Allowed

Mr. Raj H. Eswaran v. Asset Reconstruction Company (India) Limited

DRT8 Dec 2023MA/5/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed a petition to set aside an ex parte final order in a prior arbitration application. The court held that the Tribunal was not functus officio under Section 22(2)(g) of the RDDB Act and recalled the order due to failure of proper service on the petitioner and the operation of the IBC 2016 moratorium, restoring the matter for hearing.

What did the court decide?

The ex parte final order dated 28.3.2023 in TA No. 73/2022 is recalled/set aside, and the matter is restored for appropriate orders.

Mr. Raj H. Eswaran versus Asset Reconstruction Company… — Insolvency and Bankruptcy | DRT (2023)

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IN THE DEBTS RECOVERY TRIBUNAL –I AT CHENNAI

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Dated this 8^th Day of December, 2023

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PRESENT: SHRI A.S.JAYACHANDRA

Presiding Officer

M.A. 5 OF 2023

Arising out of

T.A. No.73 of 2022 [DD 25-03-2023]

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Mr. Raj H. Eswaran,

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Son of Mr. Hari Haran Eswaran, Pasupathnath, A Block, No. 26, Desika Road, Mylapore, Chennai – 600 004.

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. . . Applicant

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Versus

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1. Asset Reconstruction Company (India) Limited ,

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Repd. by its Chief Manager & Authorized Signatory Mr. Akshaay Rao, 10^th Floor, The Ruby, 29, Senapati Bapat Marg, Dadar West, Mumbai, Maharashtra – 400 028. . . . 1^st Respondent

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2. M/s. Easun Products of India Private Limited ,

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Repd. by its Chairman and Director, Mr. Hari Eswaran,

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Registered office at No. 672, Anna Salai, 6^th Floor, Temple Towers, Nandanam, Chennai – 600 035.

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3. The Hongkong and Shangai Banking Corporation Limited ,

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Repd. by its Branch Manager, No. 30, Rajai Salai, Post Box 11, Chennai – 600 001.

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4. Axis Bank Limited ,

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Repd. by its Branch Manager, No. 3, Old No.2, Club House Road, Anna Salai, Chennai – 600 002.

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5. DBS Limited ,

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Represented by its Branch Manager, No. 806, Anna Salai, Chennai – 600 002.

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6. ICICI Bank Limited ,

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Repd. by its Branch Manager, Arihant Towers, No. 24, South Phase, 4^th Floor, East Wing, Ambattur Industrial Estate, Ambattur, Chennai – 600 058. . . . Respondents

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Ld. Counsel for Applicant :- M/s.T.K.Bhaskar Ld. Counsel for Respondents :- M/s.V.V.SivaKumar

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The parties to the application are referred as Petitioner and Respondent herein. The Petitioner [defendant no-2 in TA no-73/2022 disposed by this Tribunal on 28.3.2023] files the present petition under section 19(25) r/w 22(2) (g) of the Recovery of debts and bankruptcy Act 1993 with a prayer to set aside the exparte final order. The same is filed on 27.4.2023.

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The Petitioner contends that he received the copy of the final orders by post on 3.4.2023 and also through the website of this Tribunal and further contends that he came to know that he was placed exparte on 28.4.2022. It is his case that he had never received the notices/ summons in the TA. On 28.4.2022 this Tribunal (the Ld Predecessor) placed D1 to D4 exparte). It is his contention that had he been served with the notice he would have participated in the proceedings to submit his version.

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It is also submitted that the applicant in TA had not disclosed the facts with regard to the insolvency proceedings initiated against this Petitioner by State Bank of

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India on 10.2.2021 under section 95 of the IBC 2016 before the Ld NCLT. Section 96 of the IBC had the effect of moratorium against the personal estate of this Petitioner and therefore the exparte final order dt 28.3.2023 could not have been passed in view of the statutory moratorium. Hence the application.

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Upon notice, the respondents had filed the counter. It is submitted that the private notices were served on several occasions’ i.e, 22.10.2021, 22.11.2021, 19.2.2021 & 22.4.2022. It is also submitted that this Petitioner was served and acknowledgement is filed before the Tribunal which placed him exparte on 28.4.2022. There are no tenable grounds to sustain the present petition.

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The applicant in TA further submits that the final order on merits cannot be recalled since the MA petitioner was given sufficient opportunities. The Respondents herein were not aware of the orders of the Hon’ble NCLT. This petitioner who attended all the meetings of COC did not inform the members of COC about the proceedings against him u/s 95 of IBC. Since the MA petitioner has not made out a case it is prayed that the instant petition be dismissed.

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Rejoinder is also filed retreating the petition averments and also with a tabulation of dates. It is submitted that in the teeth of section 96(1) of IBC, the final orders passed exparte has no bearing. It is submitted that the provisions of IBC overrides the RDB Act. Hence the same be recalled. There was no obligation on the part of this Petitioner to have disclosed the fact of the proceedings u/s 95 of IBC against him pending. The Principles of natural justice shall prevail to render the effective adjudication.

