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International Asset Reconstruction Co Pvt Ltd. v/s Ambalal Sarabhai Enterprises Limited & Another

    Writ Petition (L) No. 4045 of 2020

    Decided On, 29 October 2020

    At, High Court of Judicature at Bombay


    For the Petitioner: Rohit Gupta a/w Nikhil Rajani i/by V. Deshpande & Co., Advocates. For the Respondents: R1, Mihir Thakore, Senior Advocate a/w Megha Jani, Rishabh Shah i/by Raval Shah & Co., Advocates.

Judgment Text

Milind N. Jadhav, J.1. Heard.2. Rule. Rule made returnable forthwith and the matter is heard finally by consent of the parties.3. This Writ Petition has been filed under Articles 226 and 227 of the Constitution of India assailing the Order and Judgment dated 8 September 2020 passed by the Debts Recovery Appellate Tribunal, Mumbai ("DRAT" for short) thereby setting aside the order dated 4 August 2020 passed by the Debts Recovery Tribunal-1, Mumbai ("DRT" for short) seeking condonation of delay in filing Claim Affidavit by Respondent No. 1.4. Before adverting to the submissions advanced by the parties, it will be apposite to consider the relevant facts briefly:-(i) Petitioner is an Asset Reconstruction Company and acting in its capacity as Trustee of the IARCBOB- 01/07 Trust. Petitioner is an assignee of Bank of Baroda who has assigned the debt due to it from Respondent No. 2 in favour of the Petitioner under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act" for short).(ii) Respondent No. 1 is a guarantor in respect of the amount due and payable by Respondent No. 2. Respondent No. 2 was earlier a division of Respondent No. 1 before it was demerged into a separate entity.(iii) Originally Central Bank of India and Bank of Baroda filed a joint suit in this Court being Suit No. 2520 of 1989 for recovery of an amount of Rs. 7,90,02,617.69 due and payable to Bank of Baroda and Rs. 3,25,85,341.28 due and payable to Central Bank of India together with interest thereon at the contractual rate till payment and / or realization. The aforesaid suit was transferred to DRT and renumbered as Transfer Original Application No. 2571 of 1999.(iv) Multiple proceedings took place between the parties culminating in the Hon'ble Apex Court passing an order dated 20 November 2003 in Civil Appeal Nos. 6545 and 6546 of 1997, inter alia, directing Respondent No. 1 to execute a guarantee guaranteeing the dues in Suit No. 2520 of 1989 filed by the two banks which was pending before the DRT, Mumbai.(v) In compliance of the Apex Court direction, Respondent No. 1 executed Deed of Guarantee dated 16 December 2003 in favour of Central Bank of India and Bank of Baroda.(vi) Petitioner vide letter dated 29 December 2010 invoked the Guarantee dated 16 December 2003 and called upon Respondent No. 1 in its capacity as a guarantor to pay to the Petitioner a sum of Rs. 377,70,51,204.90 due and payable as on 30 November 2010 together with interest till payment and / or realization.(viii) After invocation of the Guarantee, Original Application before the DRT, Mumbai was amended and various documents and orders were placed on record which had occurred subsequent to the filing of the suit. Winding up proceedings were initiated by the Petitioner against Respondent No. 1 which were ultimately dismissed on the ground that the Guarantee would be enforceable only after adjudication of Original Application pending before the DRT.(ix) Petitioner filed its Claim Affidavit dated 10 April 2003 in the Original Application. Petitioner also filed its additional claim affidavit dated 4 September 2017 subsequently.(x) By order dated 4 September 2017, DRT directed Respondent No. 1 to file its Claim Affidavit. DRT granted extension of time to Respondent No. 1 on 2 November 2017 and recorded as under:-"The counsel appearing for IARC is present. Defendant No. 1 is called, absent, no representation. CAOD is not filed by the Defendant No. 1. Time is extended as last chance till 16th January 2018 failing which the right of Defendant No. 1 to file CAOD stands forfeited."(xi) When the matter appeared before the DRT on 16 January 2018, the following order came to be passed:-"The counsels appearing for Applicant No. 2 and Defendant No. 1 are present. CAOD is not filed by Defendant No. 1. Despite passing conditional order, the counsel appearing for Defendant No. 1 requested further extension of time for filing CAOD. Time is refused and right of Defendant No. 1 to file CAOD stands forfeited. The matter is posted to 12th April 2018 for arguments."(xii) Petitioner filed Writ Petition No. 386 of 2020 in this Court seeking expeditious disposal of the Original Application pending before DRT. By order dated 11 February 2020, this Court directed DRT to expedite the hearing of pending Original Application. Accordingly, the Petitioner moved the DRT for hearing of the Original Application.