[Debt Recovery] Service Of Summons Mandatory, Not Dispensed With Party Entering Appearance By Filing Vakalatnama: Bombay High Court

"Service of summons is a mandatory procedural requirement and is not dispensed with merely on account of the party entering appearance by filing a Vakalatnama", the court held.

Justices K. R. Shriram and A. S. Doctor were dealing with a writ petition challenging an order of the Debt Recovery Appellate Tribunal (DRAT) upholding an ex-Parte judgment of the Debt Recovery Tribunal (DRT).

The petitioners were impleaded by the respondent in a debt recovery application. The applicant did not provide the petitioners' permanent address in the application. In December 2009, the DRT allowed the application and issued recovery certificate for over 11 crores against inter alia, the petitioners in January 2010.

The DRT order recorded that the petitioners appeared through an advocate. However, he was mentioned as "Absent" in the order. The advocate who had entered appearance for petitioners in 2003 had stopped appearing in 2005. The petitioners only became aware of the proceedings before DRT in October 2010 since no summons was served on them during the proceedings.

The petitioners filed a Miscellaneous Application before DRT to set aside the judgment. The DRT rejected the application on the ground that petitioners had appeared through an advocate in whose favour a Vakalatnama had been filed.

Petitioners filed an appeal before the Debt Recovery Appellate Tribunal (DRAT) which was dismissed. Petitioners then challenged the DRAT order before the High Court.

Janak Dwarkadas, Senior Counsel for the petitioners submitted that service of summons is mandatory as per the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDBFI Act), the Debt Recovery Tribunal (Procedure) Rules, 1993, (DRT Rules) and the Debts Recovery Tribunals, Maharashtra & Goa Regulations of Practice, 2003 (DRT Regulations) and cannot be dispensed with on account of the party entering appearance by filing a Vakalatnama. Further, due to non-appearance of any advocate for almost four years, petitioners had no notice of any of the hearing dates and the DRT did not take this onto consideration.

Advocate Sushil Nimbkar for the respondent submitted that a defendant must be deemed to have waived his right for summons to be served to him if he has appeared in the matter after the registration of suit. Petitioners had knowledge of the DRT proceedings and had appeared in the matter but were not diligent enough to proceed in the case. Petitioners have neglected the matter till they received the recovery notice.

The court accepted the petitioner's arguments and observed that the petitioners clearly did not receive any summons. The burden of proof to establish that petitioners had been served with summons is on the respondent. Petitioners should not be asked to prove a negative statement.

The court perused provisions of the RDBFI Act, DRT Rules and DRT Regulations and concluded that the service of summons is a mandatory requirement and an essential tenet of the principles of natural justice.

"Respondent no.1/IOB has not produced any evidence/document to establish that summons was in fact created and served on petitioners in accordance with the aforesaid Act, DRT Rules and the aforesaid DRT Regulations or that any of the steps set out hereinabove were complied with", the court observed adding that the DRT and DRAT did not conduct any inquiry into whether a summons was ever served on petitioners. Further, alleged knowledge about the pendency of the case cannot dispense with the requirement of service of summons to petitioners to notify the day, date, time and place of hearing of the case.

The court relied on Bombay High Court's judgment in Tardeo Properties Pvt. Ltd. v. Bank of Baroda and held that requirement of serving of summons cannot be done away with if the party filed appearance through Vakalatnama. It is immaterial that the advocate appeared on behalf of petitioners in the DRT proceedings.

The court held that the proceeding before the DRT were in complete derogation and ignorance of the principles of natural justice as the respondent had essentially admitted that petitioners were never served with the summons.

The court held that the petitioners should have been personally served with the summons. Further, the DRT must have dealt with the petitioners' claim that the Vakalatnama was executed on the basis of a misrepresentation more sensitively. The petitioners cannot be made to suffer because their lawyer failed in his duties.

Even assuming that requirement of service of summons was fulfilled, the order is still an ex-parte order as the advocate stopped appearing before the tribunal. There are sufficient grounds to set aside the order under Order 9 Rule 13 of the Civil Procedure Code.

The court observed that there has been a serious lapse of procedure and set aside the orders of the DRT and DRAT. The matter was remanded back to the DRT for fresh consideration.

Case no. – Writ Petition No. 4885 of 2022

Case title – Sunil Gupta and Ors. v. Asset Reconstruction Company (India) Ltd. and Ors.

Coram – Justice K. R. Shriram and Justice A. S. Doctor