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Judgment
1.0 This application is filed by the applicant bank under Section 19(1) of Recovery of Debts and Bankruptcy Act, 1993 (formerly Recovery of Debts Due to Banks and Financial Institutions Act, 1993) against the defendants for recovery of a sum of Rs.5,60,241/- together with further interest @11.45% p.a. compounded with monthly rests plus 2% p.a. penal interest in respect of Cash Credit Account and a further sum of Rs.14,90,289/- together with further interest @11.70% p.a. compounded with quarterly rests plus 2% p.a. penal interest in respect of Term Loan Account from the date of application till the date of realization in full and for sale of schedule mentioned properties along with costs of this application.
2.0 Brief facts of the Application may be tersely stated as follows.
2.1 1st defendant is a Proprietary firm represented by its Proprietrix Mrs. M. Neeraja Rani, the 2nd defendant approached the applicant for sanction of Cash Credit facility for its cosmetics business. Considering the said request, applicant sanctioned a sum of Rs.10 lakhs vide its sanction dated 18.03.2011. 1st defendant accepting the sanction executed various loan and security documents in favour of applicant on 18.03.2001 viz., Demand Promissory Note for a sum of Rs.10,00,000/- thereby undertaking to return the said amount with interest at the base rate of 9.50% plus 1.75% i.e., 11.25% p.a. compounded with monthly rests, Demand Promissory Note Delivery letter, Letter of hypothecation along with consent cum authorization letter thereby hypothecating stocks including raw material and work in progress more fully described in Schedule 'A' to the OA, Letter of hypothecation for securing stocks along with consent cum authorization letter.
2.2 1st defendant approached the applicant bank for sanction of Term Loan facility for purchase of machineries and considering the said request applicant sanctioned a Term Loan of Rs.15 lakhs to 1st defendant vide sanction dated 18.03.2011. Having availed the said facility 1st defendant executed various loan and security documents in favour of applicant on 18.03.2001 viz., Demand Promissory Note for a sum of Rs.15 lakhs thereby promising to repay the said amount together with interest @11.50% p.a. compounded with quarterly rests, letter agreeing to pay in EMI, Letter of hypothecation along with consent cum authorization letter thereby hypothecating the machineries and stocks more fully described in Schedule 'A' to the OA, Letter of hypothecation for securing machineries and stocks along with consent cum authorization letter.
2.3 To secure the above said loan facilities availed by 1st defendant, 3rd defendant executed two personal guarantees along with consent cum authorization letter dated 18.03.2011 both for Cash Credit Loan and Term Loan account.
2.4 3rd defendant further deposited the title deeds pertaining to his immovable property more fully described in Schedule 'B' to the OA and created equitable mortgage in respect of the property in favour of applicant bank and confirmed the same by letter dated 17.3.2011. 3rd defendant also executed Memorandum of deposit of title deeds dated 17.03.2011 in favour of applicant bank and the same is registered as Doc. No.1193/2011 for Rs.25 lakhs with the Joint Sub Registrar-II, Villupuram.
2.5 1st and 3rd defendants executed separate revival letters acknowledging the debt and validity of documents executed for the Cash Credit Loan and Term Loan on 14.03.2014 and 10.01.2017.
2.6 After availing the above facilities, the borrower defaulted in repayment and the operation in accounts were not proportionate to the limits and the defendants were only routing minimum transaction. Further, the defendants flouted the conditions of sanction and failed to maintain adequate stocks and also submit stock statement on time. Therefore, the accounts of the defendants were classified as Non-Performing Assets on 30.09.2015.
2.7 Despite repeated requests as the defendants did not come forward to regularize the loan accounts applicant issued a letter demanding to regularize the loan account. The defendants despite receiving the said notice did not make any attempt to discharge the dues. Hence this application is filed for recovering a sum of Rs.5,60,241/- together with further interest @11.45% p.a. compounded with monthly rests plus 2% p.a. penal interest in respect of Cash Credit Account and a further sum of Rs.14,90,289/- together with further interest @11.70% p.a. compounded with quarterly rests plus 2% p.a. penal interest in respect of Term Loan Account from the date of application till the date of realization in full
3.0 Defendants filed their reply statement.
4.0 In the light of the above, the points that arise for consideration by this Tribunal are:
Whether the applicant bank has established its claim against the defendants? If so, for what amount?
Whether the applicant bank is entitled for pendent lite and future interest, if so, at what rate?
5.0 Point No.1
Whether the applicant bank has established its claim against the defendants? If so, for what amount?
5.1 The applicant bank in its endeavor to establish its claim against the defendants examined its official as AW1 and got marked exhibits Ex. A-1 to A-23. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-23 strenuously contended that the claim of the applicant stands established, as such, the applicant is entitled for a recovery certificate.
5.2 Ld. Counsel for applicant would contend further that the contentions put forth by the defendants in the reply statement of defendants 1 and 2 are not tenable and unsustainable apart from being unsubstantiated. Ld. Counsel would submit that the defendants duly executed necessary loan and security documents only after going through the contents therein as such it is not open for the defendants to contend that the signatures of the defendants were obtained on blank documents and the same were later used for the purpose of the present claim. Ld. Counsel would also submit that the plea of the defendants that the statement of accounts is not accompanied by necessary certificate is false as all necessary certificates have been filed along with the statement of accounts. Thus, contending Ld. Counsel prayed for allowing the claim of the applicant.
5.3 Ld. Counsel for defendants would contend that the signatures of the defendants were obtained on blank forms and they were later filled and used for the purpose of filing of this application and therefore the claim of the applicant is liable to be dismissed. Ld. Counsel would further submit that the interest has been compounded in respect of the loan account and as such the amount claimed by the applicant is also liable to be dismissed. Ld. Counsel also would submit that the statement of accounts filed is not accompanied by required certificates and as such the statement of accounts is liable to be rejected. Thus, contending the Ld. Counsel prayed for dismissing the claim of the applicant.
