28. OS WPL 4045-20.

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R.M. AMBERKAR
(Private Secretary)

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

O.O.C.J.

WRIT PETITION (L) NO. 4045 OF 2020

International Asset Reconstruction Co Pvt Ltd.. Petitioner

Versus
Ambalal Sarabhai Enterprises Limited & Anr. .. Respondents

Mr. Rohit Gupta a/w Mr. Nikhil Rajani i/by V. Deshpande & Co
for the Petitioner
Mr. Mihir Thakore, Senior Advocate a/w Ms. Megha Jani and Mr.
Rishabh Shah i/by Raval Shah & Co for Respondent No. 1

CORAM : NITIN JAMDAR &

MILIND N. JADHAV, JJ.

DATE : 29 OCTOBER 2020.

(Through Video Conferencing)

JUDGMENT (PER MILIND N. JADHAV, J.):

1. Heard.

2. Rule. Rule made returnable forthwith and the matter is

heard finally by consent of the parties.

3. This Writ Petition has been filed under Articles 226 and 227
of the Constitution of India assailing the Order and Judgment
dated 8 September 2020 passed by the Debts Recovery Appellate
Tribunal, Mumbai ("DRAT" for short) thereby setting aside the
order dated 4 August 2020 passed by the Debts Recovery
Tribunal-1, Mumbai ("DRT" for short) seeking condonation of

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delay in filing Claim Affidavit by Respondent No. 1.

4. Before adverting to the submissions advanced by the parties,

it will be apposite to consider the relevant facts briefly:-

(i) Petitioner is an Asset Reconstruction Company

and acting in its capacity as Trustee of the IARC-
BOB-01/07 Trust. Petitioner is an assignee of
Bank of Baroda who has assigned the debt due to
it from Respondent No. 2 in favour of the
Petitioner under the provisions of the
Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act,
2002 ("SARFAESI Act" for short).

(ii) Respondent No. 1 is a guarantor in respect of the

amount due and payable by Respondent No. 2.
Respondent No. 2 was earlier a division of
Respondent No. 1 before it was demerged into a
separate entity.

(iii) Originally Central Bank of India and Bank of

Baroda filed a joint suit in this Court being Suit
No. 2520 of 1989 for recovery of an amount of
Rs. 7,90,02,617.69 due and payable to Bank of
Baroda and Rs. 3,25,85,341.28 due and payable
to Central Bank of India together with interest
thereon at the contractual rate till payment and /

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or realization. The aforesaid suit was transferred

to DRT and renumbered as Transfer Original
Application No. 2571 of 1999.

(iv) Multiple proceedings took place between the

parties culminating in the Hon'ble Apex Court
passing an order dated 20 November 2003 in
Civil Appeal Nos. 6545 and 6546 of 1997, inter
alia, directing Respondent No. 1 to execute a
guarantee guaranteeing the dues in Suit No.
2520 of 1989 filed by the two banks which was
pending before the DRT, Mumbai.

(v) In compliance of the Apex Court direction,

Respondent No. 1 executed Deed of Guarantee
dated 16 December 2003 in favour of Central
Bank of India and Bank of Baroda.

(vi) Petitioner vide letter dated 29 December 2010

invoked the Guarantee dated 16 December 2003
and called upon Respondent No. 1 in its capacity
as a guarantor to pay to the Petitioner a sum of
Rs. 377,70,51,204.90 due and payable as on 30
November 2010 together with interest till
payment and / or realization.

(viii) After invocation of the Guarantee, Original

Application before the DRT, Mumbai was

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amended and various documents and orders were

placed on record which had occurred subsequent
to the filing of the suit. Winding up proceedings
were initiated by the Petitioner against
Respondent No. 1 which were ultimately
dismissed on the ground that the Guarantee
would be enforceable only after adjudication of
Original Application pending before the DRT.

(ix) Petitioner filed its Claim Affidavit dated 10 April

2003 in the Original Application. Petitioner also
filed its additional claim affidavit dated 4
September 2017 subsequently.

(x) By order dated 4 September 2017, DRT directed

Respondent No. 1 to file its Claim Affidavit.
DRT granted extension of time to Respondent
No. 1 on 2 November 2017 and recorded as
under:-
"The counsel appearing for IARC is present. Defendant
No. 1 is called, absent, no representation. CAOD is not
filed by the Defendant No. 1. Time is extended as last
chance till 16th January 2018 failing which the right of
Defendant No. 1 to file CAOD stands forfeited."

