1. Application to allow change of counsel and authorize director to represent company in SARFAESI proceedings. (Para 2 , 3 )
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2023 Supreme(Online)(DRAT) 721
DEBT RECOVERY APPELLATE TRIBUNAL
Justice Anil Kumar Srivastava
Mennonite Brethren property association of India pvt ltd – Appellant
Versus
PUNJAB NATIONAL BANK – Respondent
623/2022
Advocates:
For the Appellants/Petitioners: Asad Hussain, Ansumala Bansal, Prarthana Singh Roy
For the Respondents: Pankaj Kumar Mukherjee, K. Partha Sarthi Reddy
For the Appellants/Petitioners: Asad Hussain, Ansumala Bansal, Prarthana Singh Roy
For the Respondents: Pankaj Kumar Mukherjee, K. Partha Sarthi Reddy
The DRT must adhere to mandatory procedures under Order III Rule 4 CPC for changing counsel and Rule 5 of the DRT Procedure Rules for application registration. Its limited jurisdiction under the SARFAESI Act excludes the adjudication of internal management disputes of a company.
Headnote:(A) Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Section 22(2)(h) - Code of Civil Procedure, 1908 - Order III Rule 4 and Section 151 - Debts Recovery Tribunal (Procedure) Rules, 1993 - Rule 5 - SARFAESI Act, 2002 - Section 17 - Change of pleader - Necessity of seeking leave of Court under Order III Rule 4(2) CPC when the previous counsel refuses to provide a 'no objection' certificate - Non-compliance with mandatory procedural rules for registration and rectification of applications under Rule 5 of the DRT Procedure Rules - Lack of jurisdiction of the Tribunal to adjudicate internal management disputes of a company or society. (Paras 13, 16, 18)
(B) Jurisdiction - Scope and ambit - Jurisdiction of the Tribunal is limited to whether a sale under the SARFAESI Act was conducted in accordance with the law - Private disputes between authorized signatories or members regarding management cannot be adjudicated by the Tribunal. (Para 18)
Facts of the case:
The appellant company filed several applications before the Tribunal to change its legal counsel, permit a director to represent the company, and submit certain documents. These applications were dismissed by the Tribunal, prompting the appellant to prefer an appeal. During the appeal, an application was filed to implead the former authorized signatory as a necessary party, arguing the non-joinder of a necessary party.
Findings of Court:
The court found that the appellant failed to seek leave of the court for the change of counsel as required under Order III Rule 4(2) of the Code of Civil Procedure. Additionally, the mandatory procedure for the registration and rectification of applications under Rule 5 of the Debts Recovery Tribunal (Procedure) Rules, 1993, was not followed by the Registry. The court further held that the requested impleadment was unnecessary as the order did not prejudice the rights of the party sought to be impleaded.
Issues: Whether the change of counsel and impleadment of a party were legally sustainable given the non-compliance with the Code of Civil Procedure and the DRT Procedure Rules, and whether the Tribunal has jurisdiction over internal company management disputes.
Ratio Decidendi: Procedural requirements for changing legal representation and the registration of applications are mandatory and must be followed. The Tribunal's jurisdiction is specifically defined under the Recovery of Debts and Bankruptcy Act and the SARFAESI Act and does not extend to resolve private or internal management disputes within the organizing body of the applicant.
Result: Appeal is dismissed.
Legal Category Hierarchy
- practice and procedure
- debt and insolvency
Table of Contents
2. Dispute over non-compliance with procedural rules for change of counsel and non-joinder of necessary party. (Para 15 , 16 )
3. Procedure under Rule 5 of DRT Rules not followed; no leave of court taken for change of counsel as per Order III Rule 4 CPC. (Para 16 , 17 )
4. Change of counsel requires compliance with Order III Rule 4 CPC; Registry must follow Rule 5 of DRT Rules for defective applications. (Para 16 , 17 )
