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Toorsa Cold Storage Pvt. Ltd. v/s State Bank of India

    CO. No. 2424 of 2015
    Decided On, 15 October 2015
    At, High Court of Judicature at Calcutta
    For the Petitioner: Nimesh Mishra, Gourav Singh, Advocates. For the Opposite Party: S.P. Srivastava, N.P. Gupta, Hemant Sharma, Advocates.

Judgment Text
Harish Tandon, J.

1. 'Fairness is what justice really is' are the words of Potter Stewart acclaimed legal recognition as a part of natural justice. The concept of natural justice cannot be confined to any precise definition. The natural justice is fair play in action in its soul and spirit. The quintessence of the process of justice is inspired and guided by fair play in action and as a distillate of due process of law. In the words of Justice R.S. Sarkaria speaking for the majority in case of Swadesi Cotton Mills v. Union of India reported in AIR 1981 Supreme Court 818, the expression 'natural justice' is not static nor can be squeezed to a precise definition but considered as a part of natural law relating to the administration of justice. It would be profitable to quote the relevant excerpts from the said report, which runs thus:-

'Well then, what is 'natural justice'? The phrase is not capable of a static and precise definition. It cannot be imprisoned in the straight-jacket of a cast-iron formula. Historically, 'natural justice' has been used in a way 'which implies the existence of moral principles of self-evident and unarguable truth', 'Natural Justice' by Paul Jackson, 2nd Edn. page 1. In course of time, judges nurtured in the traditions of British jurisprudence, often invoked it in conjunction with a reference to 'equity and good conscience'. Legal experts of earlier generations did not draw any distinction between 'natural justice' and 'natural law', 'Natural justice' was considered as 'that part of natural law which relates to the administration of justice'. Rules of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not possible to make an exhaustive catalogue of such rules.'

2. The fair play in action includes an opportunity of being heard before the decision operates against him. The basic concept of natural justice is that a person should not be condemned unheard that is how the legal maxim 'audi alteram partem' evolved. In case where the breach of natural justice is alleged the rule of the Court should not be such that it is inflexible rules of universal application but to judge in the light of the facts and circumstances of each case and to call out whether there has been any infraction of such rule. The decree of compliance of the rule of audi alteram partem and resultant effect of its failure depends upon case to case. The essence of natural justice also imbibes a fair hearing to the parties before deciding the issue and ensures the scrupulous administration of justice and fairness. It is not a bull in a china shop or a bee in one’s bonnet. The elements of fair hearing are providing an opportunity of hearing and such opportunity must be real or reasonable. Both the elements are counted in a composite expression of reasonable opportunity, which is not inflexible rule but is elastic one. The reasonableness varies from case to case and it should not shock to the conscience of the Court. The opportunity of hearing not only be real but effective and provide proper latitude to meet everything, which is likely to be considered against the party. The power of High Court under Article 226 and 227 of the Constitution of India is a wide amplitude in the sense that the order passed in gross violation of natural justice having not afforded reasonable opportunity of hearing can be invoked despite existence of alternative remedy. The Doctrine of Prejudice has also received its recognition as every violation of natural justice cannot be impinged unless consequence prejudicially affects the right of aggrieved person.

3. In a recent decision rendered in case of Dharmapal Satyapal Ltd. v. CCE reported in (2015) 8 SCC 519, the Apex Court held that the proceeding must be just fair and reasonable and the negation thereof offends Article 14 and 21 of the Constitution of India. The Doctrine of Prejudice was further noticed as an integral part of the natural justice and comprehended in the following:-

'38. But that is not the end of the matter. While the law on the principle of audi alteram partem has progressed in the manner mentioned above, at the same time, the courts have also repeatedly remarked that the principles of natural justice are very flexible principles. They cannot be applied in any straitjacket formula. It all depends upon the kind of functions performed and to the extent to which a person in likely to be affected. For this reason, certain exceptions to the aforesaid principles have been invoked under certain circumstances. For example, the courts have held that it would be sufficient to allow a person to make a representation and oral hearing may not be necessary in all cases, though in some matters, depending upon the nature of the case, not only full-fledged oral hearing but even cross-examination of witnesses is treated as necessary concomitant of the principles of natural justice. Likewise, in service matters relating to major punishment by way of disciplinary action, the requirement is very strict and full-fledged opportunity is envisaged under the statutory rules as well. On the other hand, in those cases where there is an admission of charge, even when no such formal inquiry is held, the punishment based on such admission is upheld. It is for this reason, in certain circumstances, even post-decisional hearing is held to be permissible. Further, the courts have held that under certain circumstances principles of natural justice may even be excluded by reason of diverse factors like time, place, the apprehended danger and so on.