(xi) When the matter appeared before the DRT on 16

January 2018, the following order came to be
passed:-
"The counsels appearing for Applicant No. 2 and

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Defendant No. 1 are present. CAOD is not filed by

Defendant No. 1. Despite passing conditional order, the
counsel appearing for Defendant No. 1 requested further
extension of time for filing CAOD. Time is refused and
right of Defendant No. 1 to file CAOD stands forfeited.
The matter is posted to 12th April 2018 for arguments."

(xii) Petitioner filed Writ Petition No. 386 of 2020 in

this Court seeking expeditious disposal of the
Original Application pending before DRT. By
order dated 11 February 2020, this Court
directed DRT to expedite the hearing of pending
Original Application. Accordingly, the Petitioner
moved the DRT for hearing of the Original
Application.

(xiii) On 31 July 2020, Respondent No. 1 filed

Interim Application bearing No. 175 of 2020
seeking condonation of delay of 269 days in
filing the Claim Affidavit on the ground that the
DRT was not functioning since June 2018 on
account of fire in its premises in Mumbai.

(xiv) On 4 August 2020, the DRT rejected the Interim

Application filed by Respondent No. 1.

(xv) Respondent No. 1 preferred an Appeal before the

DRAT being Misc. Appeal No. 16 of 2020
impugning the rejection order dated 4 August
2020.

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(xvi) On 8 September 2020, the DRAT allowed the

Appeal of Respondent No. 1 and passed the
following order:-

"(1) Impugned order dated 04.08.2020 in I.A. No.

175/2020 and I.A. No. 176/2020 in T.O.A. No.
2571/1999 (High Court Suit No. 2520 of 1989)
on the file of DRT No. 1, Mumbai is set aside and
the Tribunal below shall receive Claim Affidavit
of the Appellants.

(2) Appellants shall file their Claim Affidavit in the

Tribunal below within week days from now after
duly serving on opposite party.

(3) Respondent financial institution shall file their

additional Affidavit, if any, in answer to Claim
Affidavit of Appellants within 10 days from the
date of filing of Claim Affidavit by Appellants.

(4) Tribunal below shall decide the main O.A.

without being influenced by any of the
observations made herein above and any
observations made in the impugned order dated
04.08.2020.

(5) The Tribunal below shall dispose of the main

O.A. as per the directions of the Hon'ble High
Court given in its order dated 11.02.2020.

(6) The Appeal is accordingly disposed of.

(7) All Miscellaneous Applications, if any, are

dismissed as infructuous."

5. Thus, Respondent No. 1 was directed to file its Claim

Affidavit in the DRT and liberty was given to the Petitioner to file
additional affidavit in reply to the same. Further directions were
given to dispose of the Original Application in terms of this Court's
order dated 11 February 2020.

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6. Mr. Rohit Gupta, learned counsel appearing on behalf of the

Petitioner submitted that by order dated 16 January 2018, the right
of Respondent No. 1 to file its claim affidavit stood forfeited
because despite passing of the conditional order on 2 November
2017, Respondent No. 1 in complete disregard and non-
compliance of the said order had requested for further extension of
time for filing its Claim Affidavit. He submitted that by filing
Interim Application No. 175 of 2020 before the DRT seeking
condonation of delay of 269 days, Respondent No. 1 was indirectly
seeking a recall of the order dated 16 January 2018 and as such, the
scope for recall of any order being very limited, no grounds
whatsoever were made out for recall of the said order.

7. PER CONTRA, Mr. Mihir Thakore, learned Senior

Advocate appearing on behalf of Respondent No.1 submitted that
the order dated 16 January 2018 passed by the DRT was an order
passed by way of a direction and it was not an order passed on
merits and adjudication on any application and / or Respondent
No. 1's case. Respondent No. 1 had immediately applied for
seeking condonation of delay and recall of the order dated 16
January 2018 since DRT-1, Mumbai resumed its normal operation
in June 2020 after the fire incident. The Presiding Officer was
appointed on 17 June 2020 in DRT-1, Mumbai. The intention of
Respondent No. 1 was bonafide in approaching the DRT at the
first instance in the peculiar facts and circumstances of the present
case. Respondent No. 1 was ready with the Claim Affidavit and

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had also filed a further application seeking cross-examination of

the Petitioner's witness which was pending with the DRT.
Respondent submitted that the order dated 16 January 2018 was
not an order passed in adjudication on the merits of the controversy
between the parties. It was an interlocutory order which did not
impinge upon the rights of Respondent No. 1 to seek recall and
modification as it did not decide any issue between the parties.