5.4 In the light of the above contentions I have carefully perused the records. In so far as the plea of the defendants that their signatures were obtained on blank papers and the same were later filled for the purpose of present case is concerned, firstly, there is no tenable basis established by the defendants to accept the said plea. Nextly, even if the said plea is assumed to be true in the light of the judgment of the of Hon'ble DRAT, Mumbai in the matter of Sangli Bank Ltd. Vs. Prabha K.Maheshwari and others reported in MANU/DM/0025/2005 wherein in paragraph 8 wherein it was held that;
"8. The grant of loan as alleged by the Bank and defendant Nos.6 to 10 having signed a guarantee agreement is an admitted position. Their contention is that on 30th July, 1992, defendant Nos. 1 to 5 had sent blank letter of lien, demand note for grant of Rs.30 lacs to the Bank, which indeed, appears to be correct. However, it has to be pointed out that settled legal position is that the person who signs blank standard documents takes responsibility for the same and the plea of non est factum is not available to him"
the said plea of the defendants is unsustainable.
5.5 In so far as the next contention of the defendants that the interest is compounded is concerned, I have carefully examined the statement of accounts and the enclosures therein and I am satisfied that the applicant has not compounded the interest as evident from the statement of accounts.
5.6 The next plea that the necessary certificates as per law are not filed along with the statement of accounts is also unsustainable as the applicant bank has filed the necessary certificates as required under the Bankers' Book Evidence Act along with the statement of accounts as is evident from Exhibit A-23. Therefore, all the pleas put forth by the defendants remained established.
5.7 Therefore, in the light of the aforesaid discussions, on careful perusal of the Proof Affidavit of AW-1 besides Exhibits A-1 to A-23, and taking into consideration the submissions of both sides the Tribunal is fully satisfied that the applicant has established its claim. This point is answered accordingly.
6.0 Point No.2
Whether the applicant bank is entitled for pendent lite and future interest, if so, at what rate?
6.1 In terms of Sec. 19 (20) of the RDB Act, the Tribunal has been empowered to pass an order regarding payment of interest from the date on or before which payment of the amount is found due, up to the date of realisation or only payment, as it think fit to meet the ends of justice.
6.2 Hon'ble Supreme Court, in its recent judgement (reported in II 2009 BC pg. 696) in the matter of State Bank of India - vs - Sarath Textiles, held that "Sec. 19 (20) of the RDDB & FI Act confers discretion on the Tribunal to award interest on the applicant being as it thinks fit to meet the ends of justice."
6.3 Hon'ble Supreme Court of India in the matter of Central Bank of India - vs - N. Raveendra (reported in 2002 [1] SCC pg. 367) held that "Sec. 34 of CPC confers discretion on the Court to award or not to award interest or to award interest at such rate as it deems fit de-horse notwithstanding the contract between the parties." Sec. 19 (20) of the RDDB & FI Act is akin to Sec. 34 CPC.
6.4. While it is the case of the applicant that the applicant bank is entitled for contractual rate of interest till discharge of the entire outstanding dues, however, the defendants would contend that in so far as pendente lite and future interest is concerned, the contractual rate of interest may not be applied. It is to be stated that the claim of the applicant bank includes the rate of interest and other charges payable as per the contract. The Tribunal already held that the applicant bank is entitled for the amount claimed in the OA. Therefore, under these circumstances, the Tribunal is inclined to grant pendente lite and future interest @ 10% p.a. simple (in respect of both Cash Credit and Term Loan) on the OA claim amount from the date of filing till the date of realization. Point No.2 is answered accordingly.
7.0 For the reasons stated as above, I find that the applicant bank has successfully proved its OA claim against the defendant and it is held that the applicant bank is entitled for a Recovery Certificate for the amounts claimed in the OA with pendente lite and future interest at and 10% per annum (simple) in respect of both Cash Credit Facility and Term Loan facility, from the date of the application till the date of realization, from the defendants, for sale of the application schedule mentioned properties along with costs of the application. The defendants 2 and 3 are also personally liable for the TA claim to the extent specified hereunder.
8.0 In the result, application is allowed as under:
(a) The applicant bank is entitled to recover a sum of Rs.5,60,241/- together with interest at the rate of @10% p.a. (simple)in respect of Cash Credit Loan Account from the date of the application till the date of its realization in full, from the defendants jointly and severally.
(b) The applicant bank is entitled to recover a sum of Rs.14,90,829/- together with interest at the rate of @10% p.a. (simple) in respect of Term Loan Account from the date of the application till the date of its realization in full, from the defendants jointly and severally.
(c) It is further ordered that in case of default of payment by the defendant, the Applicant Bank is at liberty to sell the application schedule mentioned properties in terms of the order in (a) and (b) supra and appropriate the sale proceeds towards the decretal dues.
(d) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant Bank, defendants 2 and 3 are personally liable for all such amounts due.
(e) It is further ordered that any amount remitted or realized if any, during the course of the proceedings, shall be given due credit to the loan account of the defendants.
(f) The applicant bank is entitled for costs of this application.
9.0. The applicant bank is directed to file costs memo within two weeks of the receipt of this order.
10.0 Issue recovery certificate in favour of the applicant bank in terms of this final order.
11.0. Communicate a copy of the order to the parties concerned in terms of Rule 16 read with Rule 2(c) of DRT (Procedure) Rules, 1993.
(Dictated to PS, transcribed by him, corrected, signed and pronounced by me in Virtual Court through video conference on this 11th day of May, 2020)