(xiii) On 31 July 2020, Respondent No. 1 filed Interim Application bearing No. 175 of 2020 seeking condonation of delay of 269 days in filing the Claim Affidavit on the ground that the DRT was not functioning since June 2018 on account of fire in its premises in Mumbai. (xiv) On 4 August 2020, the DRT rejected the Interim Application filed by Respondent No. 1.(xv) Respondent No. 1 preferred an Appeal before the DRAT being Misc. Appeal No. 16 of 2020 impugning the rejection order dated 4 August 2020.(xvi) On 8 September 2020, the DRAT allowed the Appeal of Respondent No. 1 and passed the following order:-"(1) Impugned order dated 04.08.2020 in I.A. No. 175/2020 and I.A. No. 176/2020 in T.O.A. No. 2571/1999 (High Court Suit No. 2520 of 1989) on the file of DRT No. 1, Mumbai is set aside and the Tribunal below shall receive Claim Affidavit of the Appellants.(2) Appellants shall file their Claim Affidavit in the Tribunal below within week days from now after duly serving on opposite party.(3) Respondent financial institution shall file their additional Affidavit, if any, in answer to Claim Affidavit of Appellants within 10 days from the date of filing of Claim Affidavit by Appellants.(4) Tribunal below shall decide the main O.A. without being influenced by any of the observations made herein above and any observations made in the impugned order dated 04.08.2020.(5) The Tribunal below shall dispose of the main O.A. as per the directions of the Hon'ble High Court given in its order dated 11.02.2020.(6) The Appeal is accordingly disposed of.(7) All Miscellaneous Applications, if any, are dismissed as infructuous."5. Thus, Respondent No. 1 was directed to file its Claim Affidavit in the DRT and liberty was given to the Petitioner to file additional affidavit in reply to the same. Further directions were given to dispose of the Original Application in terms of this Court's order dated 11 February 2020.6. Mr. Rohit Gupta, learned counsel appearing on behalf of the Petitioner submitted that by order dated 16 January 2018, the right of Respondent No. 1 to file its claim affidavit stood forfeited because despite passing of the conditional order on 2 November 2017, Respondent No. 1 in complete disregard and noncompliance of the said order had requested for further extension of time for filing its Claim Affidavit. He submitted that by filing Interim Application No. 175 of 2020 before the DRT seeking condonation of delay of 269 days, Respondent No. 1 was indirectly seeking a recall of the order dated 16 January 2018 and as such, the scope for recall of any order being very limited, no grounds whatsoever were made out for recall of the said order.7. PER CONTRA, Mr. Mihir Thakore, learned Senior Advocate appearing on behalf of Respondent No.1 submitted that the order dated 16 January 2018 passed by the DRT was an order passed by way of a direction and it was not an order passed on merits and adjudication on any application and / or Respondent No. 1's case. Respondent No. 1 had immediately applied for seeking condonation of delay and recall of the order dated 16 January 2018 since DRT-1, Mumbai resumed its normal operation in June 2020 after the fire incident. The Presiding Officer was appointed on 17 June 2020 in DRT-1, Mumbai. The intention of Respondent No. 1 was bonafide in approaching the DRT at the first instance in the peculiar facts and circumstances of the present case. Respondent No. 1 was ready with the Claim Affidavit and had also filed a further application seeking cross-examination of the Petitioner's witness which was pending with the DRT. Respondent submitted that the order dated 16 January 2018 was not an order passed in adjudication on the merits of the controversy between the parties. It was an interlocutory order which did not impinge upon the rights of Respondent No. 1 to seek recall and modification as it did not decide any issue between the parties.8. In support of the above proposition, reference was made to the judgment of the Supreme Court in the case of Arjun Singh Vs. Mohindra Kumar & Ors., (AIR 1964 SC 993(1)., our attention was drawn to Paragraph Nos. 11 to 14 of the judgment which read thus:-"11. We agree that generally speaking these propositions are not open to objection. If the court which rendered the first decision was competent to entertain the suit or other proceeding, and had therefore competency to decide the issue or matter, the circumstance that it is a tribunal of exclusive jurisdiction or one from whose decision no appeal lay would not by themselves negative the finding on the issue by it being