BANK OF BARODA vs M/S HERA INDUSTRIES, (PRESENTLY KNOWN AS HIRA INDUSTRIES), on 10 January 2024

1. 1. **M/s Hera Industries**, (Presently known as Hira Industries), a partnership firm having its office at village Bhithia, Chichari, P.S. – Sonwa, Tehsil – Ikauna, Pargana – Bahraich, Malhipur Road, District – Shrawasti – 271831, U.P. through its Partners.

2. 2. **Sri Akeelurrahman** S/o Sri Azizurrahman, R/o 90, Utdhaniya, P.O. – Patna Ghusiyari, Tehsil – Nanpara, District Bahraich (U.P.) – 271875.

3. 3. **Sri Khalilur Rahman** S/o Azizurrahman, R/o Lucknowa Kothar, Post – Patna Ghusiyari, District Bahraich, (U.P.) – 271875.

...Defendants.

Present:

**For the Applicant**

: Shri V. P. Mishra, Advocate

**For the Defendants**

: Exparte

**Dated: 10.01.2024****JUDGMENT**

1- The Applicant bank has made this application u/s 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, now Recovery of Debts and Bankruptcy Act, 1993 (here-in-after referred to as Act) on 15.07.2016, before the DRT, Lucknow, against the defendants to recover its debts from defendants of Rs. 3,24,86,676/- alongwith pendentelite and future interest @ 12% per annum with monthly rest with costs till realization. Pursuant to Gazette Notification No. 454(E), dated 15.02.2017 of the Ministry of Finance, Department of Financial Services, New Delhi, this OA bearing No. 803/2016 was transferred from DRT, Lucknow to this Tribunal.

2- The application has been duly registered and numbered as above.

3- The brief facts of the case of the applicant bank as stated in the application are as under- The applicant bank is a Banking Company and a Banking Company constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 having its Head Office at Suraj Plaza-1, Sayaji Ganj, Badoda – 390005 and corporate office at Bandra Kurla Complex, C-26, Block-G, Bandra East, Mumbai –

The facts of the case as contained in the application are that the defendant No. 1 is a partnership firm which was earlier as M/s Hera Industries and presently known as M/s Hira Industries and the defendant No. 2 & 3 are its partners. The defendant No. 1, through its partners approached the Applicant Bank to avail certain financial assistances/loans for smooth business of the said firm, defendant No. 1 and in ordinary course of its business, the Applicant Bank initially sanctioned a Cash Credit Facility to the tune of Rs. 60.00 lacs to the defendants which was further increased to Rs. 150.00 lacs vide Sanction Letter dated 24.01.2013.

In order to secure the due repayment to the Applicant Bank in respect of aforesaid credit facility, the defendants signed, executed several security documents.

In order to further secure the due repayment to the Applicant Bank in respect of aforesaid credit facility, the defendants mortgaged there immovable properties by depositing their original title deed of the same in favour of the Applicant Bank.

Details of the properties are as under:-

*Factory's land and building at Gata No. 794 admeasuring 0.356 Hectare situated at Mauja Bhitia (Chichari), Tehsil Ikauna, Bahraich – Malhipur Road, Pargana Bahraich, District Shrawasti standing in the name of Sri Dawood Ahmad (former partner who sold later on his share to the existing partner) and Sri Akeelurrahman.*

**Property No. 2:-**

*Factory's land and building at Gata No. 791 admeasuring 67.98 Sq. Mtrs. situated at Mauja Bhitia (Chichari), Tehsil Ikauna, Bahraich – Malhipur Road, Pargana Bahraich, District Shrawasti standing in the name of Sri Dawood Ahmad (former partner who sold later on his share to the existing partner) and Sri Akeelurrahman.*

**Property No. 3:-**

*Factory's land and building at Gata No. 793 admeasuring 0.057 Hectare situated at Mauja Bhitia (Chichari), Tehsil Ikauna, Bahraich – Malhipur Road, Pargana Bahraich, District Shrawasti standing in the name of Sri Dawood Ahmad (former partner who sold later on his share to the existing partner) and Sri Akeelurrahman.*

