Saturday, 17 June 2017

How to ascertain limitation for filing counter claim?

Time to file the written statement is condonable. However, delay
in filing a counter claim cannot be condoned when the claim is barred by
limitation. However the period of limitation starts running from the date
of accrual of the right to sue. An application under Section 19 of the
DRT Act for recovery of a claim has to be filed within the period of
limitation for a suit to recover the debt. When an application is filed
under Section 19, the respondent/defendant might file its written
statement contesting the claim. The respondent/defendant may claim a
set of. The respondent/defendant may also raise a counter claim. This
counter claim need not be raised in the written statement itself. It may be
filed separately, but within the period of limitation.
22. The provisions of the Limitation Act would apply to the filing of a 
counter claim. A counter claim would have to be filed within three years
from the date of accrual of the right to sue. Reference may be made to
the judgment of the Supreme Court in Mahendra Kumar & Anr. Vs. State
of Madhya Pradesh reported in (1987) 3 SCC 265. Acknowledgment
within the period of limitation with promise to pay would extend the
period of limitation.
IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 7 th December, 2016
 W.P.(C). 603/2016 
VISHAL HIRA MERCHANT PVT. LTD. & ORS.
V
HDFC Bank 
CORAM:
 MS. JUSTICE INDIRA BANERJEE
 MR. JUSTICE V. KAMESWAR RAO.
Citation: AIR 2017 Delhi 49



