EDELWEISS ASSET RECONSTRUCTION COMPANY LTD v. THE SECRETARY, DEPARTMENT OF FINANCIAL SERVICES & ORS.

1. The petitioner, which is a financial institution, has preferred the present petition seeking several reliefs – it has prayed for the setting aside of the order dated 19.02.2021 passed by the learned DRT-II in NDN 816/2020 as also for issuance of directions to the respondent no.2 to pass appropriate orders in the Original Application vide NDN No.816/2020. The petitioner has also prayed for appropriate interim orders to be issued to respondent nos. 2021:DHC:1565-DB 3-11, in terms of Section 19(3A)(c) of Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as “the Act”), directing them to disclose the particulars of other properties and assets owned by them to the Tribunal, in terms of the prayer contained in paragraphs 6 and 7 of the petitioner’s Original Application. The petitioner has further sought for a direction to respondent no.2 to dispose of its Original Application in accordance with the manner and time frame set out in Section 19(24) of the Act. Notably, the petitioner also seeks a direction to all Debt Recovery Tribunals situated within the jurisdiction of this Court to expeditiously dispose of all Original Applications that involve a claim amount of Rs. 100 crores and upwards in view of the fact that while the number of cases pending before the DRT with claim amounts of Rs 100 crores and above are only 1%, they account for 80% of the value of claims raised before the DRT. In support of the last prayer, the petitioner has placed reliance on the dictum of the Supreme Court in Standard Chartered Bank Vs. Dharminder Bhohi and Ors. 2013 (5) SCC 341.

2. As far as the facts of the present case are concerned, the petitioner’s Original Application bearing OA No.816/2020 came up before the DRT-II for the first time on 31.10.2020. The same was then taken up for hearing for the first time, by the Registrar, on 27.11.2020, when the petitioner was directed to file original documents. This direction was issued despite the fact that Section 19(3) of the Act only required the petitioner/original applicant to produce true copies of all documents relied upon by it in support of its claim. Thus, even though the statutory position made it clear that it was sufficient to file only true copies, and not originals of the documents that the petitioner was relying upon at the initial stage of presenting the Original Application or for the purpose of seeking issuance of summons and interim orders if any, the DRT insisted that the petitioner should file the original documents. Even the language contained in Form-I in the Debts Recovery Tribunal (Procedure) Rules, 1993 framed under the Act, which provides the Format for filing an Original Application under Section 19 of the Act, shows that there is absolutely no requirement for an applicant to file originals of the documents being relied upon, at the initial stage of presenting the Original Application. In fact, paragraph 10 of Form-I entitled Details of documents, explicitly requires the applicant to furnish ‘true copies of all documents and evidence of witnesses along with an index of such documents in duplicate, relied upon in support of the claim.’

3. Reverting to the facts of the case at hand, when the matter subsequently came up before the Presiding Officer of the Tribunal on 18.12.2020, instead of issuing summons and considering the petitioner’s prayer for interim relief, he adjourned the matter to 18.01.2021 for filing of original documents and hearing on the point of limitation. It is significant to note that even at this point, the petitioner had brought it to the notice of the learned Presiding Officer that Form-I contained in the Debts Recovery Tribunal (Procedure) Rules, 1993 only required the Original Application to be accompanied by true copies of all documents at the time of presentation, and that filing of the original documents was not mandatory at that time.

4. On 18.01.2021, the petitioner once again requested the learned Presiding Officer to issue notice in the Original Application while giving an assurance that the original documents would be filed at the earliest. Yet, the Presiding Officer did not issue notice in the Original Application. The petitioner filed the original documents at the registry of DRT-II on 06.02.2021 vide Diary No.989/2021. However, notwithstanding the fact that the original documents stood filed, the learned Presiding Officer did not entertain the Original Application and adjourned the matter for the purpose of verification of documents filed by the petitioner. The petitioner then filed a Letter of Undertaking before DRT-II vide Diary No.1025/2021 and subsequently followed up with its registry on 18.02.2021, whereupon it was informed that original documents stood verified. Despite all of the aforesaid, when the Original Application came up before the DRT on 19.02.2021, the matter was once again adjourned to 01.03.2021 for the purpose of verifying the affidavits filed by the petitioner. It was only on 01.03.2021 that notice was finally issued in the Original Application.

5. The petitioner’s Original Application was preferred in order to claim an amount in excess of Rs. 466 crores. From the date of its filing till the date notice and summons came to be issued in the Original Application, nearly four months elapsed – for reasons which were entirely attributable to the DRT. The DRT began by insisting on the filing of the original documents, despite there being no such necessity in law; rather, the language of Section 19(3) of the Act made it very clear that the claimant was only required to produce true copies of such documents at the time of filing the Original Application. Thereafter, the DRT began adjourning the matter for the purpose of verifying, firstly, the original documents, which were not even necessary to be filed at that stage and, secondly, to verify the affidavit.