5. Appeal dismissed; impleadment application also dismissed. (Para 22 )
6. Is compliance with Order III Rule 4 CPC mandatory for change of counsel before a Debt Recovery Tribunal?
Yes, leave of the court must be obtained as per sub-rule (2), and failure to do so renders the change of counsel procedurally defective. (Para 12 , 13 , 17 )
7. What procedure must the Registrar follow under Rule 5 of the DRT Rules upon finding a defect in an application?
The Registrar must allow the applicant to rectify the defect. If not rectified, the Registrar may decline registration. The matter can then be appealed to the Presiding Officer. (Para 15 , 16 )
8. Can a dispute between internal parties of a company be adjudicated by a Debt Recovery Tribunal in a SARFAESI matter?
No, the DRT's jurisdiction is limited to determining if the sale complied with SARFAESI Act provisions; internal disputes must be raised before another appropriate forum. (Para 18 , 19 )
9. Is a person who filed a SARFAESI application a necessary party in a subsequent appeal regarding change of counsel?
No, such a person is not a necessary party if the impugned order does not prejudice their rights. (Para 21 )
JUDGMENT : On 20th April, 2023
THE APPELLATE TRIBUNAL :
Aggrieved by the impugned order dated 31.10.2022 passed by Ld. DRT-2 Hyderabad, the Appellant preferred the Appeal challenging the order dated 31.10.2022.
2. From the pleadings as well as the impugned order it transpires that IAIR No. 1282 of 2021 was filed by the Director of petitioner Company viz. Dr. Margret Anuradha Perumalla to allow vakalatnama of Mr. Asad Hussain, Advocate in place of existing Counsel representing the Company. Another IAIR No. 1283 of 2021 and IAIR No. 1284 of 2021 were filed by the Director of Petitioner Company viz. Dr. Margret Anuradha Perumalla to permit her to represent the petitioner Applicant Company in the S.A. proceedings.
3. Another IAIR No. 1285 of 2021 was filed by the Director of the petitioner Company Dr. Margret Anuradha Perumalla to receive documents- (i) Copy of Board Resolution dated 06.08.2021 and (ii) copy of Master Data of petitioner/ Applicant Company.
4. The Applications were disposed of and dismissed by the Ld. DRT holding that the scope of the Tribunal is to enquire whether the sale was held in accordance with the provisions of the SARFAESI Acts and Rules framed thereunder. Further, there is a direction of the Hon'ble Apex Court to dispose of the matter expeditiously. Applicant cannot be permitted to drag the proceedings by filing vexatious petitions.
5. Feeling aggrieved Appellant preferred the Appeal. Pending Appeal an application I.A. No. 118 of 2023 was filed to implead Mr. P.A. John as Respondent No. 14 who was the Authorised Signatory. Application was moved on the ground that Mr. P.A. John is a necessary party who had filed the SARFAESI Application. A plea was raised regarding non-joinder of necessary party. Hence, Mr. P.A. John may be impleaded as a necessary party as Respondent No. 14. Objections are also filed against the Application.
6. I have heard the Learned Counsel for the parties and perused the record.
7. Impugned order was passed basically on an Application under Section 22(2)(h) of The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and Order III Rule 4 read with Section 151 of the Civil Procedure Code 1908.
8. Section 22(2)(h) of The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 reads as under:
22. Procedure and powers of the Tribunal and the Appellate Tribunal-
(1) The Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall have powers to regulate their own procedure including the places at which they shall have their sittings.
(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:-
(a) summoning and enforcing the attendance of any person examining him on oath.
(b) requiring the discovery and production of documents:
(c) receiving evidence on affidavit:
(d) issuing commissions for the examination of witnesses or documents'
(e) reviewing its decisions;
(f) dismissing an application for default or deciding it exparte.
(g) setting aside any order of dismissal of any application for default or any other passed by it ex parte;
(h) any other matter which may be prescribed.
9. Order III Rule 4 of Civil Procedure Code, 1908 reads as under"
4. Appointment of pleader- (1) No pleader shall act for any person in any Court, unless he has been appointed for the purpose by such person by a document in writing signed by such person or by his recognized agent or by some other person duly authorized by or under a power-of-attorney to make such appointment.
(2) Every such appointment shall be (filed in Court and s