1. In this writ petition, the petitioners have challenged an order dated th October, 2015, passed by the learned Debt Recovery Appellate
Tribunal dismissing Appeal No.373/2015, filed by the petitioners, thereby
affirming an order dated 6th August, 2015, passed by the learned Debt
Recovery Tribunal, dismissing the counter claim filed by the petitioners
against the claim of the respondent-Bank only on the ground that the
same was barred by limitation.
2. The respondent, HDFC Bank, (hereinafter referred to as HDFC
Bank) instituted an original application No.39/2010 against the petitioner 
in the learned Debt Recovery Tribunal-III Delhi, for recovery of
Rs.2,46,55,277.27 along with interest and costs from the petitioners. By
an order dated 31st May, 2012, the learned Debt Recovery Tribunal III
Delhi, closed the rights of the petitioners to file written statement and
directed HDFC Bank to file ex parte evidence. The matter was directed to
be listed before the Registrar on 2nd November, 2012, for filing evidence
and exhibiting the documents.
3. On or about 6th May, 2014, the petitioners filed an application,
praying for leave to file the written statement and counter claim out of
time.
4. By an order dated 21st May, 2015, the learned Debt Recovery
Tribunal III allowed the said application and took the written statement
filed by the petitioners on record, subject to payment of costs of
Rs.2500/-.
5. Aggrieved by the said order dated 21st May, 2015, HDFC Bank
filed an appeal being Miscellaneous Appeal No.198/2015 therefrom,
before the Debt Recovery Appellate Tribunal, Delhi.
6. By an order dated 6th August, 2015, the learned Appellate Tribunal
disposed of the appeal, holding that the written statement would be taken
on record, subject to payment of additional costs of Rs.25000/- and that
the learned Tribunal would adjudicate whether the counter claim, filed
by the petitioners, could be entertained.
7. By an order dated 6th October, 2015, the counter claim filed by the
petitioners was dismissed on the ground that the same was barred by
limitation. 
8. The petitioners filed an appeal being Appeal No.373/2015, against
the aforesaid order of the learned Tribunal, which has been dismissed by
the impugned order of the Debt Recovery Appellate Tribunal.
9. Mr.Poddar appearing on behalf of the petitioners rightly submitted
that a counter claim under Section 19 (8) of the Recovery of Debts Due to
Banks and Financial Institutions Act 1993, (hereinafter referred to as the
DRT Act) had to relate to cause of action, which had arisen before the
filing of the original application, or before the filing of the written
statement, on or before the last date fixed for defence of the respondent,
Mr. Poddar also argued rightly that under Section 19 (9) of the DRT Act a
counter claim had to be treated as a cross suit and tried along with the
original application, so that all controversies and disputes could be settled
in the same proceedings.
10. Mr. Poddar also argued, rightly that the Court had the discretion to
permit a written statement including a written statement containing a
counter claim to be filed belatedly, by condoning the delay in filing the
written statement.
11. Mr. Poddar argued that in this case, though the petitioners had been
permitted to file their written statement belatedly, their counter claim,
which is part and parcel of their written statement was erroneously not
entertained, on the ground that the same was barred by limitation.
12. Mr. Poddar argued that the cause of action, for which the counter
claim was filed had arisen before the original application was filed by
HDFC Bank, and in any case, before delivery of defence. He argued that
the learned Debt Recovery Tribunal had the jurisdiction and power to 
condone the delay in filing an application under Section 19 of the DRT
Act as well as a written statement, in view of Section 24 read with
Section 2(b) of the DRT Act. The time for filing the written statement
having been extended, the counter claim ought to have been adjudicated
along with the original application filed by the HDFC Bank.
13. Mr. Poddar’s argument that the question of whether the counter
claim was barred by limitation or not, should have been decided with the
original application, cannot be sustained in view of the direction in the
order dated 6th August, 2015, of the Debt Recovery Appellate Tribunal,
which has assumed finality.
14. The moot questions involved in this writ petition are, whether there
is any prescribed period of limitation for raising a counter claim and if so,
from what point of time, does the limitation start running; is a counter
claim raised over three years after the filing of the original application
ipso facto barred by limitation; can the delay in filing the counter claim
be condoned beyond the period prescribed by the laws of limitation and
whether condonation of the delay in filing a written statement would
extend the period of limitation for raising the counter claim.
15. Section 19 of the DRT Act enables a bank or a financial institution
to recover any debt from any person by making an application under the
aforesaid section before the appropriate Debt Recovery Tribunal having
jurisdiction. An application under Section 19 is in the nature of a suit in
respect of which the provisions of the Limitation Act, would apply. This
can also be deduced from Section 31 of the DRT Act, which provides as
follows:
“31. Transfer of pending cases.—(1) Every suit or other
proceeding pending before any court immediately
before the date of establishment of a Tribunal under this
Act, being a suit or proceeding the cause of action
whereon it is based is such that it would have been, if it
had arisen after such establishment, within the
jurisdiction of such Tribunal, shall stand transferred on
that date to such Tribunal:
Provided that nothing in this sub-section shall apply to
any appeal pending as aforesaid before any court.
16. A suit filed in a Civil Court, if transferred to the DRT, is to be
decided in the same manner as an application under Section 19, from the
stage, which was reached before such transfer or from any earlier stage as
the Tribunal may deem fit.
17. Section 24 of the DRT Act provides that the provisions of the
Limitation Act 1963 shall, as far as may be, apply to an application made
to a Tribunal. An application under Section 19 being in the nature of a
suit for recovery of debt, the limitation period prescribed in the limitation
Act for filing a suit for recovery of the same debt would apply.
18. There is no provision in the Limitation Act, 1963 for condonation
of delay in filing a suit. If a suit is time barred, it has to be dismissed.
There can be no condonation of delay. Section 5 of the Limitation Act
only applies to appeals and applications and not to a suit.
19. The Judgement of the Supreme Court in Indian Bank Vs. Mani
Lal Govindji Khona reported in (2015) 3 SCC 712 cited on behalf of the
petitioner is not an authority for the proposition that the delay in filing
recovery proceedings, which is akin to a suit, or delay in raising a counter 
claim can be condoned. In the aforesaid case, the Supreme Court held
that, since Section 5 of the Limitation Act applies to proceedings before
the Debt Recovery Tribunal, the High Court had rightly condoned the
delay of 23 days in filing a Miscellaneous Application for setting aside a
sale and rectification of recovery certificate and decree.
20. A counter claim is in the nature of a cross suit. Under Section 19(8)
and (9) of the DRT Act read with Order 8 Rule 6A(1) of the Civil
Procedure Code, a counter claim can be raised in respect of a cause of
action that has arisen before or after the filing of the suit/application for
recovery, but before the defence is delivered, or before the time for
delivering the defence has expired. A counter claim being in the nature
of a cross suit as provided in Order 6A(2) of the Code, Article 113 of the
Limitation Act would apply to a counter claim.
21. Time to file the written statement is condonable. However, delay
in filing a counter claim cannot be condoned when the claim is barred by
limitation. However the period of limitation starts running from the date
of accrual of the right to sue. An application under Section 19 of the
DRT Act for recovery of a claim has to be filed within the period of
limitation for a suit to recover the debt. When an application is filed
under Section 19, the respondent/defendant might file its written
statement contesting the claim. The respondent/defendant may claim a
set of. The respondent/defendant may also raise a counter claim. This
counter claim need not be raised in the written statement itself. It may be
filed separately, but within the period of limitation.
22. The provisions of the Limitation Act would apply to the filing of a 
counter claim. A counter claim would have to be filed within three years
from the date of accrual of the right to sue. Reference may be made to
the judgment of the Supreme Court in Mahendra Kumar & Anr. Vs. State
of Madhya Pradesh reported in (1987) 3 SCC 265. Acknowledgment
within the period of limitation with promise to pay would extend the
period of limitation.
23. Section 5 of the Limitation Act, which provides for condonation of
delay, only apply to appeals and applications and not to an application
under Section 19, which is in effect and substance of a suit or to a counter
claim.
24. The learned Debt Recovery Tribunal rejected the counter claim on
the ground that the same was barred by limitation and the Debt Recovery
Appellate Tribunal upheld the dismissal by the order impugned.
25. The DRT as well as DRAT rightly found in effect and substance
that a counter claim barred by limitation could not be entertained by
condonation of the delay. However, the finding that a counter claim
placed three years after the filing of the original application would ipso
facto be barred by limitation is ex facie misconceived. The learned DRT
as well as DRAT misdirected themselves in not considering, whether the
counter claim had been filed within three years from the accrual of the
right to sue.
26. For the reasons discussed above, the impugned orders of the
learned DRT and the DRAT cannot be sustained and the same are set
aside.
27. The learned Tribunal shall decide whether the counter claim was
barred by limitation or not, afresh in the light of the observations above,
on consideration of the materials produced by the respective parties in
support of their contentions in this regard.
28. The writ application is disposed of accordingly.

INDIRA BANERJEE, J
V. KAMESWAR RAO, J
DECEMBER 07, 2016

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