res judicata in later proceedings. Similarly, as stated already, though S. 11 of the Civil Procedure Code clearly contemplates the existence of two suits and the findings in the first being res judicata in the later' suit, it is well-established that the principle underlying it is equally applicable to the case of decisions rendered at successive stages of the same suit or proceeding. But where the principle of res judicata is invoked in the case of the different stages of proceedings in the same suit, the nature of the proceedings, the scope of the enquiry which the adjectival law provides for the decision being reached, as well as the specific provisions made on matters touching such decision are some of the material and relevant factors to be considered before the -principle is held applicable. One aspect of this question is that which is dealt with in a provision. like S. 105 of the Civil Procedure Code which enacts :"105.(1) Save as otherwise expressly provided, no appeal shall lie from any order made by a Court in the exercise of its original or appellate jurisdiction; but, where a decree is appealed from, any error, defect or irregularity in any order, affecting the decision of the case, may be set forth as a ground of objection in the memorandum of appeal.(2) Notwithstanding anything contained in sub-section (1), where any party aggrieved by an order of remand made after the commencement of this Code from which an appeal lies does not appeal therefrom, he shall thereafter be precluded from disputing its correctness."It was this which was explained by Das Gupta, J. in Satyadhayan Ghosal's case. (1960) 3 SCR 590 : (AIR 1960 SC 941) already referred to:"Does this, however, mean that because at an earlier stage of the litigation a court has decided an interlocutory matter in one way and no appeal has been taken therefrom or no appeal did lie, a higher court cannot at a later stage of the same litigation consider the matter again?........ It is clear therefore that an interlocutory order which had not been appealed from either because no appeal lay or even though an appeal lay an appeal was not taken could be challenged in an appeal from the final decree or order."12. If the correctness of the order of the Civil Judge in disposing of the application filed by the appellant on May 31, 1958 were questioned in an appeal against the decree in the suit, these principles and the observations would have immediate relevance. But it is not as if the distinction here drawn between the type of interlocutory orders which attain finality and those that do not, is of no materiality in considering whether a particular interlocutory order is of a kind which would preclude the agitation of the same question before the same court in further stages of the same proceeding. Dealing with the decisions of the Privy Council in Ram Kirpal Shukul v. Rup Kuari, 11 Ind App 37 (PC), Bani Ram V. Nanhu Mal, 11 Ind App. 181 (PC) and Hook v Administrator General of Bengal, 48 Ind App 187 : (AIR 1921 PC 11) which are the leading cases in which the principle of res judicata was held applicable to different stages of the same proceedings, Das Gupta J. observed at pp. 602-603 (of SCR) : (at p. 947 of AIR)"It will be noticed that in all these three cases, viz., Ram Kirpal Shukul's case, 11 Ind App 37 (PC) Bani Ram's case, 11 Ind App 181 (PC) and Hook's case, 48 Ind App 187 : (AIR 1921 PC 11) the previous decision which was found to be res judicata was part of a decree. Therefore though in form the later proceeding in which the question was sought to be raised again was a continuation of the previous proceeding, it was in substance, an independent subsequent proceeding. The decision of a dispute as regards execution it is hardly necessary to mention was a decree under the Code of Civil Procedure and so in Ram Kirpal's case, 11 Ind App 37 (PC) and Bani Ram's case, 11 Ind App 181 (PC) such a decision being a decree really terminated the previous proceedings. The fact therefore that the Privy Council in Ram Kirpal Shukul's case, 11 Ind App 37 (PC) described Mr. Probyn's order as an 'interlocutory judgment' does not justify the learned counsel's contention that all kinds of interlocutory judgments not appealed from become res judicata, Interlocutory judgments which have the force of a decree must be distinguished from other interlocutory judgments which are a step towards the decision of the dispute between parties by way of a decree or a final order."13. It is needless to point out that interlocutory orders are of various kinds; some like orders of stay, injunction or receiver are designed to preserve the status quo pending the litigation and to ensure that the parties might not be prejudiced by the