JAMMU AND KASHMIR BANK LIMITED vs M/s Uttam Builders on 25 February 2019

JUDGMENT

(25.02.2019)

1. The applicant Bank has filed the present O.A. on 31.03.2014, before DRT-III, Delhi under Section 19 of The Recovery of Debts Due To Banks And Financial Institutions Act, 1993 (RDDB&FI Act, 1993), for recovery of Rs. 6,10,94,010.97 (Rupees Six Crores Ten Lakhs, Ninety Four Thousand, Ten and paise Ninety Seventy only) only along with pendentelite and future interest at the rate of 17% p.a., with monthly rests from the date of filing the O.A. till realization in full and the costs of the O.A.

2. Vide order dated 09.07.2015 the O.A. was transferred to this Tribunal since as per Government Notification dated 11.05.2015 reference No. 345 New Delhi (Friday, May 29, 2015/JYAISTHA 8, 1937) jurisdiction of this matter came under this Tribunal.

3. The facts of the case are that applicant bank is a body corporate constituted under the provisions of the Jammu & Kashmir Companies Act No. XI of 1977(Samvat) having its registered Office at Residency Road, Srinagar, Jammu & Kashmir State and a branch amongst others one at NOIDA - 201301. The present O.A. has been signed and verified by Shri Jatinder Sharma, who holds a Power of Attorney on behalf of the applicant bank and is entitled to present the OA. He is competent to sign and verify the pleadings, and to pursue the OA on behalf of the applicant.

4. Defendant No. 1, which is the sole proprietorship concern of defendant no. 2 approached the applicant bank for grant of a cash credit limit of Rs. Seven Crores and the applicant bank granted the said facility carrying interest @ BR + 4.50% i.e. then @15% p.a., compounded on monthly basis and 2% penal interest on default. Defendant No. 2 & 3 also stood guarantor to the same. To secure the repayment of the loan amount the loaning / security documents were executed by the defendant No. 1 through defendant no. 2, on 24.02.2012 viz., Demand Promissory Note, Letter of Waiver, Letter of Continuity, Letter of Undertaking, Loan Agreement, Deed of Hypothecation & Irrevocable Power of Attorney along with affidavit etc. and defendant No. 3 executed a deed of Guarantee of the same day. A debit balance confirmation was also signed by defendant No. 1 on 04.07.2013, confirming the liability of Rs. 5,06,36,678.70 as on 30.03.2013. It is also stated that to secure the said advances, defendant no. 2, owner of properties bearing No. WZ-88, Raja Garden, Ring Road, New Delhi and No. B-10/1, Village Basai Darapur, colony known as Rajouri Garden, New Delhi (hereinafter referred to as ‘property in question’), created a mortgage by deposit of original title-deeds.

5. The defendant No. 1 duly availed and utilized the abovementioned loan facilities sanctioned to it by the applicant bank. The account showed very poor turnover since the beginning and it was also reported by the CA firm, whose signatures appeared on the Audited Balance Sheets for the years 2010, 2011 & 2012 submitted by defendant No. 1, that they had neither audited the said balance sheets, nor do they know defendant no. 2, purported to be Proprietor of defendant No. 1, at the given address. An FIR was lodged by the applicant against defendant nos. 2 & 3 at the Kirti Nagar Police Station, New Delhi regarding fraud, cheating and fabrication of documents. It is further stated that due to persistent irregularities and failure to maintain financial discipline the account was declared NPA on 31.03.2014. It is also stated that the applicant bank issued legal notices dated 30.01.2014 & 03.04.2014 to the defendants recalling the entire amount due and a notice u/S 13(2) of the SARFAESI Act, 2002 was sent on 08.04.2014, the objections thereto raised by defendants vide letter dated 06.06.2014, were duly replied to by letter dated 25.06.2014. Further, it is stated that the defendants fail to pay the amount as demanded, hence this OA has been filed.

6. Notice of the O.A. has been issued to the defendants.

7. In the written statement filed by the defendant nos. 2 & 3, they have raised the following objections that:

(i) The applicant has not filed all the documents relied upon in the OA.

(ii) The applicant had obtained signatures on blank documents.

(iii) Arbitrary & excessive rate of interest has been charged.

(iv) Correct and complete statement of account has not been filed by the applicant, nor is it certified in accordance with the relevant provisions under the Bankers Book of Evidence Act.

(v) The applicant has already taken physical possession of property bearing No. WZ-88, Raja Garden, New Delhi and, thus, is not legally entitled for instituting the present OA.

(vi) This Tribunal has no territorial jurisdiction as the applicant bank is situated at ‘NOIDA’ (UP).

(vii) The applicant bank has not specifically authorised the signatory of the OA to institute the present OA and the Power of Attorney relied upon is a general authority letter only.

(viii) The applicant has also obtained the physical possession of the stock amounting to Rs. 5.50 Crore (approximately). In view of the same, they have prayed to dismiss the OA.

