1. Recovery claim by bank allowed by DRT based on alleged admission despite no evidence — Writ petition filed. (Para 1 , 4 )
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2025 Supreme(Online)(AP) 17606
HIGH COURT OF ANDHRA PRADESH
CHEEKATI MANAVENDRANATH ROY,Tuhin Kumar Gedela
Associated Auto Motives – Appellant
Versus
Canara Bank – Respondent
Writ Petition No.14121 of 2025
Advocates:
For the Appellants/Petitioners: S.N. Chidambara Sastry, S.S. Prasad
For the Respondents: Prudvi Raju Mudunuri, V. Veerabhadra Chary
For the Appellants/Petitioners: S.N. Chidambara Sastry, S.S. Prasad
For the Respondents: Prudvi Raju Mudunuri, V. Veerabhadra Chary
A judgment cannot be passed solely on alleged admissions that are vague and not categorical; the plaintiff must adduce evidence to prove the claim, especially when the defendant specifically denies the plaint averments.
Headnote:(A) Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Section 31 - Transfer of pending suits to Debts Recovery Tribunal - Jurisdiction of Tribunal when claim also involves a relief against an insurance company.
(B) Code of Civil Procedure, 1908 - Order XII Rule 6 - Judgment on admission - Admission must be clear, categorical, unambiguous, and unconditional - Discretionary power of Court - Cannot be exercised when admission is vague or based on pleadings where execution of documents is denied.
(C) Code of Civil Procedure, 1908 - Order VIII Rule 5 - Specific denial required - Proviso allows Court to require proof even of admitted facts.
(D) Evidence Act, 1872 - Section 102 - Burden of proof - Illustration (b) applies only when execution of documents is admitted. (E) Constitution of India, 1950 - Article 227 - Power of superintendence - High Court can interfere where order is based on no evidence, is perverse, or results in manifest injustice - Error of law apparent on record.
Facts of the case:
A bank filed a suit in a civil court for recovery of Rs.21,99,270/- against a partnership firm, its partners, and an insurance company. The suit was transferred to the Debts Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The bank claimed it had sanctioned a loan facility to the defendants, who hypothecated stock-in-trade that was insured with the insurance company. The hypothecated goods were allegedly burnt/looted in riots, and the insurance company repudiated the claim. The bank did not produce any original documents to substantiate its claim despite opportunities. An enquiry by the Tribunal's Registrar revealed that the bank had not filed any original documents with the plaint or thereafter. The bank's witnesses did not enter the witness box and were not cross-examined. The Tribunal nonetheless allowed the claim solely based on alleged admissions in the written statement. The first defendant filed a writ petition challenging the order.
Findings of Court:
The High Court set aside the Tribunal's order, finding it was passed without any evidence and based on a misreading of the written statement. The Court held that the alleged admissions in the written statement were not clear, categorical, or unambiguous as required for a judgment on admission under Order XII Rule 6 CPC. The defendants had specifically denied the plaint averments and claimed their signatures were obtained on blank documents. The Court found that mere filing of chief-examination affidavits without cross-examination did not constitute oral evidence. No documentary evidence was adduced. The order was based on no evidence and was perverse, warranting interference under Article 227 of the Constitution. (Paras 8-16)
Issues: 1. Whether the Debts Recovery Tribunal could pass a decree based solely on alleged admissions when no oral or documentary evidence was adduced by the bank. 2. Whether the alleged admissions in the written statement were clear, categorical, and unambiguous as required for a judgment on admission under Order XII Rule 6 CPC. 3. Whether the High Court could entertain a writ petition under Article 227 when an alternative remedy by way of appeal existed, given the order was based on no evidence and was perverse.
Ratio Decidendi: The court ruled that an order passed without any evidence and based on vague, non-categorical admissions cannot be sustained. For a judgment on admission, the admission must be clear, unambiguous, and unconditional. A suit cannot be decreed solely on plaint averments when the defendants have specifically denied the claim and the plaintiff has failed to produce any evidence. The High Court can interfere under Article 227 when the subordinate court's finding is based on no material or is perverse, resulting in manifest injustice. (Paras 10-16)
Result: Writ petition allowed. Impugned order dated 06.03.2025 passed in O.A.No.725 of 2002 by the Debts Recovery Tribunal, Visakhapatnam, set aside. No order as to costs. (Para 17) (Note: Though the petitioner raised a jurisdictional issue, the Court did not base its decision on that ground; it decided the matter on the lack of evidence and perversity of the order.) Parties: The petitioner was the first defendant in the Original Application (defendant No.1). The respondents were the applicant-bank and the insurance company (defendant No.5). Dissenting Opinions: None. The judgment was unanimous. Alternative Viewpoints: The bank argued that the denial was not specific as per Order VIII Rule 5 CPC, and that under Section 102 of the Evidence Act, the burden was on the defendants. The Court rejected these arguments, finding the denial was specific and that illustration (b) to Section 102 did not apply as execution of documents was not admitted. (Paras 14-15)
Legal Category Hierarchy
- practice and procedure
- banking and finance
-
insurance
- claim repudiation (Para 4)
Table of Contents
2. Petitioner: DRT lacked jurisdiction, order without evidence violates natural justice. Bank: Admissions in written statement justify decree. (Para 5 , 6 , 14 , 15 )
