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M/s Jersey Developers (P) Limited & Ors. vs Canara Bank

Civil Appeal · 2022 INSC 425Decided 13 Apr 2022
Civil Appeal No. 2708 of 2022
M.R. Shah · B.V. Nagarathna

Background

Canara Bank sued the appellant company and its directors (who had been living in the USA for about 40 years) for recovery of a loan. Summons sent to the company's Chennai address came back "unclaimed" because the premises were shut and had since been sold, so the trial court allowed substituted service by newspaper publication and, when no one appeared, passed an ex-parte decree in 2004. The appellants said they only learned of the decree and a subsequent recovery certificate in 2014, and their applications to set aside the ex-parte decree were dismissed first by the trial court and then by the Madras High Court.

Decision Breakdown

The Supreme Court noted that the appellants had, over the course of the litigation, deposited the entire decretal amount (50% before the High Court and the balance before the Supreme Court) to demonstrate good faith and secure the bank's dues. Weighing the fact that the original summons never actually reached the appellants (having been sent to a now-sold, vacated address) against the bank's interest in recovering its money, the Court held that the fair course was to give the appellants one more opportunity to contest the suit on merits. It set aside both the High Court's and the trial court's orders as well as the original ex-parte decree, restored the suit for a fresh decision, directed the appellants to appear and file their written statement within four weeks, and allowed the bank to place the deposited amount in an interest-bearing fixed deposit pending the suit's outcome.

Lesson Learnt

Even a decree that has become final can be reopened when a party shows it never actually received notice of the proceedings and promptly acts once it learns of the decree, especially where it secures the opposing party's financial interest in the meantime: procedural finality can yield to a genuine denial of a fair hearing.

Official source (sci.gov.in)View Judgment (PDF)

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