8. In support of the above proposition, reference was made to

the judgment of the Supreme Court in the case of Arjun Singh Vs.
Mohindra Kumar & Ors.,1., our attention was drawn to Paragraph
Nos. 11 to 14 of the judgment which read thus:-

"11. We agree that generally speaking these propositions are

not open to objection. If the court which rendered the first
decision was competent to entertain the suit or other
proceeding, and had therefore competency to decide the issue
or matter, the circumstance that it is a tribunal of exclusive
jurisdiction or one from whose decision no appeal lay would not
by themselves negative the finding on the issue by it being res
judicata in later proceedings. Similarly, as stated already, though
S. 11 of the Civil Procedure Code clearly contemplates the
existence of two suits and the findings in the first being res
judicata in the later' suit, it is well-established that the principle
underlying it is equally applicable to the case of decisions
rendered at successive stages of the same suit or proceeding. But
where the principle of res judicata is invoked in the case of the
different stages of proceedings in the same suit, the nature of
the proceedings, the scope of the enquiry which the adjectival
law provides for the decision being reached, as well as the
specific provisions made on matters touching such decision are
some of the material and relevant factors to be considered
before the -principle is held applicable. One aspect of this
question is that which is dealt with in a provision. like S. 105 of
the Civil Procedure Code which enacts :

"105.(1) Save as otherwise expressly provided, no appeal shall

1 AIR 1964 SC 993(1)

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lie from any order made by a Court in the exercise of its original
or appellate jurisdiction; but, where a decree is appealed from,
any error, defect or irregularity in any order, affecting the
decision of the case, may be set forth as a ground of objection in
the memorandum of appeal.

(2) Notwithstanding anything contained in sub-section (1),

where any party aggrieved by an order of remand made after the
commencement of this Code from which an appeal lies does not
appeal therefrom, he shall thereafter be precluded from
disputing its correctness."

It was this which was explained by Das Gupta, J. in Satyadhayan

Ghosal's case. (1960) 3 SCR 590 : (AIR 1960 SC 941) already
referred to:

"Does this, however, mean that because at an earlier stage of the

litigation a court has decided an interlocutory matter in one way
and no appeal has been taken therefrom or no appeal did lie, a
higher court cannot at a later stage of the same litigation
consider the matter again?........ It is clear therefore that an
interlocutory order which had not been appealed from either
because no appeal lay or even though an appeal lay an appeal
was not taken could be challenged in an appeal from the final
decree or order."

12. If the correctness of the order of the Civil Judge in

disposing of the application filed by the appellant on May 31,
1958 were questioned in an appeal against the decree in the
suit, these principles and the observations would have
immediate relevance. But it is not as if the distinction here
drawn between the type of interlocutory orders which attain
finality and those that do not, is of no materiality in considering
whether a particular interlocutory order is of a kind which
would preclude the agitation of the same question before the
same court in further stages of the same proceeding. Dealing
with the decisions of the Privy Council in Ram Kirpal Shukul v.
Rup Kuari, 11 Ind App 37 (PC), Bani Ram V. Nanhu Mal, 11
Ind App. 181 (PC) and Hook v Administrator General of
Bengal, 48 Ind App 187 : (AIR 1921 PC 11) which are the
leading cases in which the principle of res judicata was held
applicable to different stages of the same proceedings, Das
Gupta J. observed at pp. 602-603 (of SCR) : (at p. 947 of AIR)

" It will be noticed that in all these three cases, viz., Ram Kirpal
Shukul's case, 11 Ind App 37 (PC) Bani Ram's case, 11 Ind

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App 181 (PC) and Hook's case, 48 Ind App 187 : (AIR 1921
PC 11) the previous decision which was found to be res
judicata was part of a decree. Therefore though in form the later
proceeding in which the question was sought to be raised again
was a continuation of the previous proceeding, it was in
substance, an independent subsequent proceeding. The decision
of a dispute as regards execution it is hardly necessary to
mention was a decree under the Code of Civil Procedure and so
in Ram Kirpal's case, 11 Ind App 37 (PC) and Bani Ram's case,
11 Ind App 181 (PC) such a decision being a decree really
terminated the previous proceedings. The fact therefore that
the Privy Council in Ram Kirpal Shukul's case, 11 Ind App 37
(PC) described Mr. Probyn's order as an 'interlocutory
judgment' does not justify the learned counsel's contention that
all kinds of interlocutory judgments not appealed from become
res judicata, Interlocutory judgments which have the force of a
decree must be distinguished from other interlocutory
judgments which are a step towards the decision of the dispute
between parties by way of a decree or a final order."

