Punjab National Bank vs Abhilash.P.S, And Anr.

The present Original Application has been filed by the Applicant Bank under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 for recovery of a sum of Rs.12,14,526.25 (Rupees twelve lakhs fourteen thousand five hundred and twenty six and Paise twenty five only) due under housing loan account together with further interest @ 9.15% per annum with monthly rests from 16.03.2018 till realization from the defendants jointly and severally and by sale of 'A' and 'B' schedule properties; a sum of Rs.5,05,336.12 (Rupees five lakhs five thousand three hundred and thirty six and Paise twelve only) due under overdraft account together with further interest @ 9.65% per annum with monthly rests from 16.03.2018 till realization from the defendants jointly and severally and by sale of 'A' and 'B' schedule properties and a sum of Rs.21,05,858.47 (Rupees twenty one lakhs five thousand eight hundred and fifty eight and Paise forty seven only) due under cash credit account together with further interest @ 11.70% per annum with monthly rests from 16.03.2018 till realization from the defendants jointly and severally and by sale of 'A' and 'B' schedule properties.

Brief facts of the case of the applicant as stated are that on 05.05.2014, the defendants along with late Devaki had applied for a housing loan. Pursuant to the application submitted by them, the applicant sanctioned a housing loan of Rs.9 lakhs to them on 20.06.2014. Thereafter, the defendants along with late Devaki had also applied for an overdraft facility and pursuant thereto, the applicant sanctioned an overdraft limit of Rs.3 lakhs to them on 20.10.2014, which was subsequently renewed and enhanced on 24.07.2015. The defendants along with late Devaki executed various loan documents to secure the aforesaid credit facilities. In the meantime, the 1st defendant had applied for a cash credit limit to meet the working capital requirement of his proprietary concern M/s. Ayyappavijayam Electronics. Pursuant to the application submitted by the 1st defendant, the applicant sanctioned a cash credit limit of Rs.15 lakhs to him on 02.04.2015. As security for repayment of the amount due under cash credit account, the 1st defendant executed deed of hypothecation in favour of the applicant on 02.04.2015 and hypothecated the stock-in-trade described in 'A' schedule to the OA. On 02.04.2015, late Devaki had executed agreement of guarantee in order to secure repayment of the amount due under the cash credit limit. As collateral security for the housing loan, late Devaki had created equitable mortgage over the property described in 'B' schedule to the OA by deposit of title deeds and executed letter dated 21.06.2014 confirming the creation of mortgage on 20.06.2014. Subsequently, late Devaki had executed letters dated 20.10.2014, 02.04.2015 and 24.07.2015 confirming that the security created by mortgage of property would be available to cover the liabilities under the overdraft account and cash credit account. After availing the loans, the defendants and late Devaki failed to repay the same, which resulted in issuance of notices under S.13(2) of the SARFAESI Act. Despite receipt of the same, they did not repay the amounts as demanded. Hence the present Original Application has been filed by the applicant bank.

Despite summons was duly served on the defendants, none appeared on their behalf and the case was proceeded against the defendants ex parte vide order dated 08.10.2018.

Applicant bank in order to prove its case lead its evidence through Shri. Murali. N, Senior Manager of the bank, who tendered into evidence of the bank's proof affidavit dated 25.10.2018, reiterating the averments made in the Original Application which are not reproduced here for the sake of brevity. In documentary evidence, he has tendered agreement for housing loan dated 20.06.2014 (Ex.AW/1), agreement of overdraft facility for housing loan dated 20.10.2014 (Ex.AW/2), agreement of overdraft dated 24.07.2015 (Ex.AW/3), deed of hypothecation dated 02.04.2015 (Ex.AW/4), agreement of guarantee dated 02.04.2015 (Ex.AW/5), letter dated 21.06.2014 (Ex.AW/6), assignment deed No.3236/1994 dated 23.11.1994 of Pazhayannur SRO (Ex.AW/7), letter of continuity dated 20.10.2014 (Ex.AW/8), letter of continuity dated 02.04.2015 (Ex.AW/9), letter of continuity dated 24.07.2015 (Ex.AW/10), balance confirmation letter dated 06.10.2015 in respect of housing loan (Ex.AW/11), balance confirmation letter dated 06.10.2015 in respect of overdraft account (Ex.AW/12), balance confirmation letter dated 06.10.2015 in respect of cash credit account (Ex.AW/13), notice dated 18.06.2016 under S.13(2) of the SARFAESI Act (Ex.AW/14), notice dated 30.07.2016 under S.13(2) of the SARFAESI Act (Ex.AW/15), letter dated 18.11.2016 (Ex.AW/16), letter dated 28.03.2017 (Ex.AW/17), certified copy of the statement of account relating to the housing loan (Ex.AW/18), certified copy of the statement of account pertaining to overdraft facility (Ex.AW/19) and certified copy of the statement of account relating to the cash credit limit (Ex.AW/20). Thereafter evidence on behalf of the applicant bank was closed.

I have heard the learned counsel for the applicant and have also gone through the case file properly. I have also gone through law applicable to facts and circumstances of the present case.

