2008 (1) TMI 830 - SC - Companies Law

Whether 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 was correct? Held that - In the present case, the appellants very artistically have suppressed the fact of their filing of written statement in the case while it was proceeding in the Civil Court and were being represented by their lawyer till the date of its transfer to the Tribunal at Jabalpur . The High Court, in our judgment, was equally right in dismissing the petition confirming the finding of the DRAT that the appellant had artistically suppressed material fact and no interference was called for as there is no 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. Appeal dismissed.

Issues Involved:
1. Maintainability of the civil suit against the appellants.
2. Service of summons and ex-parte proceedings before the Debt Recovery Tribunal (DRT).
3. Suppression of material facts by the appellants.
4. Application of Section 22(2)(g) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (the Act) and Rule 13 of Order IX of the Code of Civil Procedure, 1908 (CPC).

Detailed Analysis:

1. Maintainability of the Civil Suit Against the Appellants:
The appellants contended that they had resigned from the Directorship of Adhunik Detergent Ltd. on August 18, 1989, and thus were not liable for the loan repayment. They argued that the suit against them was not maintainable and requested their deletion from the array of parties. However, the Debt Recovery Tribunal (DRT) and the Debt Recovery Appellate Tribunal (DRAT) held that the appellants were aware of the proceedings and had filed a written statement in the civil suit. Consequently, the High Court confirmed the orders of the Tribunals, rejecting the appellants' contention regarding the maintainability of the suit.

2. Service of Summons and Ex-Parte Proceedings Before the DRT:
The appellants argued that they were not served with summonses after the case was transferred to the DRT and thus were not afforded an opportunity to be heard. They contended that the Bank had mala fide intentions by serving summonses at an old address and publishing them in a Hindi newspaper with no wide circulation. However, the DRT found that the summonses were properly served and published in Navbharat Times, a newspaper with wide circulation. The Tribunal concluded that the appellants had avoided service to delay the proceedings. The DRAT and the High Court upheld this finding, stating that the appellants were aware of the proceedings and had a duty to appear before the DRT.

3. Suppression of Material Facts by the Appellants:
The Tribunals and the High Court found that the appellants had suppressed material facts in their application under Section 22(2)(g) of the Act. The appellants did not disclose that they had appeared before the Civil Court, filed a written statement, and raised preliminary objections. The DRAT observed that the appellants had "artistically suppressed" these facts, creating an impression that they were unaware of the proceedings. The High Court concurred, emphasizing that the appellants had not come forward with clean hands and had intentionally concealed relevant information.

4. Application of Section 22(2)(g) of the Act and Rule 13 of Order IX of the CPC:
Section 22(2)(g) of the Act grants the DRT the same powers as a Civil Court under the CPC, including setting aside ex-parte orders. Rule 13 of Order IX of the CPC, as amended in 1977, stipulates that an ex-parte decree can be set aside if the summons was not duly served or if the defendant was prevented by sufficient cause from appearing. However, the second proviso to Rule 13 states that a decree cannot be set aside merely on the ground of irregularity in service if the defendant had notice of the hearing date and sufficient time to appear. The Supreme Court held that the appellants had knowledge of the proceedings and sufficient time to appear. Therefore, the ex-parte order could not be set aside based on the alleged irregularity in service.

Conclusion:
The Supreme Court dismissed the appeal, holding that the appellants had not made out any ground to set aside the orders of the DRT, DRAT, and the High Court. The Court found that the appellants were aware of the proceedings, had suppressed material facts, and had not come forward with clean hands. The application of Section 22(2)(g) of the Act and Rule 13 of Order IX of the CPC was upheld, and the ex-parte order was deemed valid. The appeal was dismissed with costs.

← Previous Next →