3. Writ allowed, DRT order set aside as based on no evidence and perverse findings. (Para 16 , 17 )
4. Under Article 227, can High Court interfere when a tribunal's order is based on no evidence?
Yes, when the order is based on no evidence, perverse, or results in manifest injustice, High Court can interfere under Article 227. (Para 6 , 7 , 16 )
5. What constitutes a valid admission for a judgment under Order XII Rule 6 CPC?
Admission must be clear, unambiguous, unconditional, and categorical; vague admissions cannot be the basis for a decree. (Para 10 , 11 , 12 , 13 )
6. Under Order VIII Rule 5 CPC, can a court still require proof despite a specific denial?
Yes, even if denial is specific, the court may in its discretion require proof; mere plaint averments cannot decree a suit. (Para 14 )
7. Does Section 102 Evidence Act illustration (b) apply when execution of documents is not admitted?
No, illustration (b) applies only when execution is admitted; otherwise the plaintiff must prove the claim. (Para 15 )
ORDER: (Per Hon’ble Sri Justice Cheekati Manavendranath Roy)
Aggrieved by the order dated 06.03.2025 passed in O.A.No.725 of 2002 on the file of the Debts Recovery Tribunal, Visakhapatnam, whereby the claim of the applicant therein, which is Canara Bank represented by its Manager, Buckinghampet Branch, Vijayawada, for recovery of a sum of Rs.21,99,270/-, was allowed against defendant Nos.1 to 4 therein and Recovery Certificate was issued for the said sum of Rs.21,99,270/- with interest at the rate of 9% per annum, while dismissing the claim against defendant No.5, the present writ petition has been filed by defendant No.1 in the said O.A.
2. Heard Mr. S.S. Prasad, learned Senior Counsel assisted by Mr. S.N. Chidambara Sastry, learned counsel for the petitioner, Mr. M. Prudvi Raju, learned counsel for respondent No.1 and Mr. V.
Veerabhadra Chary, learned counsel for respondent No.2.
3. The parties will be referred as they are arrayed in O.A.No.725 of 2002 before the Debts Recovery Tribunal for the sake of convenience.
4. Brief overview of the facts leading to the lis in this writ petition may be stated as follows:
(i) The applicant before the Tribunal is Canara Bank represented by its Manager, Buckinghampet Branch, Vijayawada. Defendant No.1 is a partnership firm dealing in sale of Hero Honda motorcycles and automobile spare parts, having its showroom at Governorpet, Vijayawada. Defendant Nos.2 to 4 are the partners of defendant No.1-firm. According to the applicant-bank, defendant Nos.2 to 4 approached it for loan facility of Rs.7,50,000/- for the purpose of running the business. The applicant-bank has sanctioned the loan facility of Rs.7,50,000/-. The defendants have hypothecated the stock in trade, which are motorcycles and automobile spare parts stored in the showroom of the 1st defendant, as security for repayment of the overdraft amount and they have executed hypothecation agreement in favour of the bank on 12.09.1988 along with other necessary documents. The stocks hypothecated were covered by insurance policy with the 5th defendant- United India Insurance Company Limited. So, it is stated that the applicant-bank has got first charge in respect of the hypothecated goods and defendant Nos.2 to 4 are jointly and severally liable to pay the said amount due to the applicant-bank under the above overdraft. While so, it is stated that the 2nd defendant informed the bank during January, 1989 that the stocks hypothecated with the applicant-bank were burnt/looted in the riots that took place on 26.12.1988 and requested the bank to forward the claim forms to the 5th defendant-insurance company. The forms were accordingly forwarded to the insurance company by the bank, but the said claim was not settled by the insurance company. It appears that the insurance company has repudiated the claim.
(ii) It is the further case of the applicant-bank that defendant Nos.2 to 4 have also availed financial facility of Rs.5,00,000/- under revolving Letter of Credit (LOC) issued by the applicant-bank in favour of M/s. Sri Ram Honda Power Equipments Limited on 14.04.1988, which was valid upto 13.04.1989 and that the defendant Nos.2 to 4 have executed counter guarantee in favour of the applicant-bank apart from individual guarantee. The beneficiary i.e., M/s. Sri Ram Honda Power Equipments Limited has drawn a bill dated 29.06.1988 for a sum of Rs.4,98,148/- and defendant Nos.2 to 4 failed to pay the bill amount to the bank as per the terms of the LOC.
(iii) It is further pleaded that defendant Nos.2 to 4 have also availed financial facility under irrevocable LOC of Rs.8,00,000/- in favour of M/s. Hero Honda Motors Limited, New Delhi. on 16.07.1986, which was valid upto 13.06.1987, and the defendant Nos.2 to 4 have executed counter guarantee in favour of the applicant-bank and that M/s. Hero Honda Motors Limited has drawn a bill dated 21.12.1988 for Rs.4,32,597.06 ps., and the defendant Nos.2 to 4 have failed to reimburse the amount paid by the applicant-ba
