Ms Neelam Enterprises versus Bank of India

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Reportable/ Not Reportable

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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(Misc Appeal Dy. No. 546 of 2024)

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(Arising out of I.A. No. 502 of 2024 in OA No. 702 of 2019 in DRT-2 Hyderabad)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA

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CHAIRPERSON

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M/s Neelam Enterprises, Rep by its Proprietor N. Ghanshyam Chanakya, R/o, B-5, Anchillary, Bhanur Mandal, Patancheru, Medak -502305.

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N. Ghanshyam Chanakya, S/o, N.B. Chanakya aged 51 years, Occ: Business, R/o. G2, Plot No. 887, HMT, Swarnapuri Colony, Miyapur, Hyderabad- 500040.

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… Appellants

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-Versus-

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Bank of India, represented by its Authorised Officer having its head office at Star House, C-5, Block, Bandra Kurla Complex, Bandra East Mumbai and branch amongst other places at Madhapur Branch, Plot No. 38, D-No. 98/11/3, Next to Amantran Hotel, Arunodaya Colony, Madhapur, Serlingampally, Hyderabad.

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… Respondents Counsel for the parties Mr. Vudiga Ravinder, Learned Counsel for the Appellants None for Respondents

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JUDGMENT : On 11^th July, 2024

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THE APPELLATE TRIBUNAL :

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Admission

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I.A. No. 317 of 2024

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I.A. No. 317 of 2024 Application under Section 5 of Limitation Act for condonation of delay in filing the Appeal.

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Impugned order is passed on 08.05.2024 while the Appeal is filed on 18.06.2024.

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2. Having considered the submission made by the Learned Counsel for the Appellant, I found the ground to be sufficient. Accordingly, I.A. No. 317 of 2024 is allowed. Delay in filing the Appeal is condoned.

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3. Heard the Learned Counsel for the Appellant and perused the record.

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4. Instant Appeal is preferred against an order dated 08.05.2024 passed by Learned DRT-2 Hyderabad in I.A. No. 502 of 2024 arising out of O.A. No. 702 2019 wherein the Learned DRT dismissed the I.A. No. 502 of 2024. I.A. was filed for setting aside the order dated 28.10.2022. Learned DRT vide order dated 28.10.2022 closed the right of Appellant for filing the written statement.

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5. Feeling aggrieved by the impugned order, Appellant preferred the Appeal. 6. As far as facts of the matter are concerned, an O.A. No. 702 of 2019 was filed by the Bank against the defendants under Section 19 of the Recovery of Debts and Bankruptcy Act. Notices were issued to the defendants and were served upon the Appellant. After service of the notice and summons, the written statement was not filed by the Appellant. It is admitted by him in his affidavit in I.A. No. 502 of 2024 in Para No. 3 that he received the summons on 21.10.2019. Thereafter, written statement was not filed and the right to file the written statement was closed by the

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Learned DRT on 28.10.2022. Subsequent thereto, I.A. No. 502 of 2024 was filed for recalling of the order on the ground that the Appellant has engaged one Counsel who assured the Appellant that he will file the written statement and he pursued the matter but he did not file the written statement and even the ‘No Objection to engage new Counsel was not initially given by him. Thereafter with long delay he had given the no objection for engaging new Counsel. Thereafter, when the matter was posted for defendant’s evidence, objection was raised by the Bank that written statement is not filed. Then the Appellant filed the Application I.A. No. 502 of 2024 for setting aside the order dated 28.10.2022.

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7. Without entering into the merit of the matter it would be appropriate to reproduce the provisions of Section 19(5)(i) of the Recovery of Debts and Bankruptcy Act, 1993 which is as under:

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19. (5)(i) The defendant shall within a period of thirty days from the date of service of summons, present a written statement of his defence including claim for set-off under sub-section (6) or a counter-claim under sub-section (8), if any, and such written statement shall be accompanied with original documents or true copies thereof with the leave of the Tribunal, relied on by the defendant in his defence:

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Provided that where the defendant fails to file the written statement within the said period of thirty days, the Presiding Officer may, in exceptional cases and in special circumstances to be recorded in writing, extend the said period by such further period not exceeding fifteen days to file the written statement of his defence;

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8. Now the question is as to whether the provisions are mandatory in nature or directory in nature?

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9. Provision of Order VIII Rule 1 C.P.C. and Order VIII Rule 10 C.P.C. are not applicable in the DRT. It is settled legal proposition that when any provision of the Act does not state any exception to a particular point of law, then other provision akin to the relevant provision of law is important. This view is fortified by the view taken by Hon'ble Madhya Pradesh High Court in M/s. Crest Steel and Power Private Limited va Punjab National Bank (2019 (1) MPLJ 703) which was duly approved by the Hon'ble Apex Court by dismissing the SLP.

