South Indian Bank Ltd. vs M/s. Mahalakshmi Jewellers And Ors.

This application is filed by the applicant bank against defendants 1 to 4 for recovery of a sum of Rs.61,59,837.98Ps (Rupees Sixty One Lakhs Fifty Nine Thousand Eight Hundred Thirty Seven & Paise Ninety Eight Only) towards Cash Credit Open Loan (CCOL) facility together with interest thereon at the rate of 11.70% per annum compounded with monthly rests Plus Penal interest at the rate of 2% per annum from the date of filing of this application till realization, along with costs of the application.

Summons issued to defendants 1 & 2 returned unserved with postal endorsement "Left". M/s. K. Shanmuga Sundaram, Advocate filed Vakalat for D3. Applicant bank issued private notice and effected paper publication for D1 & D2. Private notice issued to D1 & D2 returned with postal endorsement "Left". Despite which defendants neither made representation nor filed any Written Statement. Hence, defendants were called absent and set ex-parte on 14.12.2017. By way of a memo, applicant bank had impleaded the proprietorship concern as first defendant to overcome the procedural issue, as the proprietorship concern is the constituent of the bank in whose name the documents are all duly executed. Notices sent to said proprietorship concern also returned unserved as „addressee left'. As the said Proprietorship concern is arrayed as first defendant, the existing defendants have become the subsequent defendants and arrayed as defendants 2, 3 and 4 respectively. Applicant bank filed its Proof Affidavit along with 25 documents, which were marked as Ex. A-1 to A-25. The O.A. was finally heard and stood over till this day for passing ex-parte final order.

The facts leading to filing of this O.A. are:-

a) First defendant M/s. Mahalakshmi Jewellers represented by its Proprietor 2nd defendant approached applicant bank seeking financial assistance for improvement of his business. Considering the request of 1st and 2nd defendants, Applicant Bank vide its Sanction Letter dated 07.08.2014 (Ex.A-1) sanctioned CCOL facility to the tune of Rs.50,00,000/- repayable with interest at the rate of 13.70% p.a. with monthly rests against hypothecation of security of stock and book debt. 3rd defendant stood as Guarantor for loan availed by D1. 4th defendant is the purchaser of the mortgaged property (Item no.2 of the OA schedule) from 2nd defendant without the consent of applicant bank.

b) Having availed the CCOL facility, defendants 1 & 2 executed the following documents:

i) Demand Promissory Note for Rs.50.00 lakhs (Ex.A-2), executed on 07.08.2014 thereby agreeing to repay the said amount with interest at the rate of 13.70% p.a. with monthly rests.

ii) Hypothecation of Movable Assets (Ex.A-3) as per Agreement executed on 07.08.2014.

iii) Letter confirming Deposit of Title Deeds executed by 2nd defendant for Item No.I (Ex.A-4) executed on 06.08.2014.

iv) Letter confirming Deposit of Title Deeds by 2nd defendant for Item No.II (Ex.A-5) executed on 06.08.2014.

v) Letter confirming Deposit of Title Deeds executed for Item No.III (Ex.A-6) on 06.08.2014.

vi) Credit facility Agreement (CCOL-SIB Vyapar Account) (Ex.A-7).

vii) Personal (Agreement of) Guarantee executed by 3rd defendant (Ex.A-8) on 07.08.2014 and

viii) Declaration from the Mortgagor executed by 2nd defendant on 06.08.2014 (Ex.A-9).

c) 2nd Defendant offered his properties as security and executed the Memorandum of Deposit of Title Deed (MODTD) on 31.12.2008 in favour of applicant bank and the same was registered vide Doc. No. 65 of 2009 dated 05.01.2009 before SRO, Uthiramerur (Ex.A-10). Further, 2nd defendant extended his properties more fully described in the schedule to OA as security to the CCOL facility loan by executing MODTD dated 20.08.2014 in favour of applicant bank, registered as Doc.No.5467 of 2014 (Ex.A-11). Subsequently 2nd & 3rd defendants offered their properties as security and jointly executed the MODTD dated 05.03.2015 registered as Doc.No. 1237 of 2015 (Ex.A-12). However, on request the property owned by 3rd defendant mentioned as 4th Item (Schedule-C) in the MODTD dated 05.03.2015 was released on 01.12.2015 as evident vide letter dated 01.12.2015 (Ex.A-13) given by 3rd defendant along with 2nd defendant for having received the title deeds for the properties mentioned therein.

d) 3rd defendant was a mortgagor earlier by offering her property as a security for the above facility availed by 1st defendant. Subsequently, on request of 1st & 2nd defendants, the property belonging to 3rd defendant was released and hence she has not been arrayed as Mortgagor as no relief is claimed against her as Mortgagor.

e) Subsequent to availing of aforesaid loan, defendants committed default in repayment of the loan to applicant bank. Applicant bank issued notice to defendants on 14.03.2016 (Ex.A-14 and Ex A-15) to clear the dues. On account of delay / default committed by the defendants in repayment of both principal and interest, their account became NPA on 06.04.2016. Again applicant issued notice to defendants 1 to 3 bearing No.RO/61/2016-2017 dated 07.04.2016 (Ex.A-16) informing that their account became NPA and to regularize the loan account. Applicant issued notice under section 13(2) of SARFAESI Act to defendants on 24.05.2016 (Ex.A-17).

