Delay in Challenging Ex-Parte Decree Not Condoned: DRAT upholds Recovery Order against Borrowers [Read Order]

The Allahabad Bench of Debt Recovery Appellate Tribunal (DRAT) upheld the Debt Recovery Tribunal’s (DRT) ex-parte recovery decree passed in favour of HUDCO after borrowers repeatedly failed to file their written statement and the application was found to be to be time-barred with no sufficient cause shown.

Thus, the appeal was dismissed and the recovery order was affirmed.

The Appellants, Nirman Sudha, Sudha Simhal and Prabodh Simhal, filed the appeal against an order dated 08.08.2017 under section 20 of the Recovery of Debts and Bankruptcy Act, 1993 (RDB) though the Miscellaneous Application (M.A) filed by the appellant was dismissed because of time barred.

The Appellants sought financial assistance from the Housing and Urban DevelopmentCorporation Ltd. (HUDCO), in August 2004 and executed deeds of guarantee and equitable mortgage by deposit of title deeds. Due to persistent default, the loan account was classified as NPA.

After issuing a legal notice on 16.03.2015 without response, HUDCO filed O.A. No. 115/2015 before the DRT for recovery of Rs. 41,04,137/- with interest and costs.

The appellants appeared before the Tribunal on 21.05.2015, but an ex-parte order was passed against them on 16.03.2016. They filed Misc. Application No. 45/2016 on 16.05.2016 to set aside this order and also filed a condonation of delay application on 15.06.2016.

The Tribunal dismissed both applications as time-barred. Aggrieved by this dismissal, the appellants filed the present appeal before DRAT.

The Counsel for the Appellants, Maneesh Mehrotra, argued that they appeared regularly before the Tribunal and were given time to file a written statement. It was pointed out that on 09.10.2015, the case was adjourned to 14.01.2016, but due to wrong noting of the date on 14.02.2016, hence they could not appear and were proceeded as ex-parte.

Further, the Counsel stated that the ex-parte judgment came to their knowledge only on 31.03.2016, and filed an application of delay of condonation under Section on 16.05.2016. They requested the impugned order be set aside and the appeal be allowed.

The Section 22(2)(g) of the Recovery of Debts and Bankruptcy Act (RDB), 1993, explained that: Procedure and powers of the Tribunal and the Appellate Tribunal

“(2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:

(g) setting aside any order of dismissal of any application for default or any order passed by it ex parte;”

On the other hand, the Counsel for the Respondent, Alok Rai, argued that the RDB Act was a special law and the Limitation Act applies only to proceedings under Section 19 of the Act and Section 24 was limited to proceedings originating under Section 19 only.

The application under Section 22(2)(g) for setting aside ex-parte judgment was not an application under Section 19, and thus the Debt Recovery Tribunal (DRT) had no power to condone delay in filing such applications. The respondent prayed for dismissal of the appeal with heavy costs.

The Tribunal consisted of Justice R.D Khare, Chairperson, heard and reviewed the matter filed by the Appellants.

The Tribunal, after considering the submissions made, found that ample opportunity was given to the appellants to file a written statement, but they filed repeated interlocutory applications only to delay the matter.

The bench rejected the appellant's statements about wrong noting of dates, observing that had the appellant appeared on 14.02.2016, he would have known about subsequent orders dated 11.02.2016 and the ex-parte judgment on 16.03.2016. The ex-parte order was passed in the presence of appellant's counsel.

Further, the Tribunal pointed out that the appellants received certified copy of the judgment on 31.03.2016 (15 days after it was passed) without providing a convincing reason for this delay. The Tribunal concluded the appellants failed to show any infirmity or illegality in the impugned order.

Thus, the Tribunal dismissed the appeal with no order as to costs and the impugned order did not interfere with the tribunal matters.

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