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10. In Para 7 of the judgment in M/s Crest Steel (supra) following observation made by the Hon'ble Madhya Pradesh High Court Court:

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“On the other hand, learned counsel for the Bank referred to Three Judge Bench judgment of the Supreme Court reported as New India Assurance Company Limited Vs. Hilli Multipurpose Cold Storage Private Limited, (2015) 16 SCC 22 (for short 'Hilli 1'), wherein the judgment in Kailash's case (supra) was found to be not correct view as the earlier Three Judges Bench Judgment in the case reported as Dr. J.J. Merchant and others -Vs- Shrinath Chaturvedi, 2002 (6) SCC 635 was not noticed by the Bench."

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11. In view of the observation of the Hon'ble Division Bench of Madhya Pradesh High Court, it is to be seen as to whether the provisions of Section of 19(5)(i) of the Act are mandatory or directory in nature?

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12. In Para 8 of Crest Steel (supra) Hon'ble Division Bench of Madhya Pradesh High Court has placed reliance on Central Bank of India Vs. State of Kerala [(2009) 4 SCC 94] wherein it was held that:

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"92. An analysis of the abovenoted provisions makes it clear that the primary object of the DRT Act was to facilitate creation of special machinery for speedy recovery of the dues of banks and financial institutions. This is the reason why the DRT Act not only provides for establishment of the Tribunals and the Appellate Tribunals with the Jurisdiction, powers and authority to make summary adjudication of applications made by banks or financial institutions and specifies the modes of recovery of the amount determined by the Tribunal or the Appellate Tribunal but also bars the jurisdiction of all courts except the Supreme Court and the High Courts in relation to the matters specified in Section 17. The Tribunals and the Appellate Tribunals have also been freed from the shackles of procedure contained in the Code of Civil Procedure. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of the dues of banks and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the Jurisdiction of civil courts for frustrating the proceedings initiated by the banks and financial institutions.

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93. The enactment of the Securitisation Act can be treated as one of the most radical legislative measures taken by the Government for ensuring that dues of secured creditors including banks, financial Institutions are recovered from the defaulting borrowers without any obstruction. For the first time, the secured creditors have been empowered to take measures for recovery of their dues without the intervention of the courts or tribunals."

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13. Further, reliance is placed upon the judgment of Hon'ble Apex Court in Pegasus Assets Reconstruction Private Limited -Vs- Haryana Concast Limited [(2016) 4 SCC 47]

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wherein it is held that:

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"21. The RDB Act is of 1993 le. later to the Companies Act. Its avowed object is to provide for the establishment of tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto. This Act creates a special machinery for speedy recovery of dues of banks and financial institutions which, by an amendment of 2004 now includes a registered securitisation company or reconstruction company envisaged under the SARFAESI Act. Section 18 bars the jurisdiction of ordinary courts or authority in respect of matters falling within the jurisdiction of the Tribunal as specified in Section 17. An

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Appellate Tribunal is provided under Section 20. The power of the Tribunal extends to determining the debt due as well as Its realisation. Section 34 confers overriding effect upon this Act over any other law in force."

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14. It was also held in Para 13 of the judgment in M/s Crest Steel (supra) that

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"13- A reading of the Act would show that it is a complete Code providing for a Forum for adjudication of claim of the secured creditors and also to the procedure to be followed by the Adjudicating Authorities under the Act. It also mandates to ensure that there is expeditious disposal of the claim of the secured creditors, as huge public money is locked up on account of defaults of borrowers. Sub-section (4) of Section 19 of the Act provides for a show cause within thirty days of service of summons as to why relief prayed for should not be granted. In terms of sub-section (5), the defendant has to file written statement of his defence within a period of thirty days, including claim for set-off under sub-section (6) or a counter-claim under sub-section (8). The first proviso contemplates that the Presiding Officer in exceptional cases and in special circumstances can extend the period for filing of written statement, but not exceeding 15 days. In other words, the time prescribed for filing of written statement is normally thirty days, but can be extended in certain circumstances by another fifteen days. The argument of petitioners is that such provisions are directory relying upon Kailash's case."

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15. It was further held that in Crest Steel (supra) it was held that provisions of Order VIII Rule 1 CPC is not mandatory but directory in nature.

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16. In Hilli Multipurpose case [(2015) 16 SCC 20] it was held that in no case period beyond 45 days can be granted to the opposite party for filing its version of the case. In J.J. Merchant & Others -Vs- Shrinath Chaturvedi [2002 (6) SCC 635] issue relates to the applicability of the provision in Section 13 of the Consumer Protection Act, 1986 regarding

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failing to file reply to the complaint were in issue wherein it was held that in Para 15 and 17 are as under:

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"15. Under this Rule also, there is a legislative mandate that written statement of defence is to be filed within 30 days. However, if there is a failure to file such written statement within stipulated time, the court can at the most extend further period of 60 days and no more. Under the Act, the legislative intent is not to give 90 days of time but only maximum 45 days for filing the version by the opposite party. Therefore, the aforesaid mandate is required to be strictly adhered to."

