Supreme Court Restores Suit After Ex-Parte Decree in Canara Bank Loan Recovery Case

The case of M/s Jersey Developers (P) Limited & Ors. vs. Canara Bank pertains to an ex-parte decree issued against the appellants in a loan recovery suit. The Supreme Court ruled in favor of the appellants, quashing the ex-parte decree and restoring the suit for fresh adjudication.

Background of the Case

The appellants, M/s Jersey Developers (P) Limited and its directors, had availed of a loan facility from Canara Bank. The bank subsequently filed a suit (OS No.3749 of 2003) for recovery of outstanding dues.

The key sequence of events was as follows:

The appellants, who were residing in the United States of America (USA) for over 40 years, were unaware of the suit.
Summons were sent to their Chennai address, which was closed at the time, leading to a return of the notices as ‘unclaimed’.
The Trial Court ordered substituted service via newspaper publication.
As the defendants did not appear, the court proceeded ex-parte and passed a decree on February 12, 2004.
In 2013, Canara Bank sought execution of the decree through the Debts Recovery Tribunal (DRT), which issued a demand notice for Rs. 47,21,320.53.
The appellants became aware of the decree only in 2014 when one of them visited India.
They filed an application before the Trial Court to set aside the ex-parte decree, which was dismissed in 2015.
Their revision petition was also dismissed by the Madras High Court in 2021.

Arguments of the Petitioners (Jersey Developers & Ors.)

The appellants contended that they were never served proper notice as they had been residing in the USA.
The property in Chennai, where notices were sent, had been sold in 2002, further proving that they were unaware of the proceedings.
Since they were never given an opportunity to defend themselves, they should be allowed to present their case.
They had already deposited the entire decretal amount to demonstrate their bonafide intention to settle the dispute.

Arguments of the Respondent (Canara Bank)

The bank argued that due process was followed, and summons were sent to the last known address.
Substituted service via newspaper publication was an accepted method when direct service fails.
The appellants had delayed seeking relief as they filed their application a decade after the decree.

Supreme Court’s Ruling

The Supreme Court, comprising Justices M.R. Shah and B.V. Nagarathna, ruled in favor of the appellants and set aside the ex-parte decree.

1. Lack of Proper Notice Violates Principles of Natural Justice

The Court emphasized that defendants should have a reasonable opportunity to defend themselves. It stated:

“Summons were returned ‘unclaimed,’ and substituted service was ordered. Given that the appellants were staying in the USA and unaware of the proceedings, it would be in the interest of justice to grant them an opportunity.”

2. Suit to Be Restored for Fresh Adjudication

The Court ordered that the original suit be restored and heard on its merits, ensuring that both parties had a fair chance to present their cases.

3. Deposited Amount to Secure Bank’s Interests

Since the appellants had deposited the full decretal amount, the Court directed that the bank could withdraw it and place it in an interest-bearing deposit until the final outcome of the suit.

4. Appellants to File Their Defense

The Court directed the appellants to appear before the Trial Court on May 10, 2022 and submit their written statements within four weeks.

Impact of the Judgment

Reaffirms the importance of fair service of notice in civil litigation.
Ensures that ex-parte decrees do not deny parties their right to a fair hearing.
Provides a precedent for cases where defendants were unaware of pending litigation due to outdated service addresses.
Balances the interests of financial institutions with the rights of borrowers to defend themselves.

Conclusion

The Supreme Court’s decision in M/s Jersey Developers (P) Limited vs. Canara Bank reinforces the fundamental principle of natural justice. By setting aside the ex-parte decree and restoring the suit, the Court has ensured that the case is adjudicated on its merits rather than procedural lapses.

Petitioner Name: M/s Jersey Developers (P) Limited & Ors..
Respondent Name: Canara Bank.
Judgment By: Justice M.R. Shah, Justice B.V. Nagarathna.
Place Of Incident: Chennai, Tamil Nadu.
Judgment Date: 13-04-2022.

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