Panjab National Bank vs M/s. Amity Iron Trading And Ors.

This is an Original Application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 initiated by the applicant against the defendant praying for issuance of Recovery Certificate to the tune of Rs.11,43,50,395.13(Rupees Eleven Crores Forty Three Lacs Fifty Thousand Three Hundred Ninety Five and Thirteen paisa) only together with interest, cost and other usual reliefs.

The brief facts of the case as made out in the Original Application by the applicant bank is that the defendant No.1is a Proprietorship concern, having its registered office/ factory situated at Plot No.69, Khurda Industrial Estate in the district of Khurda and represent by it's sole Proprietor/ key person defendant no.2 and deals in trading of iron ores and minerals. Defendant no.3 to defendant no.6 are guarantors, given their personal guarantee to the Loan of the defendant no.1 with an undertaking for repayment of loan dues of the defendant no.1 with interest, cost, expenses etc. Furthermore, to secure the Loan of the defendant no.1, the defendant nos. 3 and 4 being the guarantor to the loan of the defendant no.1, mortgage their immovable property with the applicant. The defendant no.1 availed various facilities from the applicant bank.

The defendant no.1 through defendant no.2 vide loan application dated 10.1.2013, approached the applicant bank to render working capital facility in the name of the defendant no.1.

The applicant bank considering the loan application of the defendant no.1 so also considering the stock of Iron Ore and mineral, with certain stipulated terms & conditions of the Sanction letter of the applicant bank dated 26.8.2011 was pleased to provide Cash Credit facilities of Rs.600 Lakhs in favour of the defendant no.1 and communicated it's sanction for due acceptances of stipulated terms and conditions, to which the defendant no.2 being the Key person, for and on behalf of the defendant no.1 returned a copy of the same with proper acknowledgment therein.

Further it is stated that the Cash credit facility of Rs.600 Lakhs sanctioned by the applicant bank in favour of the defendant no.1 against hypothecation of stocks and machinery as Primary Security and against equitable mortgage of immoveable property (land & building) of the Guarantor defendant no.3 as Collateral security with personal guarantee of the defendant Nos. 3 to 6.

For availing the sanctioned Cash Credit facilities and to secure the sanctioned loan, the defendant no.2 as key person to the defendant no.1 executed security documents such as Hypothecation of Goods and Book Debts to Secure Cash Credit facility of Rs.600 Lacs, Letter of Undertaking, Affidavits sworn by the defendant nos. 2, 3, 5 and 6 regarding confirmation of their personal guarantee for sanction of Cash Credit facility of Rs.600 Lakhs to the Defendant no.1 and Agreement of guarantee executed by the defendant Nos.3, 5 and 6 in favour of the Applicant bank on 26.8.2011.

To secure the sanctioned Cash Credit facility of Rs.600 Lakhs, the defendant no.3 as guarantor to the sanctioned Loan, has deposited his personal immoveable property bearing Sale deed no.8641 dated 17.10.1981 situated under Mouza/ village - Madhurawada of SRO, Visakhapatnam with the applicant bank as Security and confirmed vide memorandum of deposit of title deed dated 18.2.2012 in respect of schedule mentioned property is meant for creation of equitable mortgage of the same and with an intention for due repayment of the moneys to be advanced by the applicant bank to the proprietorship concern defendant no.1.

In the year 2013 the Cash Credit Limit of the defendant no.1 was enhanced to from Rs.600 Lakhs to Rs.950 Lakhs vide sanction letter of the applicant dated 17.1.2013 to which the defendant no.2 as the sole proprietor accepted/ acknowledged. The limit of the defendant was enhanced subject to hypothecation of goods and book debts including and to secure the entire limit the mortgage in respect of his land & building with furniture and fixtures of the defendant no.3 was extended and against taking of title deed in respect of the immovable property of the defendant no.4 as additional security to cover the enhanced limit.