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Heard the Ld Senior Counsel Sh.T.K.Bhaskar and Sh.Abhijeet appearing for the petitioner and Sh.Chetan Ld. Counsel for the respondents.

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The ld Senior Counsel for the petitioner argues that this Tribunal does not become ‘functus officio’ in so far as exercising the powers to recall the exparte final order. It is vehemently argued that the acknowledgement card found in token of service against his client does not bear the signature of his client and he did not receive the summons. One Mr.Ravichandran who had signed in Tamil on the card is nowhere connected to his Client. Likewise another card bearing the signature of one Mr.R.DuraiPandian also is not authorised by his client to accept the notice. It is further argued that the 2^nd defendant had never received the notices.

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The Ld Senior Counsel for the petitioner had relied on the following rulings in support of the petition;

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a) Grindlays Bank Ltd Vs Central Government Industrial Tribunal and others 1980(sup) Supreme Court Cases 420 – to urge that

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‚ When sub-s. (1) ofs. 11expressly and in clear terms confers power upon the Tribunal to regulate its own procedure, it must necessarily be endowed with all powers which bring about an adjudication of an existing industrial dispute, after affording all the parties an opportunity of a hearing. We are inclined to the view that where a party is prevented from appearing at the hearing due to a sufficient cause, and is faced with an ex parte award, it is as if the party is visited with an award without a notice of the proceedings. It is needless to stress that where the Tribunal proceeds to make an award without notice to a party, the award is nothing but a nullity. In such circumstances, the Tribunal has not only the power but also the duty to set aside the ex parte award and to direct the matter to be heard afresh.‛

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b) Asit Kumar karVs State of West Bengal and Ors. (2009) 2 SCC 703 (Supreme Court of India)- wherein it is held;

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‚There is a distinction between a petition under Article 32, a review petition and a recall petition. While in a review petition the Court considers on merits where there is an error apparent on the face of the record, in a recall petition the Court does not go into the merits but simply recalls an order which was

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passed without giving an opportunity of hearing to an affected party‛.

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c) Standard Chartered Bank VsRadnik Exports &ors (2012) SCC online DRAT 66- in this ruling it is held that since the order was an exparte one the same could not have been reviewed and it could be recalled. It also held that in a recall petition the court does not go into the merit but simply recalls an order which was passed without giving an opportunity of hearing to the affected party.

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d) Maytas Properties Ltd vs. KrishnaKularu (2014) 183 Comp Cas 569 ( High Court of Andhra Pradesh) – Honble AP, High court held that a party seeking recall has to establish that the procedure followed suffered from any legality which vitiates the proceedings or that the matter was disposed on the day on which he could not attend for no fault of him.

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e) Sharp Industries Vs Bank of Maharastra 2020 SCC Online DRAT 118 ( DRAT) - to urge that though the notices sent through RPAD were served and presumption can be drawn under section 27 of the general clause Act if the same is not returned un-served or not rebutted by any evidence.

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1. On the other hand, the ld Counsel for the respondents Sh.Chetan opposing the present petition, relied on the ruling of C.C.Alavi Haji Vs PalapettyMuhammed and another (2007) 6 Supreme Court Cases 555 - to emphasise that the pleadings concerning raising of the presumption under section 27 of general clause act is not at all necessary when once the notice is sent to the correct address and the same is to be held as sufficient service. Further reliance is based on the ruling of Dwarka Das Vs State of MP 1999(3) SCC 500 which rules that section 152 and 151 of CPC only permits corrections which are accidental or non- intentional and the same cannot be invoked to modify, alter or add to the terms of the original judgement. He submits that after passing of the judgement the court or the Tribunal becomes ‘functus officio’ and thus not entitled to vary the terms of judgement. He submits that in the

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instant case this tribunal has become ‘functus officio’ and cannot recall the final orders.

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He also relied on State Bank of India & others Vs S.N.Goyal (2008) 8 SCC 92 wherein it is held as under;

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‚It is true that once an Authority exercising quasi judicial power, takes a final decision, it cannot review its decision unless the relevant statute or rules permit such review. But the question is as to at what stage, an Authority becomes functus officio in regard to an order made by him. P. Ramanatha Aiyar's Advance Law Lexicon (3rd Edition, Vol.2 Pages 1946-47) gives the following illustrative definition of the term 'functus officio’:

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"Thus a Judge, when he has decided a question brought before him, is functus officio, and cannot review his own decision."

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Black's Law Dictionary (Sixth Edition Page 673) gives its meaning as follows :

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"Having fulfilled the function, discharged the office, or accomplished the purpose, and therefore, of no further force or authority".

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Having considered the pleadings, the submissions made at the bar, the following points arise for consideration in the instant proceedings.