6. It was in this background that the present petition came to be preferred before us on 25.02.2021. While issuing notice to the respondents, we were also compelled to issue notice to the learned DRT in the light of the utter lack of sensitivity, urgency and discipline demonstrated by it when dealing with the matter – especially considering that these were recovery proceedings initiated by a financial institution which was seeking to recover large amounts, that were essentially public funds, from the respondents.

7. Learned counsel for the petitioner points out that in total, 1,25,395 cases are pending before the DRT as on date, and only 1% of these cases involve a claim amount greater than Rs.100 crores. However, the cumulative value of the claim amount involved in these 1% cases account for nearly 80% of the total monetary value of all claim petitions that are presently pending before the DRT. He has placed reliance on the decision in Standard Chartered Bank Vs. Dharminder Bhohi and Ors. 2013 (5) SCC 341 wherein the Supreme Court, inter alia, had observed as follows: - “The present appeal depicts a factual score where this Court is constrained to say that delay in disposal of the application by the Debts Recovery Tribunal and the appeal by Debt Recovery Appellate Tribunal have the effect potentiality of creating a corrosion in the economic spine of the country. It exposits a factual expose which is not only perplexing but usher in a sense of puzzlement which in the ultimate eventuate compels one to ask: “How long can the financial institutions would suffer such procrastination? How far the public interest be put to hazard because of small, and sometimes contrived individual interest? To what extent the defaulters be given protection in the name of balancing the stringent powers vested on the banks and the statutory safeguards prescribed in favour of loanees? Even assuming there are legal lapses and abuses, how long the statutory tribunals take to put the controversy to rest being oblivious of the fact that the concept of flexibility is insegregably associated with valuation of any asset? One is bound to give a wake-up call and we so do by saying “Tasmat Uttistha Kaunteya”; “Awake, Arise, ‘O’ Partha”

8. A counter-affidavit has been filed by respondent no.1, and today Mr. A.K. Thakur, Registrar of DRT-II is also present in these proceedings. The stand taken by the DRT is that by insisting on the filing of original documents, it is acting in compliance with an order passed by the learned DRAT on 24.07.2019 in the case of M/s Shakti Bhog Snacks Ltd. & Anr. Vs. Corporation Bank & Ors., Misc. Appeal No.468/2018.

9. We have considered the provisions of the Act which have been invoked by the petitioner, in the light of the express language therein. To begin with, Section 19(10A) provides that all pleadings, inter alia in the Original Application or claim petition, written statement, set-off claim, counter-claim, must necessarily be accompanied by a sworn affidavit furnished by the applicant or the defendant, as the case may be, verifying all the facts in such a pleading. This provision is then followed by a proviso which states that if there is any evidence or witnesses which are required to be led by any party, the affidavits of such witness shall be filed simultaneously by the party with the application or written statement or reply filed under Section 19(10A). The next provision, Section 19(10B) goes on to state that if any of the facts or pleadings in the application or written statement are not verified in the manner provided under Section 19(10A), a party to the proceeding shall not be allowed to rely on such facts or pleadings as evidence or any of the matters connected thereto. Thus, we find that neither Section 19(10A), nor Section 19(10B) make any reference to, nor make it incumbent for the Applicant to file original documents at the time of presenting the Original Application.

10. We have examined the decision in M/s Shakti Bhog Snacks Ltd. & Anr. Vs. Corporation Bank & Ors., Misc. Appeal No.468/2018, which the learned DRT claims, makes it mandatory for an Applicant to file original documents at the time of instituting an Original Application under Section 19 of the Act. The specific directions contained in the aforesaid decision, which the learned Registrar of the DRT has referred to, read as follows: “As far as the procedure being adopted by the DRTs for giving time to the banks as well as defendants for adducing evidence and exhibition of documents is concerned, this Tribunal feels that in view of the existing provision under Section 19(10B) of the Act of 1993, banks as well as defendants are supposed to file evidence by way of affidavits alongwith the O.A. by banks and alongwith written statements by defendants. The objective is to save unnecessary time which otherwise gets consumed for completion of evidence and thereby delays are caused in the final disposal of bank recovery cases which even otherwise are to be finally disposed of within 180 days as provided under Section 19(24) of RDDBFI Act,1993. It is seen that in almost every case the banks make reference to all the loan documents in their O.As and make them as annexures to the O.As. The O.As are duly verified also and are supported by affidavits also, which means the documents which the banks annex with the O.As become part of the O.As itself and normally there should not be any problem in accepting those documents straightaway as part of evidence and particularly in cases where defence of defendants stands struck off, which procedure, if adopted, will go a long way to cut short the period of disposal of the O.As in which crores of public monies are involved. This will also ensure that the Banks do not get any undue special treatment for filing of documents and adducing evidence. The DRTs must apply Section 19(10B) equally for the banks as well as the borrowers-defendants. It is hoped that whenever a situation arises when defence of defendants is to be struck off and even otherwise also the learned Presiding Officers will keep in mind the aforesaid observations in order to achieve the objective for which DRTs have been established.”