To secure the enhanced facility, the defendant o.2 for and on behalf of the defendant no.1 executed required security documents with the applicant bank on 17.1.2013 viz; hypothecation of Goods and Book Debts to secure the Cash Credit facility relating to limit of Rs.950 Lakhs, letter of Undertaking, affidavit sworn by the defendant nos. 2, 5 and 6 confirming their personal guarantee for the enhancement limit sanctioned to the defendant no.1 Firm. Affidavit sworn by the Defendant no.4 confirming personal guarantee for the enhancement limit sanctioned to the defendant no.1 firm including offering her immovable property as additional security for creation of equitable mortgage and towards repayment of the loan dues in respect of the Loan Account of the defendant no.1 firm.

Similarly the Personal Guarantee Deed executed by the defendant Nos.5 and 6 jointly, by the Defendant no.3 to secure the 4 enhanced facility of Rs.950 Lakhs granted to the Defendant no.1 dated 17.1.2013.

To secure the cash credit facility of Rs.950 Lakhs, the defendant no.4 as an additional Security with a letter of declaration of deposit of title deed dated 27.5.2013, has admitted the deposit of the title deed no.303 dated 11.4.1972 with the applicant bank on 27.5.2013 with an intention for creation of equitable mortgage of the same and to secure repayment of the dues of the applicant bank towards the Cash Credit Loan Account of the defendant no.1 and vide letter dated 31.5.2013 confirmed the same. Similarly, the defendant no.3 with an intention to extend his guarantee and to secure the cash credit limit of Rs.950 Lakhs of the defendant no.1, vide letter of continuity dated 28.5.2013 extended his mortgage already created in favour of the applicant on 18.2.2012 and the extension was correctly reflected in the mortgage register of the applicant.

After enhancement of the facility the defendant no.1 utilized the enhanced facility but failed to repay interest, so also failed to transact the loan account in regular manner and also not submitted the stock statement for which the loan account found on stress and the said facts has been personally intimated to the defendant no.2 with a request to regularize the matter. However, after repeated persuasion, the defendant no.2 personally present on the 31.12.2014 and assured the applicant to shut out the matter very soon and executing balance and security confirmation letter dated 31.12.2014 has acknowledged the liabilities in respect of the Cash credit loan account maintaining with the applicant bank.

Even after repeated persuasion and confirming of outstanding balance, the defendant no.2 did not show any inclination to regularize the loan account and for the reason he including guarantors were once again reminded on 7.3.2015 about the liabilities with a request to repay the dues/ over dues but the applicant yielded no result. Thereafter, the applicant bank issued Demand notice U/s.13(2) of the SARFAESI Act, 2002 to the borrower/ guarantors on 18.5.2015 and accordingly, taken further course of action under the statue being found the defendants neglected in repayments of dues of the applicant bank. The defendants also failed and neglected to clear their outstanding dues to the applicant bank. For the continuous irregularities, the Loan Account maintaining with the applicant bank comes to stress and at last turned to NPA on 21.4.2015.

Further the applicant bank submits that the applicant bank has sold the immovable property bearing Sale deed No.8641 dtd.17.10.1981 situated under Village- Madhurawada of SRO Visakhapatnam stand recorded in the name of defendant no.2 Sri Allda Apparao in public auction under the SARFAESI Act, 2002 on 15.3.2017 against sale consideration of Rs.1,27,000/- and adjusted the sale proceeds towards the loan dues of the defendant No.1. Hence, after adjustment of sale proceeds, an amount of Rs.11,43,50,395.13 is still due to applicant bank.

In the above circumstances the applicant bank submits that the defendants are liable to pay the outstanding dues of Rs.11,43,50,395.13(Rupees Eleven Crores Forty Three Lacs Fifty Thousand Three Hundred Ninety Five and Thirteen paise) only together with pendentilite and future interest @ 15.10% per annum with monthly rests, cost and charges till full realization.

Notice was issued to the defendants to show cause as to why the relief prayed for by the applicant bank be not granted. The notice sent to the defendants through Registered post. The notice sent to defendant no.4 was returned with reason "insufficient addresses" and the notices sent to other defendants are neither returned nor acknowledged. Adhering to the principle of natural justice, the notices pertaining to the defendants was published in a widely circulated Odiya newspaper. Despite service through publication, the defendants had neither appeared nor had filed the show cause reply. Consequently, defendants were set ex-parte on 21.7.2017. The Tribunal had no other option but to hear ex-parte against the defendants. I have heard the learned Counsel for the applicant bank and have perused the relevant documents.

