The Punjab & Haryana High Court has delivered a decisive ruling affirming that procedural delays in filing written statements cannot justify automatic dismissal of a defendant’s defense without affording a hearing. The judgment reasserts the primacy of natural justice and judicial discretion in debt recovery proceedings under the Recovery of Debts and Bankruptcy Act, 1993, overturning a blanket directive issued by the Debt Recovery Appellate Tribunal that encouraged mechanical ex parte decrees.
Background & Facts
The Dispute
The two writ petitions challenge orders passed by Debt Recovery Tribunals (DRTs) in Chandigarh that struck off the defenses of borrowers for allegedly late filing of written statements. In both cases, the DRTs relied on a circular order dated 24.07.2019 issued by the Debt Recovery Appellate Tribunal (DRAT), Delhi, which directed all DRTs under its jurisdiction to proceed ex parte and pass final orders immediately upon striking off a defense, irrespective of whether the written statement was filed before the next hearing date.
Procedural History
- CWP-26365-2019: The petitioners filed their written statement on 01.08.2019, prior to the next hearing date of 02.08.2019. Despite this, the DRT struck off their defense on 02.08.2019, citing non-filing by the original deadline of 07.06.2019.
- CWP-25611-2022: The petitioners’ counsel arrived at the DRT at 10:32 a.m. on 06.08.2019, when the matter was listed at serial No. 37. The Presiding Officer had already proceeded ex parte by 10:34 a.m., without allowing counsel to enter appearance or submit the power of attorney.
- In both cases, the DRTs cited the DRAT’s 24.07.2019 order as binding authority to bypass procedural safeguards.
- Applications for recall of the ex parte orders were dismissed, prompting the writ petitions.
Relief Sought
The petitioners sought quashing of the impugned orders, including the DRAT’s circular, on grounds of violation of natural justice, non-compliance with statutory mandates under Section 19(5A) of the RDB Act, 1993, and arbitrary application of procedural timelines.
The Legal Issue
The central question was whether Section 19(5A) of the Recovery of Debts and Bankruptcy Act, 1993 permits a Debt Recovery Tribunal to strike off a defense and proceed to judgment without fixing a hearing date for admission or denial of documents, and whether a delay in filing a written statement - especially when filed before the next hearing - justifies automatic dismissal without considering the circumstances.
Arguments Presented
For the Petitioner
The petitioners relied on Salem Advocate Bar Association v. Union of India and C.N. Ramappa Gowda v. C.C. Chandregowda to argue that the time limit for filing written statements under Section 19(5) is directory, not mandatory. They contended that the DRTs violated Section 19(5A), which mandates a hearing for document admission before proceeding to judgment. They further argued that the DRAT’s directive amounted to a judicial overreach, converting procedural flexibility into rigid automation, thereby violating principles of natural justice and the Supreme Court’s directive in Kailash v. Nanhku that procedural rules must expedite, not scuttle, justice.
For the Respondent
The Bank contended that the petitions were maintainable only if no alternative remedy existed, and that Section 20 of the RDB Act provided a statutory appeal mechanism. They relied on Order 8 Rule 10 CPC to argue that courts may pass judgment against parties failing to file written statements. They also asserted that the DRAT’s directive was a legitimate effort to reduce pendency and expedite recovery of public funds under the RDB Act’s objective.
The Court's Analysis
The Court undertook a meticulous review of statutory provisions and binding precedents. It emphasized that Section 19(5A) is mandatory: upon expiry of the time for filing a written statement, the Tribunal “shall fix a date of hearing for admission or denial of documents.” The DRAT’s directive to bypass this step was held to be in direct conflict with the statute.
"The effect of non-filing of the written statement and proceeding to try the suit is clearly to expedite the disposal of the suit and is not penal in nature wherein the defendant has to be penalised for non-filing of the written statement by trying the suit in a mechanical manner by passing a decree."
The Court distinguished between procedural delay and procedural denial. In CWP-26365-2019, the written statement was filed before the next date; in CWP-25611-2022, counsel appeared within two minutes of the hearing. The DRTs’ refusal to accept filings or hear submissions was deemed arbitrary and violative of Article 14 and Article 21 of the Constitution.
The Court further held that the DRAT’s order, though not binding on non-parties, was circulated as a binding directive, effectively creating a rule of law without statutory authority. This constituted an abuse of power. The Court also rejected the argument that Section 20’s appeal remedy barred writ jurisdiction, citing Whirlpool Corporation v. Registrar of Trade Marks to affirm that writs are maintainable where principles of natural justice are breached.
The Verdict
The petitioners succeeded. The High Court quashed the DRAT’s 24.07.2019 order and all consequential DRT orders. The Court held that delay in filing a written statement cannot justify automatic striking off of defense without a hearing, and that Section 19(5A) mandates a procedural hearing before any ex parte decree. The matters were remanded to the DRT with a final 15-day opportunity to file written statements.
What This Means For Similar Cases
Written Statement Timelines Are Directory, Not Absolute
- Practitioners must argue that Section 19(5) and Order 8 Rule 1 CPC are directory, allowing courts discretion to accept late filings in exceptional cases.
- Even if filed after 30 or 90 days, a written statement must be considered if submitted before the next hearing date.
- Courts cannot treat late filing as a waiver of the right to defend.
Section 19(5A) Hearing Is Mandatory
- DRTs must fix a date for document admission or denial before proceeding to judgment.
- Any order passed without such a hearing is void ab initio.
- Banks cannot rely on affidavits alone to prove claims if disputed facts exist; the burden remains on them to establish prima facie case.
DRAT Directives Cannot Override Statutory Procedure
- Circulars or administrative directions from appellate tribunals cannot override statutory mandates.
- Practitioners may challenge such directives as ultra vires under Article 226 if they violate natural justice or statutory procedure.
- The mere objective of speedy disposal cannot override fundamental procedural rights.