normal delay which the proceedings before the court usually take. They do not, in that sense, decide in any manner the merits of the controversy in issue in the suit and do not, of course, put an end to it even in part. Such orders are certainly capable of being altered or varied by subsequent applications for the same relief, though normally only on proof of new facts or new situations which subsequently emerge. As they do not impinge upon the legal rights of parties to the litigation the principle of res judicata does not apply to the findings on which these orders are based, though if applications were made for relief on the same basis after the same has once been disposed of the court would be justified in rejecting the same as an abuse of the process of court. There are other orders which are also interlocutory, but would fall into a different category. The difference from the ones just now referred to lies in the fact that they are not directed to maintaining the status quo or to preserve the property pending the final adjudication, but are designed to ensure the just, smooth, orderly and expeditious disposal of the suit. They are interlocutory in the sense that they do not decide any matter in issue arising in the suit, nor put an end to the litigation. The case of an application under O. IX. R. 7 would be an illustration of this type. If an application made under the provisions of that rule is dismissed and an appeal were filed against the decree in the suit in which such application were made, there can be no doubt that the propriety of the order rejecting the reopening of the proceeding and the refusal to relegate the party to an earlier stage might be canvassed in the appeal and dealt with by the appellate court. In that sense, the refusal of the court to permit the defendant to "set the clock back" does not attain finality. But what we are concerned with is slightly different and that is whether the same Court is finally bound by that order at later stages, so as to preclude its being reconsidered. Even if the rule of res judicata does not apply, it would not follow that on every subsequent day on which the suit stands adjourned for further hearing the petition could be repeated and fresh orders sought on the basis of identical facts. The principle that repeated applications based on the same facts and seeking the same reliefs might be disallowed by the court does not however necessarily rest on the principle of res judicata. Thus if an application for the adjournment of a suit is rejected, a subsequent application for the same purpose even if based on the same facts, is not barred on the application 'of any rule of res judicata, but would be rejected for the same grounds on which the original application was refused. The principle underlying the distinction between the rule of res judicata and a rejection on the ground that no new facts have been adduced to justify a different order is vital. If the principle of res judicata is applicable to the decision on a particular issue of fact, even if fresh facts were placed before the Court, the bar would continue to operate and preclude a fresh investigation of the issue, whereas in the other case, on proof of fresh facts, the court would be competent, nay,, would be bound to take those into account and make an order conformably to the facts freshly brought before the court.14. This leads us to the consideration of the nature of the court's direction under O. IX, R. 7 - the nature of that interlocutory proceeding with a view to ascertain whether the decision of the Court under that provision decides anything finally so as to constitute the bar of res judicata when dealing with an application under O. IX, R. 13, Civil Procedure Code. To sum up the relevant facts, it is common ground that the suit 134 of 1956 had passed the stages up to R. 5 of O. IX Order IX, R. 6 applies to a case where a plaintiff appears and the defendant does not appear when the suit is called on for hearing. Order XI, rule 6 provides, to quote the material part :"Where the plaintiff appears and the defendant does not appear when the suit is called on for hearing then-(a) if it is proved that the summons was duly served, the court may proceed exparte;........This is the provision under which the Civil Judge purported to act on the 29th of May. And then comes O. IX, R. 7 which reads :"Where the Court has adjourned the hearing of the suit ex parte and the defendant, at or before such hearing, appears and assigns good cause for his previous non-appearance, he may, upon such terms as the Court directs as to costs or otherwise, be heard in answer to the suit as if he had appeared on the day fixed for his appearance."On that very date the