13. It is needless to point out that interlocutory orders are of

various kinds; some like orders of stay, injunction or receiver are
designed to preserve the status quo pending the litigation and to
ensure that the parties might not be prejudiced by the normal
delay which the proceedings before the court usually take. They
do not, in that sense, decide in any manner the merits of the
controversy in issue in the suit and do not, of course, put an end
to it even in part. Such orders are certainly capable of being
altered or varied by subsequent applications for the same relief,
though normally only on proof of new facts or new situations
which subsequently emerge. As they do not impinge upon the
legal rights of parties to the litigation the principle of res
judicata does not apply to the findings on which these orders are
based, though if applications were made for relief on the same
basis after the same has once been disposed of the court would
be justified in rejecting the same as an abuse of the process of
court. There are other orders which are also interlocutory, but
would fall into a different category. The difference from the
ones just now referred to lies in the fact that they are not
directed to maintaining the status quo or to preserve the
property pending the final adjudication, but are designed to
ensure the just, smooth, orderly and expeditious disposal of the
suit. They are interlocutory in the sense that they do not decide
any matter in issue arising in the suit, nor put an end to the
litigation. The case of an application under O. IX. R. 7 would
be an illustration of this type. If an application made under the

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provisions of that rule is dismissed and an appeal were filed

against the decree in the suit in which such application were
made, there can be no doubt that the propriety of the order
rejecting the reopening of the proceeding and the refusal to
relegate the party to an earlier stage might be canvassed in the
appeal and dealt with by the appellate court. In that sense, the
refusal of the court to permit the defendant to "set the clock
back" does not attain finality. But what we are concerned with is
slightly different and that is whether the same Court is finally
bound by that order at later stages, so as to preclude its being
reconsidered. Even if the rule of res judicata does not apply, it
would not follow that on every subsequent day on which the
suit stands adjourned for further hearing the petition could be
repeated and fresh orders sought on the basis of identical facts.
The principle that repeated applications based on the same facts
and seeking the same reliefs might be disallowed by the court
does not however necessarily rest on the principle of res
judicata. Thus if an application for the adjournment of a suit is
rejected, a subsequent application for the same purpose even if
based on the same facts, is not barred on the application 'of any
rule of res judicata, but would be rejected for the same grounds
on which the original application was refused. The principle
underlying the distinction between the rule of res judicata and a
rejection on the ground that no new facts have been adduced to
justify a different order is vital. If the principle of res judicata is
applicable to the decision on a particular issue of fact, even if
fresh facts were placed before the Court, the bar would continue
to operate and preclude a fresh investigation of the issue,
whereas in the other case, on proof of fresh facts, the court
would be competent, nay,, would be bound to take those into
account and make an order conformably to the facts freshly
brought before the court.

14. This leads us to the consideration of the nature of the

court's direction under O. IX, R. 7 - the nature of that
interlocutory proceeding with a view to ascertain whether the
decision of the Court under that provision decides anything
finally so as to constitute the bar of res judicata when dealing
with an application under O. IX, R. 13, Civil Procedure Code.
To sum up the relevant facts, it is common ground that the suit
134 of 1956 had passed the stages up to R. 5 of O. IX Order
IX, R. 6 applies to a case where a plaintiff appears and the
defendant does not appear when the suit is called on for
hearing. Order XI, rule 6 provides, to quote the material part :

" Where the plaintiff appears and the defendant does not appear

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when the suit is called on for hearing then-

(a) if it is proved that the summons was duly served, the court
may proceed exparte;........