39. We are not concerned with these aspects in the present case as the issue relates to giving of notice before taking action. While emphasising that the principles of natural justice cannot be applied in straitjacket formula, the aforesaid instances are given. We have highlighted the jurisprudential basis of adhering to the principles of natural justice which are grounded on the doctrine of procedural fairness, accuracy of outcome leading to general social goals, etc. Nevertheless, there may be situations wherein for some reason - perhaps because the evidence against the individual is thought to be utterly compelling - it is felt that a fair hearing 'would make no difference' - meaning that a hearing would not change the ultimate conclusion reached by the decision-maker - then no legal duty to supply a hearing arises. Such an approach was endorsed by Lord Wilberforce in Malloch v. Aberdeen Corpn., who said that:

'…A breach of procedure … cannot give (rise to) a remedy in the courts, unless behind it there is something of substance which has been lost by the failure. The court does not act in vain.'

Relying on these comments, Brandon L.J. opined in Cinnamond v. British Airports Authority that:

'… no one can complain of not being given an opportunity to make representations if such an opportunity would have availed him nothing.'

In such situations, fair procedures appear to serve no purpose since the 'right' result can be secured without according such treatment to the individual.

40. In this behalf, we need to notice one other exception which has been carved out to the aforesaid principle by the courts. Even if it is found by the court that there is a violation of principles of natural justice, the courts have held that it may not be necessary to strike down the action and refer the matter back to the authorities to take fresh decision after complying with the procedural requirement in those cases where non-grant of hearing has not caused any prejudice to the person against whom the action is taken. Therefore, every violation of a facet of natural justice may not lead to the conclusion that the order passed is always null and void. The validity of the order has to be decided on the touchstone of 'prejudice'. The ultimate test is always the same viz. the test of prejudice or the test of fair hearing.'

4. On the conspectus of the aforesaid proposition of law, let me see whether the order impugned can be interfered with in this Revisional Application. The Petitioner has assailed the order of the Debt Recovery Tribunal on various grounds including the one that the decision has been arrived without considering the defence taken in the written statement, the original whereof, was not admittedly taken on record. The Petitioner No. 1 Company having owned and possessed a land in District Alipurduar intended to construct a cold storage and applied for a loan with the Opposite Party bank. The bank sanctioned the permit loan to the down of 280 lacs and further provided a cash credit facility to the extent of Rs. 16,00000/- to the Petitioner. The land was put on equitable mortgage and the Petitioner Nos. 2 and 3 also offered their personal guarantees. After declaring the loan accounts as Non Performing Assets (NPA) a notice was issued under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act). The Petitioner, therefore, took further steps under Section 13(4) of the SARFAESI Act after the expiration of the statutory period. The Petitioners took out an application under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal being S.A No. 691 of 2013 which is still pending. It appears that prior to any action taken under the SARFAESI Act by the Opposite Party bank an application under Section 19 of the Recovery of Debts due to Banks and Financial Institution’s Act, 1993 (RDB Act) was filed before the Debt Recovery Tribunal being O.A. Case No. 1351 of 2012 for a certificate to recover a sum of Rs. 7,23,22,215.60/- (Rupees Seven Crores Twenty Three Lacs Twenty Two Thousand Two Hundred Fifteen and Sixty Paisa Only) with further declaration that the assets hypothecated as security for such loan shall remain hypothecated and charged to the bank.

5. It is a matter of record that an application under Section 17 of the SARFAESI Act is pending and has not been decided finally as yet. However, the Petitioners were contesting, the proceeding initiated under the RDB Act. Order dated 22.04.2014 would reveal that the Petitioners took time to file the written statement which was allowed by the Presiding Officer of the Debt Recovery Tribunal. In the said proceeding an application was also taken out for dismissal thereof as an action under SARFAESI Act has been taken by the bank. The record would further reveal that on 10.06.2014 the Tribunal took up the application filed by the Petitioner for dismissal of the original application and fixed the hearing on 9th July, 2014 with the specific direction upon the Petitioner to file the written statement within 30 days there from. It was expressly recorded in the said order that the matter shall be taken up at Siliguri. The Tribunal further passed an order on the said date appointing the Chief Manager, Alipurduar Branch of the Opposite Party bank as a Special Officer to collect the detailed information from the date of a NPA from the Defendants on the quantum of potatoes kept in the cold storage, rent received and / or receivable in case of release and to submit the report within 30 days therefrom. The matter was taken up on 14.07.2014 on the report filed by the Special Officer and several directions were passed on the basis thereof with categorical recording that the matter would be taken up on 9th September, 2014 at the camp sitting at Siliguri. The adjournment was sought on 9th September, 2014 when the matter was taken up at Siliguri with further direction to file the written statement and the supplementary affidavit by the Petitioner. It is recorded in the said order that the learned Advocate for the Opposite Party bank intimated the Tribunal that the copy of the written statement has been served upon them but since the original written statement was not there on the record, the Tribunal directed the Petitioners to ensure that the original written statement is filed before the Tribunal within a period of 30 days.