f) Meanwhile, applicant bank obtained Encumbrance Certificate (Ex.A-18) and came to know that 2nd defendant executed a Sale Deed (for Item No. II) in favour of one Mr. V. Prabakaran, S/o. Mr. Varadapillai. The applicant through their counsel issued Legal Notice dated 08.05.2017 (Ex.A-19) to defendants. Third defendant sent reply notice dated 14.06.2017 which is marked as Ex.A-20.

g) After execution of MODTD in favour of applicant bank by 2nd defendant, 2nd defendant executed a Sale Deed (for Item No.II) in favour of one Mr.V. Prabakaran, S/o. Mr. Varadapillai vide Sale Deed dated 25.09.2015 registered as Doc. No. 4716/2015 (Ex.A-21) without consent or knowledge of applicant bank. Applicant bank further submit that, while the mortgage created in favour of bank is subsisting, 4th defendant purchased the same, knowing pretty well that there is a subsisting mortgage over the property. As bank is having valid and prior mortgage over the said property, the title derived by 4th defendant over Item No.II property of OA schedule is defective and not binding on applicant bank. After issuance of the above notice, there was no response for the said notice. However, the encumbrance created and the Sale Deed dated 25.09.2015 registered in favour of Mr.V.Prabakaran with SRO, Uthiramerur is still in force. Hence Mr.V.Prabakaran has been arrayed as 4th defendant in the Recovery Suit. Sale Deed dated 22.03.2010 (Doc.No.949/2010), Sale Deed dated 14.06.2012 (Doc.No.24/2013), Sale Deed dated 29.10.2007 (Doc.No.4941/2007) are filed as Ex. A-22, Ex.A-23 & Ex.A-24 respectively along with the above O.A. Despite efforts of applicant bank, defendants did not come forward to repay the dues.

f) Hence, above O.A. has been filed for recovery of a sum of Rs.61,59,837.98Ps (Rupees Sixty One Lakhs Fifty Nine Thousand Eight Hundred Thirty Seven & Paise Ninety Eight Only) towards Cash Credit Open Loan (CCOL) facilty together with further interest thereon, as evidenced by Statement of Accounts (Ex.A-25) filed along with O.A.

Points for Consideration

(i) Whether applicant bank is entitled for the claim amount in the application from the defendants?

(ii) Whether applicant bank is entitled to get rate of interest as prayed in the OA during the pendent lite period?

Points (i) & (ii)

A careful examination of the pleadings in the Proof Affidavit and documents viz. Exhibits A-1 to A-25 evidence that the borrowal of credit facilities and execution of loan and security documents are true, in terms of averments made in Original Application as well as Proof Affidavit filed by applicant bank establishing its claim. Applicant bank filed Statement of Accounts duly certified under Bankers' Book Evidence Act, evidencing amount claimed against defendants. Defendants were set ex-parte on 14.12.2017, but till this day did not take any action to set aside the ex-parte order and did not choose to contest the claim. Further, a careful scrutiny of records makes it clear that present application is filed well within limitation and this Tribunal possess necessary and proper jurisdiction to entertain and adjudicate the claim. No oral or documentary evidence on the side of defendant is produced or filed to dispute the claim of applicant bank. Defendants neither confronted nor rebutted the documents produced and relied upon by applicant bank. Hence, it can be concluded that applicant bank has proved its claim against defendants.

In view of what has been discussed above, it is observed that applicant bank has proved its O.A. claim against defendants and applicant is entitled to Recovery Certificate in O.A. in terms of the direction given below. Points (i) & (ii) are answered accordingly.

In the result:-

(a) The applicant bank is entitled for a Recovery Certificate as against defendants 1 to 3 for a sum of Rs.61,59,837.98Ps (Rupees Sixty One Lakhs Fifty Nine Thousand Eight Hundred Thirty Seven & Paise Ninety Eight Only) towards Cash Credit Open Loan (CCOL) facility (Loan Account No. 029108 40000 00002) together with interest at the rate of 10% p.a. (simple) on the amount as determined above and remained unpaid from the date of filing of this O.A till the date of its realization with costs.

(b) It is further ordered that any amount remitted by defendants or realized by applicant bank during pendency of this OA, shall be given due credit to the respective loan account of defendants.

(c) It is ordered that 2nd and 4th defendants right in Item No. II of the schedule property is subject to the applicant's 1st charge over the same.

(d) It is ordered that in case of default by defendants to pay the amount adjudged, applicant bank is entitled to sell all or that part of the schedule mentioned properties to answer the claim of the Recovery Certificate and appropriate the sale proceeds towards amount due.

(e) If sale proceeds are not found sufficient, after defraying expenses of such sale for the payment of all such amounts, defendants 2 & 3 are personally liable for the deficiency of adjudged amount with interest and costs until realization.

(f) Schedules mentioned in the OA shall form part of Recovery Certificate.

It is further ordered that 15 days time is granted to the applicant bank to file costs memo from the date of receipt of this order, to enable the Registry to prepare the recovery certificate as directed above. If in case, the cost memo is not filed within the above mentioned time, Recovery Certificate be prepared based on the available records and forwarded to the Recovery Officer for execution in accordance with law.

Recovery Certificate be prepared as per the directions given above of this final order and issued accordingly. A copy of the order be communicated to the parties concerned as per the extant guidelines.

(Dictated to Steno(TS), transcribed by him, corrected, signed and pronounced by me in the Virtual Court, through Video Conference on this the 5th day of October, 2020)