8. In the replication to the written statement filed by the defendant No. 2 & 3, the applicant bank has denied the allegations made in the written statement and reiterated the averments made in the O.A. It is further denied that the valuation of the stock is Rs. 5.50 Crores.

9. Shri Harshad Singh, Senior Executive of the applicant bank in his affidavit while deposing on the lines of the O.A. has proved documents Ex. PW-1/1 to Ex. AW-1/47.

10. I have heard the Ld. Counsel for the applicant and the contesting defendants and perused the record. Now, I shall hereafter deal with the objections raised by the defendants.

11. The first objection filed by the defendants is that the documents relied upon by the applicant in the OA, have not been filed.

The defendants have not specified any document relied upon and not filed, but just made a bald statement, which has no specifics. On perusal of documents filed by the applicant filed, I find that sanction letter acknowledged by the borrower (Ex. PW-1/8 Colly), Demand Promissory Note (Ex. PW-1/9), other documents executed including the letter of Guarantee (Ex. PW-1/10 to PW-1/17, PW-1/19 to PW- 1/20), Memorandum of deposit of title-deeds (Ex. PW-1/18 Colly) have been filed by the applicant in support of their claim. Hence, this objection has no merit and thus hereby dismissed.

12. The next objection of the defendants is that the applicant had obtained signatures on blank documents. This objection is only an after-thought story, as the defendants have not produced any evidence to the effect that they had ever taken up this matter with higher authorities, prior to the filing of the present OA.

These defendants have not claimed that they are illiterate persons. Once the signature on a document is admitted, it stands proved. In such an eventuality, the burden of proof that the documents were not executed or they were executed blank shifts on the defendants. Except bald statement in their written statement, the defendants have failed to produce any cogent and independent evidence on record to show that the documents were blank when the same were signed by the defendants. Defendants are grown up persons and are doing business. It is highly improbable that they would have signed blank documents merely on the asking of the bank officials. No documentary evidence has been placed on record to show that during the period the defendants were availing the credit facilities any such protest was lodged with the higher officials of the bank or any other government agency to this effect. This plea is otherwise also a sham plea as has been held by the Hon’ble Delhi High Court in a case titled ‘Indian Bank Vs. M/s. Cheese Wafers (India) Pvt. Ltd.’ reported in 76(1998) DLT 892. Hence, this objection does not hold water and hence hereby rejected.

13. The next objection of the defendants relates to arbitrary and excessive rate of interest charged by the applicant bank. Per Contra, the Ld. Counsel for the applicant has submitted that the interest rates charged, including the penal interest charged are in accordance with agreements based on changes in base rate from time to time. A perusal of record shows that the defendants had agreed to pay interest @ Base Rate + 4.50% p.a. with monthly rests in the accepted terms and conditions (Ex. PW-1/8 & PW-1/9) and for penal interest @ 2% above the prescribed rate (Ex. PW-1/12). Thus, this objection has no merit and also hereby rejected.

14. The next objection by the defendants’ states that correct and complete statement of account has not been filed and it has not been certified in accordance with the relevant provisions under the Bankers Book of Evidence Act. Exhibit PW-1/47 is the statement of account, duly accompanied by a certificate under the Bankers Book Evidence Act. I do not find any discrepancy in the said certificate and the attached statement. Therefore, this plea of the defendants is not proper and is hereby dismissed.

15. The next objection raised by the defendants states that in view of the physical possession having been taken by the applicant, of the property at WZ-88, Raja Garden, New Delhi, the applicant has no right to file the present OA. There are a number of rulings on the issue that SARFAESI Act, 2002 under which the secured creditor proceeds to enforce its rights on the charged properties and the RDDB&FI Act, 1993 under which a bank/FI approaches the DRT for adjudication of its claim are complimentary and simultaneous proceedings under the same are held to be permissible. The Hon’ble Supreme Court in M. D. Frozen Foods Exports Pvt. Ltd. Vs Hero Fincorp Ltd. Civil Appeal NO. 15147 of 2017 (Arising out of SLP(C) No. 19559 of 2017) has held that:

“A close reading of Section 37 shows that the provisions of the SARFAESI Act or the Rules framed there under will be

in addition to the provisions of the RDDB Act. Section 35 of the SARFAESI Act states that the provisions of the SARFAESI Act will have overriding effect notwithstanding anything inconsistent contained in any other law for the time being in force. Therefore, reading Sections 35 and 37 together, it will have to be held that in the event of any of the provisions of the RDDB Act not being inconsistent with the provisions of the SARFAESI Act, the application of both the Acts, namely, the SARFAESI Act and the RDDB Act, would be complementary to each other.” In view of the above, the plea of the defendants does not have any support and is hereby dismissed.

