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Ambalal Sarabhai Enterprises Limited v/s International Asset Reconstruction Company Private Limited & Another

    Misc. Appeal Nos. 10 to 12 of 2021
    Decided On, 15 April 2021
    At, Debts Recovery Appellate Tribunal At Mumbai
    For the Appellant: Megha Jani alongwith Anshul Anjarlekar, i/b M/s. Raval Shah & Co. Advocates. For the Respondents: R1, Rohit Gupta alongwith Nikhil Rajani, i/b M/s. V. Deshpande & Co, Advocates.

Judgment Text
1. Heard Advocates for parties through Video Conference.

2. These three Appeals are argued together as point involved is common. Appellant here in filed application under Ex.80 dated 12 April 2018 (production and discovery of documents), I.A. 212/2020 seeking cross examination of Ms. Pallavi Sharma with reference to her Claim Affidavit dated 4th September 2017 and I.A. 292/2020 seeking cross-examination of Ms.Ankita Mannari with reference to her Claim Affidavit dated 11th November 2020 before Tribunal below and I.D. P.O. by common order dated 15th January 2021 dismissed all the three applications and aggrieved by the same present Appeals are filed.

3. Brief facts germine for the purpose of these Appeals are as follows. Central Bank of India and Bank of Baroda sanctioned Credit Facilities to one Swastik Household & Industrial Products Limited Bank of Baroda sanctioned Bill Discounting Facility and 22 bills worth of Rs.71,67,783.42 Ps. Were dishonoured. Bank of Baroda extended Bank Guarantee Facility and Bank guarantees were invoked and Bank paid Rs.20,40,243.19 Ps. Gujarat High Court sanctioned scheme in pursuant of which a Memorandum of Understanding was entered. As Appellant did not furnish guarantee in terms of understanding, Central Bank of India, Bank of Baroda filed joint Suit before the High Court recovery of money in Suit No.2520 of 1989. They also filed Appeals before High Court to set aside the scheme dated 24th December 1987. High Court disposed of these Appeals through order dated 27th February 1997. Appellant filed Special Leave Petition before Supreme Court challenging High Court’s order. Supreme Court disposed of Civil Appeal Nos.6545-6546 of 1997 and directed Appellant to execute guarantee for securing the dues in Suit No.2520 of 1989. In compliance of Supreme Court order Appellant executed Deed of Guarantee dated 16th December 2003 in favour of Central Bank of India and Bank of Baroda Suit No.2520 of 1989 was transferred to DRT on establishment of Tribunal. Due to BIFR proceedings Suit is not proceeded with. LARC (International Asset Reconstruction Company) is substituted in the Suit in view of Assignment Deed. In 2016 claim of Central Bank of India is dismissed and O.A. is proceeded with in respect of claim of LARC. On 4th September 2017 Claim Affidavit is filed on behalf of LARC. Appellant did not file their Claim Affidavit when DRT dismissed their application, this Tribunal by order dated 8th September 2020 permitted Appellant filed their Claim Affidavit. On 11th September 2020 Appellant filed its Claim Affidavit. LARC filed Claim Affidavit in answer to the Claim Affidavit of Appellant on 14th November 2020. Appellant filed I.A.No.212/2020 on 15.09.2020 and filed I.A.No. 292/2020 on 24th November 2020. Application under Ex.80 is filed on 12th April 2018 seeking production and inspection of documents. First Claim Affidavit by bank officer is filed on 14th March 2003, second Claim Affidavit by Ms.Pallavi Sharma is filed on 4th September 2017 and Additional Claim Affidavit of Ms.Ankita Mannari is filed on 11th November 2020.

4. Advocates representing both parties argued at length and also filed Written Submissions reiterating what all they have submitted orally. Firstly Advocate for Appellant submitted that the objection of Respondent that there is delay in filing this petition is not tenable. She submitted as per judgment of Supreme Court in Union of India V/s. Delhi High Court Bar Association (Reported in AIR 2002 S.C. 1479) the stage for filing application for cross examination of witness is only after completion of filing Claim Affidavits and in this case the Claim Affidavit of Appellant is filed on 11th September 2020 and first application seeking cross examination of Ms.Pallavi Sharma is filed on 15th September 2020 and second application seeking cross examination of Ms. Ankita Mannari is filed on 21st November 2020, thus there is no delay all. In response to this submission Advocate for Respondent submitted that judgment of Supreme Court in Union of India V/s. Delhi High Court Bar Association is in respect of challenging constitutional validity of RDDB Act and the same has to be read in context of questions that arose for considering in the case in which judgment is delivered. It is submitted that para relied on by Appellant are mere observations and passing remarks, they have no binding effect. He further submitted that decision is prior to amendment of the Rules and as per Rule 12 (9) as amended, discretion is with DRT and Tribunal below exercised its discretion and there is no wrong exercise of discretion as such this Tribunal cannot interfere. Before answering this aspect, it may be necessary to examine other aspects.