Since, Sri Dawood Ahmad, the former partner of the partnership firm had retired and new partner Sri Khalilurrahman S/o Sri Azizurrahman had replaced him vide deed of partnership dated 01.05.2011, Sri Dawood Ahmad sold and transferred his undivided 50% share in the land of the factory in his favour through following sale deeds which are also deposited by the existing partner Sri Khalilurrahman with the Applicant Bank with intention to continue the mortgage:

*½ undivided share in the Factory's land and building at Gata No. 794 admeasuring 0.356 Hectare situated at Mauja Bhitia (Chichari), Tehsil Ikauna, Bahraich – Malhipur Road, Pargana Bahraich, District*

3DRT, ALLAHABADTA 296 of 2018 [J]

*Shrawasti standing in the name of Sri Dawood Ahmad (former partner) sold and transferred to Sri Khalilurrahman (the existing partner).*

**Property No. 2:-**

*½ undivided share in the Factory's land and building at Gata No. 791 admeasuring 67.98 Sq. Mtrs. situated at Mauja Bhitia (Chichari), Tehsil Ikauna, Bahraich – Malhipur Road, Pargana Bahraich, District Shrawasti standing in the name of Sri Dawood Ahmad (former partner) sold and transferred to Sri Khalilurrahman (the existing partner).*

**Property No. 3:-**

*½ undivided share in the Factory's land and building at Gata No. 793 admeasuring 0.057 Hectare situated at Mauja Bhitia (Chichari), Tehsil Ikauna, Bahraich – Malhipur Road, Pargana Bahraich, District Shrawasti standing in the name of Sri Dawood Ahmad (former partner) sold and transferred to Sri Khalilurrahman (the existing partner).*

Further, the defendants approached the Applicant Bank for increasing their Cash Credit Limit for the purpose of working capital from Rs. 150.00 lacs to Rs. 200.00 lacs together with interest @11.75% per annum with monthly rest and a fresh Term Loan for purchase of Sortex Machine, other machines for Sortex Machine, Fabrication and civil work etc. to the tune of Rs. 97.82 lacs together with interest @11.90% per annum with monthly rest vide its Sanction Letter dated 06.12.2013.

The defendants executed the Letters of Acknowledgement of Debt for the earlier Cash Credit Limit of Rs. 150.00 lacs on 13.12.2013.

The aforesaid Term Loan Account No. is 13340600015498 and Cash Credit Account No. 13340500011571 in the records off the Applicant Bank.

As per the sanction, the aggregate term loan of Rs. 97.82 lacs was divided in two purposes i.e. For Import of Sortex Machine for China of Rs. 35.96 lacs and for other machines for Sortex Machine, Fabrication and Civil work etc. of Rs. 61.86 lacs and the aforesaid Term Loan of Rs. 97.82 lacs was repayable in 28 quarterly installments to be commenced from January 2014.

In order to secure the due repayment to the Applicant Bank in respect of aforesaid credit facilities (for Term Loan of Rs. 97.82 lacs & Cash Credit Limit of Rs. 200.00 lacs), the defendants signed, executed and delivered several security documents on 13.12.2013.

Apart from it, in terms of the sanction, the defendant No. 2 namely Sri Akilurrahman, mortgaged following properties by depositing Title Deeds as collateral securities with the applicant Bank on 13.12.2013 to secure the repayment of the facilities mentioned above:-

*Land admeasuring 0.255 Hectare being portion of Gata No. 261 situated at Village Fulwariya Shahpur, Pargana Nan para Tehsil Bhingia, District Shrawasti (U.P.) standing in the name of Sri Akilurrahman (def. No. 2).*

**Property No. 2:-**

4DRT, ALLAHABADTA 296 of 2018 |J|

Plot No. 39 admeasuring 167.28 Sq. Fts. Only (60'x30') situated at Mohalla Imamganj, Bakhshi Pura, Pargana, Tehsil & District Bahraich (U.P.) with construction in the name of Sri Akilurrahman (def. No. 2).

3. The defendants availed the aforesaid facilities but failed to repay the dues of the bank as per agreed terms, they failed to adhere the financial discipline of the applicant bank, the account of the defendants became irregular and sticky and were declared NPA on 24.02.2016. The applicant Bank sent Legal/ demand/recall notice on 02.07.2016 to the defendants but despite receipt of the same, the defendants failed to liquidate bank's dues. All these acts and conduct on the part of the defendants are contrary to the terms and conditions of the documents signed and executed by defendant on behalf of defendant no. 1. Accordingly the applicant bank has moved this O.A. to recover public money.