16. The next objection of the defendants is on the territorial jurisdiction of this Tribunal, In view of the fact that the applicant is situated in NOIDA (UP). Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 which pertains to territorial jurisdiction of the Tribunal reads as under:- “19. Application to the Tribunal (1) Where a bank or a financial institution has to recover any debts from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction:- (a) The branch or any other office of the bank or financial institution is maintaining an account in which debts claimed in outstanding, for the time being; or (aa) The defendant, or each of the defendants where there are more than one, at time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or (b) Any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or

(c) The cause of action, wholly or in part arises”.

The applicant has, in the OA, invoked the jurisdiction of this Tribunal on the ground of the defendants residing and working for gain – carrying on their business at Rajouri Garden, New Delhi, which admittedly falls under the territorial jurisdiction of this Tribunal. Hence, the objection raised by the defendants does not have any footing, in light of provisions of law discussed above and is hereby dismissed.

17. The next objection of the defendants is that the signatory to the OA has not been specifically authorized to institute the present OA and the Power of Attorney granted to him is general in nature. Exhibit Mark 2 which is the Power of Attorney granted by the applicant bank to Mr. Jatinder Sharma states that: “… The said attorney shall have in particular the following powers and authorized to be exercised by him singly on behalf and in the name of the said Bank:

a) To take and use all lawful proceedings and means for recovering all debts, advances and claims due to the said bank and also to commence any action/s or proceeding/ s in any court of competent jurisdiction for the recovery of any debt, sum of money, right, title, …. …

j) to institute suits and file applications for execution of decrees, to appear and act on behalf of the said bank in any court or courts of original jurisdiction and court or courts of appeal and in Civil, Criminal and revenue courts and office/s and to …” In view of the facts narrated above, the plea of the defendants is without any base and is hereby dismissed.

18. The last objection raised by the defendants is that the applicant has also obtained the physical possession of the stock amounting to Rs. 5.50 Crore (approximately). Per Contra, Ld. Counsel for the applicant denies that the value of stocks is in the region of Rs. 5.50 Crore. Even otherwise, the present OA has been filed by the applicant for recovery of a fixed sum, with pendentelite and future interest thereon and the proceeds of whatever the value the said stocks may fetch in an auction shall be deductible from the liability of the defendants. Therefore, this plea of the defendants has no relevance for the adjudication of the present OA, hence rejected.

19. The witness of the applicant bank has fully corroborated the averments made in the OA. Even otherwise the whole case of the applicant bank is based on documents and the witness has duly proved all these documents. In my view there is no question of disbelieving the evidence lead by the applicant bank and the applicant bank has proved its case beyond reasonable doubts. The liability of defendant No. 1 to 3 is joint and several.

20. Therefore, considering the aforesaid facts and circumstances of the case, this OA deserves to be allowed against the defendant nos. 1 to 3.

21. The applicant Bank has claimed pendentelite and future interest @ 17.0% with monthly rests, till its realization which is allowed in terms of order dated 23.01.2019 of the Hon’ble DRAT, Delhi in Appeal No. 368/2018 titled as M/s Duncan ICICI Bank Ltd. Vs. Mecheill Power India Limited & Ors..

ORDER

i) I allow this OA and direct the defendants Nos. 1, 2 and 3 jointly and severally liable to pay within a period of 30 days a sum of Rs. 6,10,94,010.97 (Rupees Six Crores Ten Lakhs, Ninety Four Thousand, Ten and paise Ninety Seventy only) only along with pendentelite and future interest at the rate of 17% p.a., with monthly rests from the date of filing the O.A. till realization in full and the costs of the OA, failing which the aforesaid amount shall be recovered from the sale of mortgaged immovable property bearing No. WZ-88, Raja Garden, Ring Road, New Delhi and No. B-10/1, Village Basai Darapur, colony known as Rajouri Garden, New Delhi and from the sale of hypothecated stocks of super snow white chips, colored marble chips, fine powder, high class oxide, J. K. Birla Kerla white cement polish Batti, white Makrana, pink, green, black slabs, Makrana Doongri Slabs & Tiles, Kota Stone, Granite Tiles & Marble Polished Tiles, Natural Marble- Tiles, Italian Marbles etc., book-debts, furniture, fixtures and tools of whatever nature as well as from the sale of personal moveable and immovable assets of the defendant Nos. 2 and

3. ii) The applicant is also directed to file the revised statement of account before the Ld. Recovery Officer of this Tribunal.

iii) The recovery certificate be issued forthwith and be sent to the Recovery Officer, DRT-I, Delhi.

iv) The parties are directed to appear before the Ld. Recovery Officer on 28.03.2019.

v) Copy of this judgment and recovery certificate be sent to all the parties free of cost by registered post.

vi) File be consigned to record room.

(Dr. REKHA G. DHAKAR) PRESIDING OFFICER, DRT-I, DELHI ANNOUNCED IN OPEN COURT February 25, 2019