5. Advocate for Appellant contended Rule 12 (9) provides for production of witness for cross examination where it is necessary to do so. It is submitted that the words “necessary to do so” have been interpreted in Sonu Textile & Ors. V/s Punjab National Bank (2007 SCC Online BOM 935) and relied on para 12 to 15. The relevant extracts are as follows:

“12. “Necessary to do so” essentially need to be construed conjunctively while discerningly keeping in mind ‘to do so’ shall mean what to do. It has to be construed keeping in view the nature of the proceedings and the fact that it is a Special Tribunal constituted with the object of expeditious disposal of cases instituted by financial institutions. Thus, the Tribunal has to determine the issues fully and finally, while affording proper opportunity to the parties to lead their evidence, of course, in compliance to the provisions of Rule 12(6). The reasons to be recorded by the Tribunal thus should relate to these aspects and necessarily should be in conformity with the concept of basic rule of law. The expression “necessary” should also be given a meaning as contemplated under Order 1, Rule 1 of the Civil Procedure Code where an applicant be impleaded in the suit at any stage, being a necessary party. In accordance with the settled canons of law, a party is a necessary party when its presence before the Court is essential for factually and completely adjudicating the matters in dispute.

13. Again “Necessary to do so” are the words of great significance appearing in Rule 12(6) of the Rules in fact, that is the most essential condition which should be satisfied before the application for cross-examination can be allowed. The word “necessary” must be construed in the connection in which it is used. It is a word capable of various meanings. It may import absolute physical necessity, or that which is only convenient or useful or essential. It may also be construed as indispensable. The word “necessary” sometimes means such as must be; impossible to be otherwise; not to be avoided; inevitable. In the case of Faqir Chand Agarwal vs Smt. Bhagwanti, the Court wile explaining the words “necessary for disposal of suit” observed as under:

The use of this language in this Article can only mean that the question involved must be such that it is not possible to dispose of the suit without determining the constitutional question raised.

14. We are of the considered view that the expression “necessary” should be given reasonably liberal interpretation as it is part of procedural law and cannot be construed in abstract without reference to the facts and law of the case. It is always beneficial to construe such provisions with the aid of nceessitas cst lex temponis et loci. The word “necessary” should be understood and construed to suitably conclude the proceedings effectively and to meet the ends of justice in contradistinction to impossible to be otherwise. Some element of relaxation is essential as the Tribunal has been vested with the discretion to deal with such applications by recording appropriate reasons. The discretion vested in the Tribunal in furtherance to the provisions relating to procedural law is to be guided by settled judicial norms and is a controlled exercise of power unlike “do as you like”. The rule certainly contemplates restricted exercise of power and consequent power and discretion but it cannot be treated as an absolute proposition of law that in no circumstances the Tribunal would permit cross examination of witnesses. Such an approach would frustrate the cause of the Rule rather than further its cause. The procedure is something designed to facilitate justice and further its ends, not a penal enactment leading to absolute denial. Too technical a construction of a provision that leaves no room for elasticity of interpretation and, therefore, be guarded against, as procedural laws are founded on principle of natural justices. Reference can be made in this regard to the judgments of the Supreme Court in the cases of (i) Chinnammal v. P. Arumugham , and (ii) Ghanshyam Dass v Dominion of India . The object of Rule 12(6) is to permit cross-examination of a witness, if the condition precedent thereto is satisfied. To give the meaning of an absolute physical necessity would sub serve the purpose of procedural law. The appellants have made out a clear case that the documents were not produced by the Bank and it is stated that they are not in possession of the Bank. However, averments in that regard have been made in the affidavit filed on behalf of the Bank. Furthermore, the appellants had made out grounds which would certainly fall within the ambit of valid causes for justifying the prayer for cross-examination of the Manager A very maternal controversy arises between the parties as to on whose instructions the goods were brought back to Mumbai and under whose authority the goods were kept for such a long period, the liability of which is ultimately fastened upon the appellants. The admission of the Bank that they did not have G.Rs. In their possession but still facts have been averred in the affidavits would certainly bring the case of the appellants within the four corners of the provisions of Rule 12(6). In the original application filed by the Bank, it is stated in para5 that the goods were delivered to the consignee but later on the stand was that they were re imported to Mumbai. If such an averment is not supported by proper documents, which even partially is conceded before the Court, then the appellants would be entitled to cross examine the witness in regard to such averments made in the affidavit tendered in evidence. There cannot be fixed parameters for consideration of such applications and each case would have to be examined on its own merits.