The total outstanding due in the account comes to Rs. 3,24,86,676/- inclusive of interests which has been claimed by means of present O.A.

The interest /compound interest has been charged at such rates, and capitalized at such periodical rests as are permitted by and do not run counter to the directives of Reserve Bank of India.

Since, the defendants have failed and neglected in spite of several reminders to make payment of the dues recoverable to bank, hence this application has been filed by the bank.

4- U/s 19 (4) of the Act & Rule 11 of the DRT [Procedure] Rules, 1993, copies of application & paper book were sent by this Tribunal to the defendants by registered/speed post on 01.03.2023, and summons/notices issued requiring the defendants to show-cause within 30 days of the service of summons/notices as to why relief prayed for, should not be granted.

On perusal of the case records, it is seen that on 01.03.2023, summons/notices were sent to the defendants, but the defendants have not appeared.

Despite the registered summons/notices and publication of notice in newspaper, the defendants have not appeared before this Tribunal to contest the case. The sufficient time has been given to the defendants to defend their case, but they failed to appear and to file WS, hence, the Tribunal has passed an order to proceed exparte against the defendants on 22.12.2023.

5- To prove its case, the applicant Bank has referred attested copies of various documents before this Tribunal on 15.07.2016. The applicant bank has also given evidence on affidavit by way of affidavit of Shri Kamlesh Singh, Manager of the applicant bank. The details of documents are as follows. :-

<thead> <tr> <th>Sl.No</th> <th>Description of Documents(Attested copies)</th> <th>Date of Execution</th> <th>Amount [In lacs]</th> <th>Signature of executants</th> <th>Ex./ Ann. No.</th> </tr> </thead> <tbody> <tr> <td>1</td> <td>Copy of the Power of Attorney</td> <td>--</td> <td>--</td> <td>Bank</td> <td>A- 1</td> </tr> <tr> <td>2</td> <td>Copy of the Partnership</td> <td>01.05.2011</td> <td>--</td> <td>Dawood,</td> <td>A- 2</td> </tr> </tbody> </table>

<thead> <tr> <th></th> <th>Deed</th> <th></th> <th></th> <th>Def. 2 &amp; 3</th> <th></th> </tr> </thead> <tbody> <tr> <td>3</td> <td>Copy of the Registration Certificate</td> <td>22.06.2011</td> <td>--</td> <td>Dawood,<br/>Def. 1, 2 &amp; 3</td> <td>A- 3</td> </tr> <tr> <td>4</td> <td>Copy of the Letter regarding intimation of sanction</td> <td>08.02.2013</td> <td>150.00</td> <td>Dawood,<br/>Def. 1, 2 &amp; 3</td> <td>A- 4</td> </tr> <tr> <td>5</td> <td>Copy of the Sale Deed</td> <td>08.04.2009</td> <td>--</td> <td>Dawood &amp;<br/>Def. 2</td> <td>A- 5</td> </tr> <tr> <td>6</td> <td>Copy of the Sale Deed</td> <td>25.01.2010</td> <td>--</td> <td>Dawood &amp;<br/>Def. 2</td> <td>A- 6</td> </tr> <tr> <td>7</td> <td>Copy of the Sale Deed</td> <td>25.01.2010</td> <td>--</td> <td>Dawood &amp;<br/>Def. 2</td> <td>A- 7</td> </tr> <tr> <td>8</td> <td>Copy of the Sale Deed</td> <td>05.07.2013</td> <td>--</td> <td>Dawood &amp;<br/>Def. 2</td> <td>A- 8</td> </tr> <tr> <td>9</td> <td>Copy of the Sale Deed</td> <td>05.07.2013</td> <td>--</td> <td>Dawood &amp;<br/>Def. 2</td> <td>A- 9</td> </tr> <tr> <td>10</td> <td>Copy of the Sale Deed</td> <td>05.07.2013</td> <td>--</td> <td>Dawood &amp;<br/>Def. 2</td> <td>A- 10</td> </tr> <tr> <td>11</td> <td>Copy of the Sanction Intimation Letter</td> <td>24.12.2013</td>