11. On a perusal of the aforesaid extract, we find that apart from reiterating the terms of Section 19(10B) of the Act, and emphasizing the need to adopt time-saving measures while dealing with recovery proceedings, the learned DRAT has not made any directions which are of the nature claimed by the Registrar before us. In fact, all that the learned DRAT has observed in the above extract is that in case there is no contest to the claim in the Original Application, the DRTs may entertain and expeditiously dispose of recovery proceedings before it on the basis of the affidavit filed by the claimant – financial institution at the time of filing the Original Application, as also the documents filed along with it. There is nothing to say that – even at that stage original documents have to be filed. Therefore, we find that the ground taken by respondent no.1 to justify the delay in issuing notice/summons in the petitioner’s Original Application viz. the purported directions of the learned DRAT in Shakti Bhog Snacks Ltd (supra), is completely misplaced and unjustified. In fact, the underlying spirit of the observations made by the learned DRAT in that decision was to encourage the DRTs to deal expeditiously with the recovery proceedings pending their consideration, which we find was completely violated by the dilatory directions passed and the attitude displayed by the learned DRT in the instant case.

12. The further submission of the respondent is that the petitioner itself desired to file original documents and, therefore, had sought adjournments for that purpose. We find this submission to be completely wrong and contrary to the record. Since the petitioner had itself filed true copies of the original document along with the Original Application, there was no question of the petitioner seeking adjournment for filing original documents. In fact, the order dated 27.11.2020 shows that apart from raising an objection to the Original Application on the ground of limitation, the Registry had also raised an objection on the ground of non-filing of the original documents. In fact, we find that these objections to the Original Application were raised in an order passed by the learned Registrar, Mr. A.K. Thakur, himself who is appearing before us today. If we were to accept the submission of Mr. Thakur that the petitioner had itself sought an adjournment to file original documents, that would mean that the petitioner, despite filing true copies of the documents, did not want notice/summons to be issued in its own Original Application and wanted to compel itself to repeatedly appear before the Tribunal only to be directed to file the original documents. This submission is absurd and is only to be noted to be rejected. We would have appreciated if the respondent/DRT had come forward to accept the lapse on its part and to assure this Court of making amends in the future. Unfortunately, the approach adopted by the learned DRT before us is to justify the blunder which has been noted hereinabove.

13. We, therefore, make it clear that there is absolutely no statutory or legal basis for insisting on the filing of original documents when filing an Original Application before the Debt Recovery Tribunals. Thus, the filing of original documents along with the Original Application cannot, and should not, be insisted upon in light of the provision already taken note of hereinabove, namely Section 19(3) of the Act and Form-I contained in the Debts Recovery Tribunal (Procedure) Rules, 1993 framed under the aforesaid Act.

14. The other significant issue raised by the petitioner in these writ proceedings is in respect of the pace at which the Tribunals are dealing with petitions seeking to recover sums over and above Rs. 100 crores. The financial institutions who approach the DRT to seek recovery are dealing with public funds. In fact, the whole purpose and object for creating Debt Recovery Tribunals was to expedite the disposal of such claims of banks and financial institutions, to enable early recovery of public monies. Delay in disposal of such claims is bound to have a deleterious effect on the economy, as the banks and financial institutions would be disabled from advancing monies to borrowers if their monies are stuck in long drawn legal proceedings. The banks and financial institutions advance loans to enable small, medium and large businesses to grow. Chocking of the monies of the banks and financial institutions would arrest the growth of the economy itself. The DRT ought to have been sensitive to these aspects. A perusal of the records shows that presently pending recovery proceedings, in respect of large claims exceeding Rs 100 crores, are far fewer in number viz-a-viz. the total number of cases that are pending today. When the sums involved are so significant and the final disposal of those cases could lead to resolution of large claims and recovery of huge sums of public monies, there can be no debate with the idea of prioritizing such cases for expeditious and urgent disposal. This also appears to be in line with the observations of the Supreme Court in Standard Chartered Bank (supra).

15. We find that even the statute endorses this line of thought. The mandate of Section 19(24) of the Act, as shown by its explicit phrasing, is that any application made to the Tribunal under Section 19(1) or 19(2) of the Act is required to be dealt with expeditiously and that the Tribunal shall make an honest endeavour to dispose of the same within a period of one hundred and eighty days from the date of receipt of the application.