15. 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, in our opinion, the application should have been allowed by the Tribunal. In the present case, we have no hesitation in coming to the conclusion that the Tribunal has erred in law declining the request of the applicants for cross examination of the Bank Manager.”

6. Referring to above paras she submitted cross examination is to be permitted if:

(a) The Applicants make out a clear case that documents are not produced by the Bank and it is stated that they are not in possession of the Bank.

(b) If an admission is made by the Bank that they do not have certain documents in their possession, but still aver facts in affidavit.

(c) If any averment is not supported by proper documents.

(d) Based on non production of documents, contradictory stand of the Bank, the documents being not supportive of each other and the controversy laced in the pleading a case can be said to be a fit case where request should be allowed to completely and fully determine and decide the claim of the Bank.

She also submitted following are undisputed facts:

(i) The suit was filed on original side of Bombay High Court in June 1989, much before the Recovery of Debts and Bankruptcy Act, 1993 (“DRT Act”) came into force. The plaint did not conform to the requirement of an Original Application that is filed under Section 19 of the DRT Act. No statement of account, much less a statement certified under Banker’s Books Evidence Act, 1891 was filed with the plaint.

(ii) The statement of only six months prior to filing of the suit of the account where main transaction took place is produced. Accounts, even after the suit is filed, are produced which establishes tat accounts were in operation even after filing of the suit. The Applicant however is silent about the recoveries made after filing of the suit.

(iii) The Applicant No.2 admits that it came across 57 documents for the first time in November 2020 (which inter alia resulted in admitted reproduction of claim) when she “once again checked the record” in the circumstances of Defendant No.1 calling upon Applicant No.2 to produce documents relied upon by it (Para 8, Page 878 of the Paper book).

(iv) The Applicant No.2 admits that documents have been lost / misplaced. (Para 6 Page 22 of the Reply to Misc Appeal 10 of 2021)

(v) Mr.Vidvans produces account of IFB Branch for the period from 07.08.1986 to 14.02.1989 (Pg 514-516 of Paper Book) and of Ambarnath Branch for the period from 01.01.1989 to 24.06.1989 (Pg 517-526 of Paper Book). Ms. Ankita Mannari states for the first time in November 2020 (Para 32, Pg 895 of the Paper Book) that cash credit facility was split into two, one being maintained at IFB, Mumbai main branch and other sub-limit of the same parked at Ambernath Branch. She produces statement of account of IFB Branch for the period between 07.08.1986 to 29.12.1988 (Pg 1031-1039 of the Paper Book) of Ambernath Branch for the period from 23.03.1989 to 15.11.1990 (Pg 1043 1048 of the Paper Book). The aforesaid statements show transactions even after filing of the suit. Though account at Ambernath Branch was the account where daily transactions took place, the accounts prior to 01.01.1989 are not produced. The accounts at IFB Branch shows entries from Ambernath Branch. No corresponding entry is found in the account at Ambernath Branch in whatever statement that is produced. The contradictions an accounts and suppression of major portion of the statement can be brought to light only by cross examining a witness.

(vi) So far as claim in respect of Bank Guarantee is concerned, no statement of account whatsoever is produced. There is every possibility that the amount of Bank Guarantee was debited to the Cash Credit Account in view of the Deed of Guarantee (Pg 472 of the Paper Book), which records as under (emphasis added):

“we hereby irrevocably authorize you at your discretion to make the payment to the beneficiary without reference to us to the debit of our cash credit account or any other account/s or appropriate any other sum / sums lying with you, as and when the beneficiary makes demand on the said guarantees issued by you on our behalf”.

Ms. Mannari’s affidavit also makes contradictory statements by stating on one hand in Para 27 of her affidavit (Pg 893 of the Paper Book) that the amount of bank guarantee invoked by IPCL, was debited to GI. Bill Passed due Account and by stating on the other hand in para 28 (Pg 893 of the Paper Book) that no separate account was maintained for bank guarantees.