<td>Def. 1, 2 &amp; 3</td> <td>A- 11</td> </tr> <tr> <td>12</td> <td>Copy of the Letter of Acknowledgement of Debt</td> <td>13.12.2013</td> <td>149.48</td> <td>Def. 1, 2 &amp; 3</td> <td>A- 12</td> </tr> <tr> <td>13</td> <td>Copy of the D. P. Note for Partnership Firm</td> <td>13.12.2013</td> <td>97.82</td> <td>Def. 1, 2 &amp; 3</td> <td>A-13</td> </tr> <tr> <td>14</td> <td>Copy of the Letter of Installments with Acceleration clause</td> <td>13.12.2013</td> <td>97.82</td> <td>Def. 1, 2 &amp; 3</td> <td>A-14</td> </tr> <tr> <td>15</td> <td>Copy of the Letter of Instrument of Hypothecation of Moveable Machinery</td> <td>13.12.2013</td> <td>97.82</td> <td>Def. 1, 2 &amp; 3</td> <td>A-15</td> </tr> <tr> <td>16</td> <td>Copy of the Letter of Partnership</td> <td>13.12.2013</td> <td>--</td> <td>Def. 1, 2 &amp; 3</td> <td>A-16</td> </tr> <tr> <td>17</td> <td>Copy of the Undertaking not to withdraw deposit by the partners/directors etc.</td> <td>13.12.2013</td> <td>97.82</td> <td>Def. 1, 2 &amp; 3</td> <td>A-17</td> </tr> <tr> <td>18</td> <td>Copy of the Letter of Authority to make payment directly to the dealers</td> <td>13.12.2013</td> <td>97.82</td> <td>Def. 1, 2 &amp; 3</td> <td>A-18</td></tr></tbody></table>

<thead> <tr> <th></th> <th>continuing security</th> <th></th> <th></th> <th></th> <th></th> </tr> </thead> <tbody> <tr> <td>26</td> <td>Copy of the letter of partnership</td> <td>13.12.2013</td> <td>--</td> <td>Def. 2 &amp; 3</td> <td>A-26</td> </tr> <tr> <td>27</td> <td>Copy of the letter of draft undertaking/declaration (for risk fund)</td> <td>13.12.2013</td> <td>--</td> <td>Def. 1, 2 &amp; 3</td> <td>A-27</td> </tr> <tr> <td>28</td> <td>Copy of the Letter of Declaration cum undertaking cum Authority</td> <td>13.12.2013</td> <td>--</td> <td>Def. 1, 2 &amp; 3</td> <td>A-28</td> </tr> <tr> <td>29</td> <td>Copy of the Letter of Declaration regarding legal heirs and successors</td> <td>13.12.2013</td> <td>200.00</td> <td>Def. 1, 2 &amp; 3</td> <td>A-29</td> </tr> <tr> <td>30</td> <td>Copy of the Letter of Power of Attorney in respect of book debts facility</td> <td>13.12.2013</td> <td>--</td> <td>Def. 1, 2 &amp; 3</td> <td>A-30</td> </tr> <tr> <td>31</td> <td>Copy of the General form of guarantee</td> <td>13.12.2013</td> <td>200.00</td>

<td>A-31</td> </tr> <tr> <td>32</td> <td>Copy of the Letter of Composite Hypothecation Agreement for stocks/book debts/vehicles/ moveable machineries</td> <td>13.12.2013</td> <td>297.82</td> <td>Def. 1, 2 &amp; 3</td> <td>A-32</td> </tr> <tr> <td>33</td> <td>Copy of the Letter of Pledge of goods to secure credit facilities (for imported goods)</td> <td>13.12.2013</td> <td>35.96</td> <td>Def. 1, 2 &amp; 3</td> <td>A-33</td> </tr> <tr> <td>34</td> <td>Copy of the Sale Deed</td> <td>20.06.2007</td> <td>--</td>

