'District Judge Has Shown Undue Favour To Plaintiffs' : Punjab & Haryana HC Seeks Explanation From Judge; Transfers Case

In an extraordinary order, the Punjab and Haryana High Court has sought an explanation from a District Judge, after noting that the judge has shown undue favors to plaintiffs in a suit.

The High Court made this observation in a petition filed by the State Bank of India challenging an order of interim injunction passed by District Judge, Nawanshahar(Shaheed Bhagat Singh Nagar), restraining the bank from taking coercive steps against the complany with respect to default of around Rs 1100 crores.

The matter arose out of a suit filed by SEL Manufacturing Company Limited and Neeraj Saluja seeking, inter-alia, restructuring of their loan availed from SBI. They also filed an interlocutory application seeking an injunction to restrain the bank from taking coercive steps. The trial court rejected the prayer for interim injunction, which was challenged by the plaintiffs before the District Judge, Nawanshahar.

While issuing notice on the appeal, the District Judge passed an ad-interim order, restraining the bank from taking coercive steps for recovery of arrears.

This was challenged by the bank before the High Court in a petition filed under Article 227 of the Constitution.

The Bank told the HC that insolvency proceedings are pending before the National Company Law Tribunal in respect of the default committed by the plaintiff-company, and that an interim resolution professional has also been appointed. The NCLT proceedings were unsuccessfully challenged by the plaintiff by approaching the NCLAT, the HC and the SC. The suit was filed concealing these orders.

After the District Court passed the injunction order, the plaintiff did not appear before the trial court in the suit, resulting in the suit getting dismissed for non-prosecution. Though an application to restore the suit has been filed, the same is not being prosecuted diligently. Despite these circumstances, the District Court extended the temporary injunction on several occasions.

A bench of Justice Arvind Singh Sangwan of the HC observed that the bank's appeal deserved to be allowed for 13 reasons. The HC said that there was "total non-application of judicial mind" on the part of the appellate court in continuing the injunction order even after the original suit was dismissed for non-appearance.

The HC said that the interim order was passed by the appellate court in violation of the settled principle that detailed reasons should be provided for granting injunction in an appeal against the refusal of the trial court to grant the same.

It was also observed that the District Judge passed the order ignoring the insolvency proceedings in NCLT, which were confirmed by the NCLAT, HC and the SC.

The District Judge also did not show diligence in ensuring that his direction to the trial court to decide the restoration application in a time-bound manner was complied.

"...the District Judge has failed to perform even the administrative duty by not keeping a check on trial Court which has not decided the application for restoration of suit till date i.e. even after lapse of 08 months, in violation of his own order dated 29.02.2020.

The District Judge being the administrative head of the District, is required to keep a check on the subordinate judiciary and the manner in which the order in the civil suit are passed, show that an effort is made to delay the proceedings to enable the plaintiffs to gain time", the HC observed.

The HC observed that the continuation of the interim order was against all settled precedents.

"The default in payment of public money involved in the case is more than 1100 crores of rupees and therefore, the continuation of the interim order by the Appellate Court is not at all in public interest", the HC said.

The HC observed that by delaying the hearing of the appeal the District Judge was showing "undue favour to the plaintiffs".

The Court further observed :

"Once the petitioner – Bank on 07.12.2019 has brought to the notice of the Appellate Court, about all the orders passed by High Court & the Hon'ble Supreme Court as well as the dismissal of the suit in default, there was no justification for the Appellate Court to continue with the stay order, which was obtained by concealing the aforesaid litigation and orders and therefore, continuing with the stay order by ignoring the orders of the High Court and the Hon'ble Supreme Court inter se parties, the District Judge has shown disrespect to orders and, on face of record has shown favour to the plaintiffs to delay the proceedings". 

The HC therefore sought an explanation from the District Judge on the reasons (a) to (m) cited by the High Court.

The Court also invoked the powers under Section 24 of the Code of Civil Procedure to transfer the case from District Judge, SBS Nagar to Additional District Judge, SBS Nagar.

"The explanation of the District Judge, S.B.S. Nagar, shall be submitted before this Court through the Registrar General of this Court, within a period of 30 days from the date of receipt of certified copy of this order and be placed before the learned Administrative Judge for S.B.S. Nagar along with a copy of this order", the HC ordered.

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