After hearing learned counsel for the applicant bank and after going through the case, I have come to the considered conclusion that evidence adduced by the applicant bank on the case file stood unchallenged and unrebutted. Defendants have opted not to contest the Original Application. From the evidence available on record in the shape of documents, it is proved on record that the defendants along with late Devaki, who reportedly died on 23.11.2015, had availed a housing loan of Rs.9 lakhs on 20.06.2014, overdraft facility of Rs.3 lakhs on 20.10.2014, which was subsequently enhanced to Rs.4 lakhs on 24.07.2015 and the 1st defendant had availed a cash credit limit of Rs.15 lakhs on 02.04.2015 from the applicant bank and executed various security documents and hypothecation charge was created over 'A' schedule property to secure the cash credit limit and equitable mortgage was created over 'B' schedule property by deposit of title deeds to secure all the credit facilities availed from the applicant. An aggregate amount of Rs.38,25,720.84 was pending against the defendants as on 15.03.2018 as shown in the statements of accounts. The Certificate of Bankers' Books Evidence Act has been annexed with Original Application.

It is the admitted case of the applicant that it had debited a sum of Rs.35,912.15, Rs.15,365.17 and Rs.70,033.86 in housing loan account, overdraft account and cash credit account respectively. It is well settled that penal interest cannot be capitalized and no interest can be charged on penal interest. If any authority is required, we find the same in Central Bank of India v. Ravindra [reported in AIR 2001 SC 3095]. The applicant bank, therefore, is not entitled to claim any interest on the aforesaid penal interest of Rs.35,912.15, Rs.15,365.17 and Rs.70,033.86.

The amount involved in the present original application is Rs.38,25,720.84 (Rupees thirty eight lakhs twenty five thousand seven hundred and twenty and Paise eighty four only) which falls within the pecuniary jurisdiction of this Tribunal. The loans were sanctioned by the applicant bank's Pazhayannur Branch, Thrissur, which is within the territorial jurisdiction of this Tribunal. Therefore, this Tribunal is having pecuniary as well as territorial jurisdiction to entertain and try the present original application.

So far as period of limitation is concerned, equitable mortgage was created over the immovable property on 20.06.2014 and the defendants have acknowledged the liability under the loan accounts on 06.10.2015 and hence the original application presented 16.03.2018 is well within the period of limitation prescribed under the Act. Section 24 of the Recovery of Debts and Bankruptcy Act, 1993 provides that the provisions of the Limitation Act, 1963, shall, as far as may be, apply to an application made to a Tribunal.

So far as rate of interest charged by the applicant bank is concerned, applicant bank has charged rate of interest as per terms and conditions of loan documents executed by the defendants. However, as per the provision of Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993 which is analogous to Section 34 of Civil Procedure of Code 1908, on filing of the suit/claim, the contract between the parties comes to an end and the Court/Tribunal has a discretion to award the same depending upon the circumstances of each case. Same principle has been laid down by the Hon'ble Apex Court in the case of Central Bank of India Vs. Ravindra & Others. Taking stock of all the circumstances and keeping in view that there is a drastic fall in rates of interest globally and domestically, I am of the opinion that interest of justice will be served if interest at the rate of 9 % per annum is awarded for housing loan and overdraft facility and at the rate of 11 % per annum for the cash credit limit.

In the light of the above discussions, the Original Application deserves to be allowed.

O R D E R

1) I hereby allow this O.A. of the Applicant Bank and direct the defendants jointly and severally to pay to the applicant bank within 30 days from today, a sum of Rs.12,14,526.25 (Rupees twelve lakhs fourteen thousand five hundred and twenty six and Paise twenty five only) due under housing loan account together with future interest on the sum of Rs.11,78,614.10 (Rupees eleven lakhs seventy eight thousand six hundred and fourteen and Paise ten only) @ 9 % per annum from 16.03.2018 till the date of realization of dues with costs and expenses; the sum of Rs.5,05,336.12 (Rupees five lakhs five thousand three hundred and thirty six and Paise twelve only) due under overdraft account together with future interest on the sum of Rs.4,89,970.95 (Rupees four lakhs eighty nine thousand nine hundred and seventy and Paise ninety five only) @ 9 % from 16.03.2018 till the date of realization of dues with costs and expenses; and the sum of Rs.21,05,858.47 (Rupees twenty one lakhs five thousand eight hundred and fifty eight and Paise forty seven only) due under cash credit account together with future interest on the sum of Rs.20,35,824.61 (Rupees twenty lakhs thirty five thousand eight hundred and twenty four and Paise sixty one only) @ 11 % per annum from 16.03.2018 till the date of realization of dues with costs and expenses.

2) In case of failure to deposit the amount found due under the housing loan account, the same shall be recovered by sale of 'B' schedule property attached to the original application and also from assets if any other than 'B' schedule property left by deceased Devaki in the hands of the defendants, who shall be personally liable to the extent of the value of such assets in the event of their failure to satisfactorily account for the same; in case of failure to deposit the amount found due under the overdraft account, the same shall be recovered by sale of 'B' schedule property attached to the original application and also from assets if any other than 'B' schedule property left by deceased Devaki in the hands of the defendants, who shall be personally liable to the extent of the value of such assets in the event of their failure to satisfactorily account for the same; and in case of failure to deposit the amount found due under the cash credit account, the same shall be recovered by sale of 'A' and 'B' schedule properties attached to the original application and also from assets if any other than 'B' schedule property left by deceased Devaki in the hands of the defendants, who shall be personally liable to the extent of the value of such assets in the event of their failure to satisfactorily account for the same.

3) In case of any shortfall, the same shall be recovered from the personal movable and immovable properties of the defendants.

4) Recovery Certificate is issued forthwith and is sent to the Recovery Officer, Debts Recovery Tribunal-II, Ernakulam.

5) Registry of this Tribunal is hereby directed to issue free copy of the order and sent to both the parties.

6) Any other application pending stands disposed of. File be consigned to records.

Pronounced in Open Court: