribunal:
Aggrieved by the order of the DRT, the petitioners appealed to the Debt Recovery Appellate Tribunal (DRAT), which also dismissed their appeal. The DRAT held that the necessity for cross-examination was not made out in the application filed by the appellants.

7. Right to Cross-examination under Rule 12(6) and (7) of The Debts Recovery Tribunal (Procedure) Rules, 1993:
The petitioners challenged the correctness of the DRAT's order, arguing that Rule 12(6) and (7) of the Debts Recovery Tribunal (Procedure) Rules, 1993, mandates the authority to allow cross-examination in the interest of justice. The respondent Bank contended that the right to cross-examination is an exception and not a rule, and the Tribunal has the discretion to decide on such applications.

8. Interpretation of Procedural Law and Its Application by the Tribunal:
The judgment emphasized that procedural laws are designed to achieve the ends of justice and must be interpreted to ensure compliance with the basic rule of law. The Tribunal has the discretion to permit cross-examination if it is necessary for a fair determination of the case. The Tribunal must record sufficient reasons for allowing or denying cross-examination.

Conclusion:
The High Court quashed the impugned orders of the DRT and DRAT, holding that the Tribunal erred in law by declining the request for cross-examination of the Bank Manager. The petitioners were granted liberty to cross-examine the Bank Manager in accordance with law, ensuring a fair and complete adjudication of the disputes. The rule was made absolute, with parties bearing their own costs.

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