This is the provision under which the Civil Judge purported to

act on the 29th of May. And then comes O. IX, R. 7 which
reads :

" Where the Court has adjourned the hearing of the suit ex
parte and the defendant, at or before such hearing, appears and
assigns good cause for his previous non-appearance, he may,
upon such terms as the Court directs as to costs or otherwise, be
heard in answer to the suit as if he had appeared on the day
fixed for his appearance. "

On that very date the court took evidence of the plaintiff and
reserved judgment. In other words, the hearing had been
completed and the only part of the case that remained thereafter
was the pronouncing of the judgment. Order XX, R. 1 provides
for this contingency and it reads:-

"The Court, after the case has been heard, shall pronounce
judgment in open Court, either at once or, as soon thereafter as
may be practicable, on some future day; and when the judgment
is to be pronounced on some future day, the Court shall fix a
day for that purpose, of which due notice shall be given to the
parties or their pleaders.

Two days after the hearing was completed and judgment was
reserved the defendant appeared and made the application
purporting to be under O. IX, R. 7. And it is the dismissal of
this application that has been held to constitute a bar to the
hearing of the application under O. IX, R. 13 on the merits."

9. We have heard the learned counsel appearing on behalf of

the respective parties, perused the pleadings on record and
considered the submissions made.

10. The order dated 16 January 2018 cannot be said to be an

order passed in adjudication on merits. Order impugned in the

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present petition passed by the DRAT has considered the same and
records the background of the lis between the parties. It records
that on 29 June 2020, learned counsel appearing on behalf of the
Petitioner (Applicant No. 2 therein) had itself submitted that since
the record in the case was bulky and it required detail arguments,
instead of virtual hearing, physical hearing may be taken in the case
and had in fact, consented for a short adjournment. Further on 20
July 2020, matter before the DRAT came to be adjourned on the
request of both the parties. According to the Petitioner delay was
required to be calculated from 16 January 2018 and would
therefore amount to a delay of two years as against the delay of 269
days argued by Respondent No. 1, the DRAT has taken an overall
view while observing that though there were some lapses on the
part of Respondent No. 1 in not filing the Claim Affidavit, but
since the Claim Affidavit was ready, no prejudice whatsoever would
be caused to the Petitioner (Financial Institution). It is to be noted
that ultimately the case was required to be decided on the basis of
the material evidence placed before the DRAT. DRAT also
reserved liberty to the Petitioner to file its additional affidavit in
response to the Claim Affidavit of Respondent No. 1. Paragraph 9
of the impugned order records these findings and reads thus:-

"9. I have perused the material papers including order dated

16.01.2018 and impugned order dated 04.08.2020. From a
perusal of record it is clear that there are some lapses on the part
of the Appellants in not filing Claim Affidavit within time
granted. But as the Appellants are now ready with the Claim
Affidavit, no prejudice would be caused to opposite party i.e
financial institution, because main case is to be decided on the
basis of material evidence placed before it. Simply because
Claim Affidavit is received, it does not mean that Claim

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Affidavit is accepted and the case of the Appellants as stated in

their Claim Affidavit is accepted in toto. Ultimately the
Tribunal has to decide the correctness of the Claim Affidavit
with reference to other material documents and material
evidence. However as Claim Affidavit is filed belatedly, the
opposite party i.e financial institution, must have a chance of
filing their Additional Affidavit in answer or reply to the Claim
Affidavit of Appellants".

11. On a thorough consideration of the pleadings, we are in

agreement with the findings given by the DRAT in its order and
judgment dated 8 September 2020 and do not find the need to
interfere therewith. However, considering that the list between the
parties is pending since 1989, we are inclined to pass the following
further directions:-

"(i) Appellants shall file their Claim Affidavit in the

DRT within one week from the date on which
the present order is uploaded on the website after
duly serving a copy of the same on the opposite
party;

(ii) The Application for cross-examination of the

witnesses of Respondent - Financial Institution
filed by the Appellants in main O.A. shall be
decided within a period of four weeks including
witness action, if any, from today;

(iii) DRT shall dispose of the main O.A. as

expeditiously as possible and in any event, within
a period of eight months from today.

12. Rule is made absolute in the above terms. No order as to

costs.

13. This order will be digitally signed by the Private Secretary of

this Court. All concerned to act on production by fax or email of a

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digitally signed copy of this order.

[ MILIND N. JADHAV, J. ] [ NITIN JAMDAR, J. ]

Digitally
signed by
Ravindra Ravindra M.
Amberkar
M. Date:
Amberkar 2020.11.05
17:39:41
+0530

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