(vii) The same thing goes for claim under Bill Discounting The amount of bill discounted, if any, must have been credited to Cash Credit Account as is clear from a note dated 30.09.1986 addressed by Chief Manager (482 of the Paper Book) which states that “we have written a letter to the party requesting them to impress upon the drawees to settle these bills early or alternatively to make adequate arrangement in their cash credit account to enable us to reverse these entries”. (emphasis added)

(viii) Silence about securities:

The dues of the Bank were well secured through hypothecation of goods (Pg 407-447 @ Pg 436 of the Paper Book). There has been siphoning of assets worth crores by Defendant No.2 to which the Bank has remained a mute spectator. The Applicant No.2 has neither produced any documents to show the security held by it from time to time, the assets held by Defendant No.2, steps taken by Applicant No.2 to safeguard and liquidate such assets and security, nor has made averments to that effect in the pleadings. The Defendant No.1as a Guarantor. It is therefore necessary to cross examine witnesses of Applicant No.2 to bring on record acts and omissions of Applicant No.2 which were inconsistent with the rights of Defendant No.1 as also with respect to omissions on the part of Applicant No.2 in doing all such acts which their duty to the guarantors required them to do as also to establish impairment and loss of eventual remedy which the guarantor has under law against the Principal Debtor.

By referring to above, it is submitted that confronting a witness with such contradictions, non-production, selective production and suppression has bearing on the claim and Applicant should not be deprived of opportunity to cross examine the witness.

7. In answer to the above argument of Appellant, Advocate Shri. Rohit Gupta, Advocate for Respondents, submitted three conditions are to be satisfied to invoke Rule 12 (9) and they are (1) the desire on the part of one of the parties for production of a witness for cross examination, (2) the opinion on the part of Tribunal that it is necessary to permit such cross examination and (3) recording of sufficient reasons by Tribunal to permit cross examination. It is submitted in the present case Trial Court judiciously applied law and followed Rule 12 (9) and there is no infirmity that requires interference from this Tribunal. It is submitted Hon’ble Supreme Court in Delhi Bar Association case held cross examination in case of banks is a rarity and not the normal course. He referred to following extract from that judgment:

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 it 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 a affidavits, in such a case, would not be sufficient.

8. It is further submitted that main purpose for which application for cross examination was filed pertains to bills discounting facility, bank guarantee and statement of account. It is submitted it is evident from record that Appellant was fully aware at all times of the discounting of the bills of exchange and its default, the drawer of all the bills of exchange were all parties related to / associated to the appellant and same can be visualised from the material on record.

9. It is submitted that judgment of Sonu Textile has no application and Respondent rely on judgment of High Court of judicature at Hyderabad in Aditya Steel Industries, Medchal & Ors. V/s. Kotak Mahindra Bank wherein it is held an officer who swear to an affidavit after long time would only speak to facts as disclosed in the files, in such case there is no use of putting questions to such officer who does not have personal knowledge of transaction. It is further submitted in Sonu Textile case cross examination was permitted as there was counter claim therefore non-production of documents by bank therein was held relevant, but here it is not like so, therefore, that decision has no application.

10. It is not in dispute reliefs claimed in interlocutory application governs rule 12 (9) of DRT (Procedure) Rules, 1993. It may be relevant to read the same which is as follows:

“(9) The Tribunal may at any time for sufficient reason order that any particular fact or facts shall be proved by affidavit, or that the affidavit of any witness shall be read at the hearing, on such conditions as the Tribunal thinks reasonable:

Provided that after filing of the affidavits by the respective parties where it appears to the Tribunal that either the applicant or the defendant desires the production of a witness for cross examination and that such witness can be produced and it is necessary to do so, the Tribunal shall for sufficient reasons to be recorded, order the witness to be present for cross-examination, and in the event of the witness not appearing for cross-examination, then, the affidavit not be taken into evidence and further that no oral evidence other than that given in the provision will be permitted.”

11. From a reading of the above it is clear discretion is with Tribunal to call any witness for cross examination. Tribunal shall satisfy that production of a witness is necessary depending on the facts of a given case.

