Bombay High Court: In the present case, an interim application was filed by the applicant, seeking setting aside of the ex-parte Judgment and Order dated 31-7-2023 passed in favour of the respondent whereby the applicant was directed to pay Rs 4,81,02,500 along with interest at the rate of 12% p.a. on the principal sum of Rs 3,55,00,000 from 1-4-2018 to 28-2-2021 and further simple interest at the same rate till actual payment and realization. A Single Judge Bench of Abhay Ahuja, J., opined that if there were more than one addresses of the applicant and service was effected or deemed effected on even one of the addresses, that was valid and effective service. The Court further opined that once it was held that the service was duly effected by the respondent, it would not be necessary to consider the second condition for setting aside a decree and Order XXXVII Rule 4 of the Civil Procedure Code, 1908 (‘CPC’), i.e., facts which would entitle the applicant leave to defend the suit. The Court thus dismissed the interim application and directed the applicant to pay a cost of Rs 1 lakh to the respondent.
Background
Midas Impex (P) Ltd. by invoking Section 9 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) filed a company petition against the Prince SWR System Pvt. Ltd (‘the Company/the Corporate Debtor’) and initiated the Corporate Insolvency Resolution Process (‘CIRP’). Thereafter, the NCLT, Mumbai passed an order dated 16-4-2021, whereby CIRP was initiated against the Company wherein the applicant was the Director.
The NCLT prohibited institution of suits and continuation of pending suits against Prince SWR System (P) Ltd., including execution of any judgment, decree, or order in any court of law, tribunal, arbitration Panel, or other authority; transferring, encumbering, alienating, or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover, or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the recovery of any property by an owner or lessor where such property was occupied by or in possession of the corporate debtor.
Counsel for the applicant submitted that the address at which the service was effected was not being used by the applicant as the company in which he was director was undergoing CIRP and that even otherwise the person on whom the service was effected was not employed by him and that therefore, the service ought to have been effected at the residential addresses on one of which the decrees were also served. Therefore, this was a case of non-service of writ of summons and special circumstance to set aside the decrees dated 31-7-2023.
Analysis, Law, and Decision
The Court relied on Purnendu Shekharmal Jain v. ACG Associated Capsules (P) Ltd., 2017 SCC OnLine Bom 107, wherein the Division Bench of this Court reiterated the principle set out by the Supreme Court in Rajni Kumar v. Suresh Kumar Malhotra, (2003) 5 SCC 315, regarding Order XXXVII Rule 4 of CPC. The Court opined that to set aside a decree and Order XXXVII Rule 4 of CPC, the applicant must not only to show special circumstance(s) which prevented him from appearing or applying for leave to defend but he must show by affidavit or otherwise, facts which would entitle him leave to defend the suit, i.e., even if one of the condition was not met, the applicant could not succeed. The Court further opined that non-service of writ of summons was undoubtedly a special circumstance.
The Court noted that the clerk of the sheriff of Bombay affirmed that the packet containing the copy of the Writ of Summons and the Plaint dispatched to the applicant was returned with the remark “unclaimed return to sender” on 1-10-2021. The Court relied on C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555, wherein the Supreme Court held that return of a packet with the remark “unclaimed” was to be considered as duly served. Thus, the Court agreed with the respondent’s contention that the service as recorded in affidavit of service dated 28-10-2021 was to be treated as good service.
The Court stated that the fact that since Prince SWR System (P) Ltd. was under CIRP and the Board of Directors including the applicant was suspended; the applicant had stopped using the office premises, was not communicated to the respondent. Therefore, even if the respondent had sent a letter to the applicant’s residential addresses dated 6-7-2023 notifying the applicant about the ex-parte orders passed in the suit to an address other than the one to which the service was effected, it could not be said that no service had been effected upon the applicant which prevented him from entering appearance in the matter.
The Court opined that there were no malafides before this Court, as the decrees were posted on three addresses, out of which the packets of service of the decree on two addresses was returned with the remark “unclaimed”, however, the service on the third address, which was obtained by the respondent from a broker, was effected. The Court opined that if there were more than one addresses of the applicant and service was effected or deemed effected on even one of the addresses, that was valid and effective service.
The Court opined that fair opportunity was afforded and there was no injustice in the present case. The Court stated that an attempt to thwart decrees passed by this Court following due process in accordance with the special procedure under Order XXXVII of CPC, in this manner, was an abuse of process of law which deserved to be met with imposition of costs upon the applicant.
The Court further opined that once it was held that the service was duly effected by the respondent, it would not be necessary to consider the second condition for setting aside a decree and Order XXXVII Rule 4 of CPC, i.e., facts which would entitle the applicant leave to defend the suit.
The Court took note of the order dated 16-4-2021 passed by the NCLT and stated that the said order indicated that the prohibition was with respect to institution and continuation of suits only against the said company and not against the applicant. Accordingly, the moratorium referred to in the said order did not apply to the applicant but only to the corporate debtor/the company.
The Court thus dismissed the interim application and directed the applicant to pay cost of Rs 1 lakh to the respondent as the Court opined that the present application was only a frivolous and vexatious attempt to thwart judgments/decrees passed by this Court.
[Piyush Gangji Chheda v. Paras Bharat Chheda, Interim Application No. 1686 of 2025, decided on 30-4-2025]
Advocates who appeared in this case :
For the Applicant/Original Defendant: Dinesh Dubey a/w Pranay Chaugule, Advocate for the Applicant in IA/1368/2025, 1686/2025, 1715/2025, 1716/2025.
For the Respondent/Original Plaintiff: Amrut Joshi a/w Maulik K. Tanna Advocate for the Original Plaintiff/Respondent in IA/1368/2025, 1686/2025, 1715/2025, 1716/2025.