6. Further, on the prayer of the Opposite Party bank several, directions were passed in the said order and the record would further show that a copy of the affidavit of evidence was also served on the learned Advocate of the Petitioner who was permitted to file objection on the next date. The Tribunal fixed the matter for final hearing on 18.01.2015 at Siliguri. The Petitioner challenged the said order before the Debt Recovery Appellate Tribunal at Kolkata being Appeal No. 100 of 2014 which was disposed of on 14.11.2014 setting aside the portion of the order by which the direction was made to deposit the rent with the Joint Receiver. No substantial progress could be seen on the next date and the matter was further adjourned and fixed on 17.03.2015 the Tribunal declined to grant adjournment prayed for on the said date and ask the Defendant/Petitioner to cross-examine the said witness. The Court after recording the conduct of the Petitioners closed the evidence and fixed the date for passing of the Judgment on 11.05.2015 permitting the Petitioner to file the written statement within 10 days there from and also to file the written notes of argument within 3 weeks from date. The Petitioner challenged the said order before Debt Recovery Appellate Tribunal, Kolkata but could not secure the order for stay of the proceeding. Since there was no fetter on the part of the Debt Recovery Tribunal in proceeding with the matter, the original OA was disposed of by the impugned order which is challenged in this Revisional Application.

7. The learned Advocate for the Petitioner assailed the said order on several points including the point that the defence taken in the written statement was not considered by the Tribunal. The sum and substance of the argument advanced by the Petitioner is that the Tribunal has violated the principle of natural justice in not considering the defence taken in the written statement. The Revisional Application was admitted by this Court in absence of the bank solely on the ground that if the order is an outcome of the violation of the principle of natural justice it cannot be sustained. In course of an argument it transpires that the written statement, in fact, was filed on 8th September, 2015 at the Principal Sitting of the Tribunal, Kolkata when there was a specific order that the original application shall be taken up at camp in Siliguri.

8. The bank took a plea that there was no written statement filed which is seriously disputed by the Petitioner. The Registrar of the Debt Recovery Tribunal was called to appear before the Court and to appraise whether the written statement was filed at Principal Sitting in Kolkata or not. In course of an interaction with the Registrar who appeared before this Court it transpires that there is no mechanism for receiving the written statement which does not require any requisite fee to be put on if filed in the receiving counter. The attention of the Court is further drawn to the Debt Recovery Tribunals Regulations, 2015 framed in exercise of the power conferred under sub-Section 1 of Section 22 of the RDB Act providing the procedure and the mechanism of dealing the proceeding initiated before the Debt Recovery Tribunal. After meticulously examining the said regulation, this Court feels that the same is not exhaustive as certain aspects have not been considered therein. It came out in course of an argument that the written statement was in fact filed on 8th September, 2015 but the same was neither tagged with the original record nor there is any recording in any register maintained at the receiving section. To avoid such anomalous situation this Court feels that the following directions may facilitate the Tribunals to function more effectively and smoothly. The following directions should be followed by the Debt Recovery Tribunals:-

i) The counter of the Tribunal shall not receive written statement, affidavit of service, written notes of argument, evidence, supplementary affidavit in connection with the application, which shall be submitted before the presiding officer/recovery officer at the time of hearing on the next date and in each case there should be a recording in the order sheet to that effect. If there be any occasion to file/submit the same party/parties can submit the same before the next date of hearing by submitting a put up application before the register/presiding officer/recovery officer as the case may be.

ii) The transmission of records from receiving counter (with fees) to registrar and/or Registrar Bench to Presiding officer and/or Presiding Officer to registrar and/or to any other officials as per direction of the presiding officer shall be recorded in the separate register and/or record Books.

9. Reverting back to the merit of the case all other points than the point relating to violation o

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f principal of natural justice are capable of being agitated before the Appellate Tribunal under Section 20 of the RDB Act. There is a distinction between an erroneous order and the order based on violation of principal of natural justice. An erroneous order is capable of being challenged before the Appellate Authority constituted under the relevant statute and the High Court should not act in such capacity under Article 227 of the Constitution. If the authority have acted in violation of the principal of natural justice, there is no fetter in exercising the power of superintendence or judicial review under Article 227 and 226 respectively by the High Court despite the existence of an alternative remedy by way of statutory appeal. The order impugned cannot be said to have not considered the defence taken in the written statement even the original written statement was not on record. The Debt Recovery Tribunal categorically observed that though the original written statement was not on record but the copy thereof had been submitted by the bank and was treated as part of the record for considering the issues involved therein. Several observations have been made on the averments made in the written statement which is evident from the impugned order. It is one thing to say that the defence has not been scanned properly for addressing an issue but it is totally different when the written statement has not been considered at all. 10. This Court, therefore, does not find that the order can be interfered with being an outcome of the violation of principal of natural justice. 11. The Revisional Application, therefore, fails. 12. There shall be no order as to costs. 13. The Registrar General is directed to circulate the copy of this Judgment to all Debt Recovery Tribunals situated in the territorial jurisdiction of this High Court.