12. Advocate for Appellant mainly focused on the aspect that accounts are maintained even after the suit, that full statements of accounts are not produced and the affidavits of three deponents contradicts with each other on material points. As rightly pointed out by other side advocate, these aspects are not grounds to call a witness for cross examination. The points focused are already on record, it is for the Tribunals to finally assess them while deciding the issue of entitlement of claim amount. Further the two witnesses of whom Appellant intends to cross-examine have no personal knowledge and they were not the officers at the time of transactions and their affidavits are purely based on the records. This Tribunal as Appellate Tribunal shall examine whether Tribunal below judiciously exercised its discretion or not and this Tribunal cannot say anything about the correctness of the statements of deponents or about the correctness of the statements of deponents or about maintenance of accounts even after suit is filed etc. It is for the Appellant to persuade these aspects in the Tribunal below while dealing with evidence of deponents. As rightly pointed out by advocate for Respondent whether cross examination is necessary or not depends on facts of each case and in this case Appellant wants the witnesses for cross examination with reference to facts which are already on record. So the request of Appellant for cross examination is not bona fide. Tribunal below elaborately dealt the request of Appellant and there is absolutely no infirmity in the impugned order. Facts in the decision of Andhra Pradesh High Court relied on by Respondent are nearer to the facts of this case as the affidavits of Ms. Pallavi Sharma and Ma. Ankita Mannari are not based on personal knowledge and they were not the officers at the time of transactions. Further in Sonu Textiles case, Affidavits filed are contrary to pleadings therefore, judgment of Bombay High Court where counter is also there, is not helpful to Appellant. Facts of Sonu Textiles case are completely different from case on hand.

13. Now coming to production of documents, request of appellant is for production of 22 bills, copy of statement of account for bills discounting in the name of M/s.Swastik Household as on 30th June 1988, guarantees issued by assignor bank, statement of account of all guarantees invoked and correspondence between IPCL and Applicant. During course of argument except stating that there is no delay in filing Ex.80 for production and inspection, nothing is stated how they are relevant to decide the issue involved in the O.A. Appellant referred to decision of Hon’ble Supreme Court in M.L.Shethi V/s Shri. K.P.Kapoor (reported in 1972 SCC 427) as to the entitlement of parties for production. Nothing is argued as to how production of these documents is relevant in solving the issues involved in the O.A. In answer Advocate for Respondents submitted that documents in possession of Respondents have been submitted before the Tribunal below. I have perused the mat

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erial papers and impugned order dated 15th January 2021.Ld.PO in paras 35, 36 and 37 dealt this aspect and rightly held such a request was made belatedly. Normally remedy of inspection of documents would be available immediately after filing written statement. In this case written statement is filed in 2003 and additional written statement is filed in 2017. Petition under Ex.80 is filed in 2018. As per section 22 of RDDB Act, Tribunal can exercise the powers vested in C.P.C. in respect of certain aspects and one such aspect is discovery and production of documents. Order 11 of C.P.C. deals with discovery, inspection etc, Basically discovery means a pre-trial procedure under which each party is given opportunity to obtain evidence from opposite party or parties. In fact, it is a procedure wherein parties get a chance to exchange information regarding the evidence which will be presented during trial. Hear the suit is at final stage. There is no whisper as to how these documents are relevant in deciding the controversy between the parties. Respondent herein filed the O.A. and their claim is to be established by them. If the evidence on record is not sufficient to established by them. If the evidence on record is not sufficient to establish the claim, it is the risk of Respondent. Appellant is not pleading discharge, their contention is they are not liable. So mere showing entitlement is not sufficient for production and inspection of documents. As rightly pointed out by advocate for Respondent, Appellant failed to make out any case and Tribunal below rightly refused the request. 14. On a security of material, I have no hesitation in holding that request of Appellant for production and inspection is not bona fide and Tribunal below was right in refusing their request. 15. With reference to calling Ms. Pallavi Sharma and Ms. Ankita Mannari for cross examination, I am of the considered view that there are no merits in the case as such whether there is delay or not in filing applications have no bearing. According to Appellant, facts referred in para 3.2 of their written submissions are either undisputed or admitted. If that is the case where is the need or necessity to cross examine with reference to admitted or undisputed facts, therefore I have to accept the objections of Advocate for Respondent that these applications are to further delay the case. 16. For the above reasons, it is held that there are no grounds to interfere with orders dated 15 January 2021 of DRT-I, Mumbai, and all the Appeals deserve dismissal. 17. In the result, all the Appeals are dismissed with costs. 18. All other Miscellancous Applications, if any, are dismissed as infructuous.