Delhi High Court Sets Aside Dismissal of Bank’s Recovery Suit for Alleged Non-Existent Defendant: “Commercial Court Ignored Material Documents Supporting Substituted Service” — Remands Case for Fresh Consideration Under Order V Rule 20 CPC

Court’s Decision

The Delhi High Court set aside the Commercial Court’s order dated 20 May 2022 that had dismissed the appellant’s suit for being instituted against a non-existent person and imposed costs of ₹25,000. The Division Bench held that the rejection of the appellant’s application under Order V Rule 20 CPC was based on erroneous factual assumptions. The case has been remanded to the Commercial Court for fresh consideration of the application for substituted service, and further proceedings in the suit will abide by that outcome.

Facts

The appellant bank had instituted CS (COMM) 308/2020 seeking recovery of ₹11,19,609.70 along with interest at 11.85% per annum, alleging that the defendant, as proprietor of a concern, had availed a loan of ₹9,90,000 under the Pradhan Mantri Loan Scheme but failed to repay it. Two residential addresses of the defendant were provided in the suit—one in Delhi and another in Sonipat, Haryana.

Despite issuance of summons, the defendant could not be served. The notices sent to both addresses were returned with the endorsement “no such person.” Subsequently, the appellant moved an application under Order V Rule 20 CPC for substituted service, which was rejected by the Commercial Court on the ground that the defendant never resided or worked for gain at the addresses mentioned.

Issues

1. Whether the Commercial Court was justified in dismissing the application under Order V Rule 20 CPC.
2. Whether the conclusion that the suit was filed against a non-existent person was sustainable in light of the documents on record.
3. Whether the dismissal of the suit with costs was appropriate.

Petitioner’s Arguments

The appellant contended that several documents—such as the defendant’s Aadhar card, PAN card, a rent agreement dated 29 December 2016, Credit Information Form, VAT Return Verification Form, and Import-Export Certificate—had been filed before the Commercial Court and demonstrated the existence of the defendant at the given addresses. It was argued that the impugned order failed to consider these materials and thus the application under Order V Rule 20 CPC was wrongly dismissed.

Respondent’s Arguments

Despite notice, there was no appearance on behalf of the respondent before the High Court.

Analysis of the Law

Order V Rule 20 CPC allows for substituted service where the defendant is avoiding service or where service cannot be effected in the ordinary manner. The application of this provision depends on the court being satisfied that the defendant cannot be found and that ordinary means of service have failed despite due diligence.

Precedent Analysis

The judgment does not cite specific precedents but relies on procedural interpretation of Order V Rule 20 CPC, which mandates a factual satisfaction by the court that ordinary service is not feasible. The High Court found that such satisfaction was based on misreading of facts and incomplete record consideration.

Court’s Reasoning

The High Court noted the following:

• The Commercial Court erred in stating that the service reports categorically said “no such person ever resided at the given addresses.” In reality, they merely stated “no such person at the address,” which could mean temporary absence.
• The Commercial Court failed to consider critical documents submitted by the appellant proving the defendant’s linkage to the addresses.
• The findings were thus factually incorrect, and the rejection of the Order V Rule 20 application was based on these inaccuracies.

The High Court also flagged a separate administrative issue: the certified copy of the impugned order provided by the Commercial Court was defective, showing discontinuity between lines across pages. It directed the Commercial Court to investigate the lapse and take necessary steps.

Conclusion

The Delhi High Court:

• Set aside the Commercial Court’s order dated 20 May 2022.
• Remanded the application under Order V Rule 20 CPC for fresh consideration.
• Directed that further proceedings in the suit would abide by the outcome of the substituted service application.
• Requested the Commercial Court to take up the matter on 28 May 2025 without granting adjournments to the appellant.

Implications

This judgment underscores the importance of judicial diligence in considering documentary evidence before rejecting service-related applications. It reiterates that substituted service cannot be denied merely based on ambiguous or incomplete service reports when there is prima facie material showing the defendant’s presence at the disputed address. It also reflects the court’s sensitivity towards procedural integrity and judicial record-keeping.

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