The defendants had not contested the case of the applicant bank. Thus, the points for determination in this case are -

(i) Whether the claim of the applicant bank is within time?

(ii) Whether the defendants had utilized the loan facilities granted by the bank?

(iii) Whether the defendants are liable to the amount due to the applicant bank or not?

The applicant bank by oral and documentary evidence has established its case. The documentary evidence comprises from Annexure/Exhibit-1 to Annexures/Exhibits-13, which are available in paper book filed by the applicant bank.

From the perusal of the documents referred above and the copy of the statement of account, which is filed as Annexure/Exhibit-13, it is established that the defendants had availed the financial facility from the applicant bank and had withdrawn the amount through the account.

The oral testimony comprises of an affidavit of Sri Harinder Pal Singh Chawla, S/o. S. Gian Singh Chawla, Asst. General Manager Punjab National Bank, Lewis Road, Bhubaneswar Branch in the district of Khurda. The averments in the application and the facts stated by the witness of the applicant in his affidavit are unrebutted.

From the perusal of the Statement of Account which is Annexure/Exhibit-13, the total outstanding comes to Rs.11,43,50,395.13 (Rupees Eleven Crores Forty Three Lacs Fifty Thousand Three Hundred Ninety Five and Thirteen paise) only which the applicant bank is entitled to recover from the defendants.

In view of the above discussion and after considering the entire evidence-on-affidavit of the applicant bank and the documents filed by the applicant bank, I have no hesitation to hold that the applicant bank is entitled to recover a sum of Rs.11,43,50,395.13 (Rupees Eleven Crores Forty Three Lacs Fifty Thousand Three Hundred Ninety Five and Thirteen paise) only from the defendants who are liable for the same. The contentions of the applicant bank is that they shall also be entitled to pendentelite and future interest @ 15.10% per annum with monthly rests from the date of filing of the Original Application till the date of realization. The interest rate is discretion of Tribunal as per the principles laid down by the Hon'ble Supreme Court in case of Central Bank of India -Versus- Ravindra and other reported in AIR 2001 SC 3095.

From the above discussion, it is held that the contractual rate of interest was 15.10% per annum with monthly rests. Certified copy of the statement of account provides that the rate of interest was changed from time to time which are recorded in the statement of account. The rate of interest which was being charged was 15.10% p.a. with monthly rests granting of pendentilite and future interest is the discretion of the Tribunal and the provisions of Section 34 of CPC does not necessarily mean that in case of commercial transaction, the court is bound to award contractual interest.

In view of the above discussion and after considering the entire evidence on affidavit of the applicant bank and the original document filed by the applicant bank, I have no hesitation to hold that the applicant bank is entitled to recover a sum of Rs.11,43,50,395.13(Rupees Eleven Crores Forty Three Lacs Fifty Thousand Three Hundred Ninety Five and Thirteen paise) only from the defendants, which the bank is entitled to get. Considering the facts and circumstances of the case, it will be just and proper to award simple interest @ 10% per annum from the date of filing of the original application till the date of realization.

O R D E R

The application for the recovery of Rs.11,43,50,395.13(Rupees Eleven Crores Forty Three Lacs Fifty Thousand Three Hundred Ninety Five and Thirteen paise) only is allowed ex-parte with ex-parte cost against the defendants. The defendants shall pay pendentelitie and future interest @ 10% per annum on the amount due from the date of filing of the original application till full realization of the claim amount. The applicant bank can recover the Bank dues from the defendants after the sale of the movable property and immovable property mortgaged properties to the bank which are more-fully described in the original application which shall form a part of this judgment, if the sale proceeds are insufficient to satisfy the Certificate, than from other properties of the defendants which are uncharged.

The defendants are restrained from depleting, transferring, encumbering or in any way dealing with his assets without first paying the claim of the applicant bank.

Let a Recovery Certificate be issued under Section 19 (22) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the same be forwarded to the Recovery Cell for further action as per law.

The parties are directed to appear before the Recovery Officer on 20.8.2020 for further action in accordance to law in the event the entire amount is not paid by the said date.

Let a copy of the Judgment be supplied to the parties forthwith as per rules.

Dated :11.6.2020

Judgment signed, dated and Pronounced in open Court.