court took evidence of the plaintiff and reserved judgment. In other words, the hearing had been completed and the only part of the case that remained thereafter was the pronouncing of the judgment. Order XX, R. 1 provides for this contingency and it reads:-"The Court, after the case has been heard, shall pronounce judgment in open Court, either at once or, as soon thereafter as may be practicable, on some future day; and when the judgment is to be pronounced on some future day, the Court shall fix a day for that purpose, of which due notice shall be given to the parties or their pleaders.Two days after the hearing was completed and judgment was reserved the defendant appeared and made the application purporting to be under O. IX, R. 7. And it is the dismissal of this application that has been held to constitute a bar to the hearing of the application under O. IX, R. 13 on the merits."9. We have heard the learned counsel appearing on behalf of the respective parties, perused the pleadings on record and considered the submissions made.10. The order dated 16 January 2018 cannot be said to be an order passed in adjudication on merits. Order impugned in the present petition passed by the DRAT has considered the same and records the background of the lis between the parties. It records that on 29 June 2020, learned counsel appearing on behalf of the Petitioner (Applicant No. 2 therein) had itself submitted that since the record in the case was bulky and it required detail arguments, instead of virtual hearing, physical hearing may be taken in the case and had in fact, consented for a short adjournment. Further on 20 July 2020, matter before the DRAT came to be adjourned on the request of both the parties. According to the Petitioner delay was required to be calculated from 16 January 2018 and would therefore amount to a delay of two years as against the delay of 269 days argued by Respondent No. 1, the DRAT has taken an overall view while observing that though there were some lapses on the part of Respondent No. 1 in not filing the Claim Affidavit, but since the Claim Affidavit was ready, no prejudice whatsoever would be caused to the Petitioner (Financial Institution). It is to be noted that ultimately the case was required to be decided on the basis of the material evidence placed before the DRAT. DRAT also reserved liberty t

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o the Petitioner to file its additional affidavit in response to the Claim Affidavit of Respondent No. 1. Paragraph 9 of the impugned order records these findings and reads thus:-"9. I have perused the material papers including order dated 16.01.2018 and impugned order dated 04.08.2020. From a perusal of record it is clear that there are some lapses on the part of the Appellants in not filing Claim Affidavit within time granted. But as the Appellants are now ready with the Claim Affidavit, no prejudice would be caused to opposite party i.e financial institution, because main case is to be decided on the basis of material evidence placed before it. Simply because Claim Affidavit is received, it does not mean that Claim Affidavit is accepted and the case of the Appellants as stated in their Claim Affidavit is accepted in toto. Ultimately the Tribunal has to decide the correctness of the Claim Affidavit with reference to other material documents and material evidence. However as Claim Affidavit is filed belatedly, the opposite party i.e financial institution, must have a chance of filing their Additional Affidavit in answer or reply to the Claim Affidavit of Appellants".11. On a thorough consideration of the pleadings, we are in agreement with the findings given by the DRAT in its order and judgment dated 8 September 2020 and do not find the need to interfere therewith. However, considering that the list between the parties is pending since 1989, we are inclined to pass the following further directions:-"(i) Appellants shall file their Claim Affidavit in the DRT within one week from the date on which the present order is uploaded on the website after duly serving a copy of the same on the opposite party;(ii) The Application for cross-examination of the witnesses of Respondent - Financial Institution filed by the Appellants in main O.A. shall be decided within a period of four weeks including witness action, if any, from today;(iii) DRT shall dispose of the main O.A. as expeditiously as possible and in any event, within a period of eight months from today.12. Rule is made absolute in the above terms. No order as to costs.13. This order will be digitally signed by the Private Secretary of this Court. All concerned to act on production by fax or email of a digitally signed copy of this order.