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"17. In view of the aforesaid provisions, the Commission can certainly refer to Order VII Rule 14 which provides that where a plaintiff sues upon a document or relies upon document in his possession or power in support of his claim, he shall enter such documents in a list, and shall produce it in the Court when the plaint is presented by him and shall, at the same time deliver the document and a copy thereof, to be filed with the plaint. It appears that this mandatory requirement is not followed and thereafter, there is complaint of delay in disposal. Similarly, in case of written statement under Order VIII Rule I-A, defendant is required to produce the documents relied upon by him when written submission is presented. The Commission can always insist on production of all documents relied upon by the parties along with the complaint and the defence version."

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17. Further, the same judgment was relied upon by the Hon'ble Apex Court in the case of New India Assurance Co. Limited -VsHilli Multipurpose Cold Storage Private Limited, (2015) 16 SCC 20] wherein Para 16 Hon'ble Apex Court has held that:

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"16- In the aforestated circumstances, we have now to consider whether in a case under the provisions of the Act, where a complaint has been filed and the opposite party has not filed its version to the case within 30 days or within extended period of 45 days, which at the most could have been granted by the District Forum, the version given by the opposite party can be accepted."

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18. In Para 24 of the judgment of Hon'ble Apex Court the

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Three Judges Bench decision in J. J. Merchant case (supra) was followed wherein it was held in Para 13 that:

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"13 The question arose in the case of Dr. J.J. Merchant (supra) whether the Forum can grant time beyond 45 days to the opposite party for filing its version. After considering the aforestated section in the light of the object with which the Act has been enacted, a three-Judge Bench of this Court came to the conclusion that in no case period beyond 45 days can be granted to the opposite party for filing its version of the case."

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19. Further, it was held that judgment delivered in J.J. Merchant case (supra) followed the field and therefore, we are agreed the view that the District Forum can grant a further period of 15 days to the opposite party for filing of version or reply and not beyond that. Ultimately, in Para 29 of the judgment it was held that law laid down by the Three Judges Bench of Hon'ble Apex Court J.J. Merchant case (supra) should prevail.

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20. In Crest Steel (supra) at Para 11 Hon'ble Madhya Pradesh High Court has held as under:

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"11- The experience of more than 20 years to speed up recovery of public dues, the Act was amended while enacting The Insolvency and Bankruptcy Code, 2016 published on 28^th of May, 2016. The Act was also amended by another Central Act No.44 of 2016 "The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016." The later Act has inter-alia amended Section 19 of the Act. The amended Act (Section 31B) gives priority to the dues of the secured creditors over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority. 12- With this back ground, the relevant provisions of Act need to be extracted before the arguments raised by learned counsel for the parties are dealt with. The provisions read as under: -

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(5) (i) The defendant shall within a period of thirty days from the date of service of summons, present a written statement of his defence including claim for set-off under sub-section (6) or a counter-claim under sub-section (8), if any, and such written

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statement shall be accompanied with original documents or true copies thereof with the leave of the Tribunal, relied on by the defendant in his defence:

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Provided that where the defendant fails to file the written statement within the said period of thirty days, the Presiding Officer may, in exceptional cases and in special circumstances to be recorded in writing, extend the said period by such further period not exceeding fifteen days to file the written statement of his defence;

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(24) The application made to the Tribunal under subsection (1) or sub-section (2) shall be dealt with by it as expeditiously as possible and every effort shall be made by it to complete the proceedings in two hearings, and to dispose of the application finally within one hundred and eighty days from the date of receipt of the application."

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21. On the basis of the discussion made above we are of the considered view that the written statement was required to be filed within 30 days and in exceptional cases or in special circumstances be extended by the DRT by another 15 days. In the present case written statement was not filed either in 30 days or in extended 15 days. Provisions of the Act have to be assigned meaning thereby keeping in view the objective of the Act rather that to frustrate the object. Accordingly, I am of the considered opinion that defendant/respondent have no right to file written statement.

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22. The law laid down as above is squarely applicable upon the facts of the present case. Written statement was not filed within 30 days of service and thereafter not even extended period of 15 days. Accordingly, it was in violation of mandatory provisions of Section 19 (5)(1) of the Recovery of Debts and Bankruptcy Act, 1993.

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23. Accordingly, I am of the considered view that Tribunal has no jurisdiction to extend the period of 30 days and in exceptional cases for 15 days in O.A. proceedings. Accordingly, I am of the considered view that the Learned DRT has rightly dismissed the I.A. No. 502 of 2024. No interference is required in the matter.

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ORDER

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Appeal is dismissed at admission stage in limini. Judgment and order dated 08.05.2024 passed by Learned DRT-2 Hyderabad in I.A. No. 502 of 2024 arising out of O.A. No. 702 of 2019 is confirmed.

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No Order as to costs.

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File be consigned to Record Room.

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Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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Copy of the Judgment/ Final Order be uploaded in the Tribunal’s Website.

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Order signed and pronounced by me in the open Court on this the 11^th day of July, 2024.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 11^th July, 2024 2/tp

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Ms Neelam Enterprises v. Bank of India

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Ms Neelam Enterprises v. Bank of India

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