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I) Whether this Tribunal becomes ‚Functus Officio‛ to entertain the present proceedings.

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II) Whether the petitioner makes out a case for recalling the exparte final order dt 28.3.2023 in TA No-73/2022.

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1. To answer the first point, the ld Counsel for the respondents had relied on State Bank of India & others supra. It is his contention that the quasi-judicial authorities like Tribunals do not have powers to review its decision unless the act and rules permit the review. He further submits that when a Judge decides a question brought before him he becomes ‘functus officio’.

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In the instant case it is to be noted that the petition is filed u/s 19(25) of the RDDB Act. Sub section 25 of section 19 vests the powers with the Tribunal to pass such orders which may be necessary and expedient or to secure the ends of justice. Section 22(2)(g) empowers the Tribunal to set aside any order of dismissal of any application for default or any order passed by it exparte.

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The Ld Counsel for the petitioner submits that the said provision found in the statue confers power to set aside the exparte order which includes the exparte final order also. After going through the relevant provisions of law, it cannot be said that the powers to set aside the orders of exparte are confined only to such of the interlocutory orders only. An order of exparte also includes the final orders passed. Therefore the ruling relied by the ld Counsel in Dwarka Das supra that this Tribunal becoming ‘functus officio’ cannot be entertained since the relevant the provisions of the statue empowers the Tribunal and thus cannot be dismissed on the simple ground that the Tribunal has become ‘functus officio’. When the statue itself provides certain powers to set aside the exparte orders, the ruling relied by the ld Counsel which dealt primarily the powers u/s 151 and 152 of CPC will not come to his help. In the said case the Trial court has not granted the interest pendente-lite despite the prayer. However the Trial Court entertains the petition under section 152 in granting the interest. This ruling is distinguishable on facts. Thus this Tribunal is of the opinion that in entertaining the petitions seeking setting aside the exparte order which are permitted under the RDDB Act cannot be termed as becoming ‘functus officio’ after passing the exparte final orders, since the powers vested with the Tribunal u/s 22 (2) (g) are akin to the provisions of order 9 Rule 13 of CPC. Thus the Point No-1 is answered accordingly.

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Now this Tribunal has to examine the merits of the case seeking the setting aside of the exparte order.

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No doubt that the addresses found in the acknowledgement card which were examined by my Ld Predecessor in placing the defendant exparte vide order dt 28.4.2022 are not denied by the defendant no-2 who approaches with the instant petition. While disposing the TA-73/2022, at the behest of the applicant recovery is sought against Defendant no-2 only at Para 2.1, this Tribunal also noted that D1 to D4 were placed exparte and did not contest. It is the case of the petitioner that the persons whose signatures found on the acknowledgement cards are not the authorised persons to receive the summons. This cannot be valid arguments to rebut the presumption of service.

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However the other ground urged at Para 7 of the petition is that the State Bank of India had initiated proceedings u/s 95 of the IBC code on 10.2.2021 and that the Hon’ble NCLT by an order had appointed the interim resolution professional is not denied by the contesting financial institution. In the reply filed, it is submitted that the orders of the Ld. NCLT, Chennai was not in the knowledge of the applicant in TA. It is also pleaded by the contesting party that the defendant no-2 though participated in the COC meeting had not brought to the knowledge of the applicant in TA about the orders of the NCLT. Therefore the order passed by the NCLT concerning the present petitioner is not in dispute.

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The ld Counsel for the petitioner submits that section 96 of the IBC Code which reads as under;

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‚When an application is filed under section 94 or section 95—

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(a) an interim-moratorium shall commence on the date of the application in relation to all the debts and shall cease to have effect on the date of admission of such application; and

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(b) during the interim-moratorium period—

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(i) any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and

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(ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt.

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(c) Where the application has been made in relation to a firm, the interim-moratorium under sub-section (1) shall operate against all the partners of the firm as on the date of the application.

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(d) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator‛.

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Considering the statutory embargo and having taken note of that such an application was filed before the Ld NCLT on 10.2.2021, the interim moratorium commenced from that date and that the provisions of section 96 of IBC having over riding effect, this Tribunal in the absence of proper representation and having not been put to the knowledge about the IBC proceedings had passed the exparte final order. Now having been put to the knowledge of the same the contention of the ld Counsel appearing for the petitioner cannot be brushed aside. Therefore this Tribunal is of the considered opinion that the defendant no-2 in the exparte final order TA No-73/2022 dt 28.3.2023 had made out a case for setting aside the exparte final orders. Consequently the following;

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The MA -5/2023 stands allowed.

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TA No-73/2022 is restored on record to its original number. The exparte final order dt 28.3.2023 is hereby recalled/set aside.

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The Recovery Certificate issued if any consequently stands recalled.

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The matter be called on 3.1.2024 for appropriate orders.

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Sd/- (A.S.JAYACHANDRA)

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PRESIDING OFFICER DRT-I, CHENNAI