<td>A-34</td> </tr> <tr> <td>35</td> <td>Copy of the Intiukhab Khatauni showing land use conversion</td> <td>--</td> <td>--</td> <td>--</td> <td>A-35</td> </tr> <tr> <td>36</td> <td>Copy of the Sale Deed</td> <td>25.03.2006</td> <td>--</td> <td>Def. 2</td> <td>A-36</td> </tr> <tr> <td>37</td> <td>Copy of the Mutation in Nagar Palika Parishad, Bahraich</td> <td>--</td> <td>--</td> <td>--</td> <td>A-37</td> </tr> <tr> <td>38</td> <td>Copy of the Letter of Confirmation of creation/extension of mortgage</td> <td>13.12.2013</td>

<td>A-38</td> </tr> <tr> <td>39</td> <td>Copy of the Letter sent by Applicant bank to defendants</td> <td>24.07.2015</td> <td>205.85</td> <td>Def. 2</td> <td>A-39</td> </tr> <tr> <td>40</td> <td>Copy of the Letter sent by Applicant bank to defendants</td> <td>15.10.2015</td> <td>212.52</td> <td>--</td> <td>A-40</td> </tr> <tr> <td>41</td> <td>Copy of the Recall Notice with postal receipt</td> <td>02.07.2016</td> <td>308.98</td> <td>--</td> <td>A-41</td> </tr> <tr> <td>42</td> <td>Copy of the Statement of Account with certificate</td> <td>--</td> <td>--</td> <td>--</td> <td>A-42</td> </tr> &lt;/</tbody></table>

has been proved by documentary and oral evidence. It is further submitted by the Ld. Counsel for the Applicant Bank that Rs. 68,48,531/- has been recovered by the Applicant Bank by invoking SARFAESI actions, by selling the property. Further submitted that the recovery certificate may be issued after deducting the recovered amount It is further submitted by ld. Counsel of applicant bank that there is no any stay granted by any Higher Court, in respect of the proceedings of the present OA and requested to issue recovery certificate, as claimed for, in OA.

7- It has been established that defendants are living and carrying on their business in the state of Uttar Pradesh. Cause of action also arose in the State of Uttar Pradesh. The said claim on the date of filing of application exceeded Rs.10 lacs. The applicant bank is functioning within jurisdiction of this Tribunal. Therefore, this Tribunal has territorial as well as pecuniary jurisdiction to adjudicate upon the present application.

8- On the issue of Limitation, to prove it, the applicant bank has submitted that the applicant bank has declared the account as NPA on 24.02.2016, whereas the present application has been filed on 15.07.2016. Even, it is counted for the purpose of Limitation, then it is established that the applicant bank has filed the case within the limitation period from the date of declaring the account as NPA. As such, it is established that present application has been filed well within the period of limitation.

9- In the affidavit of Shri Kamalesh Singh, Manager of the applicant bank, has stated that he is well acquainted with the facts of the case and has on verification of record, sworn in the affidavit in support of contents of application and the documents as evidence and established on oath the pleadings and documents of the applicant bank as stated above.

The documents as stated above reveal that the defendants have applied for loan and the bank had sanctioned the loan and to secure the loan and for repayment of loan amount with interests etc., the defendants have executed various loan documents, which strength the case of the applicant bank.

The applicant bank has also furnished statement of account as above, which is not only admissible but shall be taken as correct statement of account, more so since the entries in the statement of account has not been challenged.

10- Since, the defendants were proceeded exparte, all contentions raised and documents produced by plaintiff remained unrebuted and the tribunal may act upon the affidavit of the applicant as per law. Defendants have neither denied the utilization of funds advanced by applicant bank nor have pointed out any specific error and discrepancy in the Statement of Account, which is kept in due course of business, evidence on affidavit, which has supported the claim of the applicant bank, established to have fully correct and believable. Provisions contained in Section 4 of the Banker's Books Evidence Act, 1891 apply to certified copies of entries in banker's book furnished along with the application filed under section 19[1] of the Act. Hence, the entries in the Statement of Account are also proved.

11- On consideration of the arguments and on perusal of the application, documents and affidavit, it is proved that the applicant bank has granted the loan facilities, documents were executed by the defendants and facilities were availed by the defendants as stated in the application.

12- Now, whether interest has been charged as per agreement and as per R.B.I. Guidelines?

13- The applicant bank has sought for recovery of a sum of Rs. 3,24,86,676/- with cost and further interest @ 12% per annum with monthly rest from the date of filing i.e. 15.07.2016 till realization. But during the pendency of O.A., the properties were sold for a sum of Rs. 68,48,531/-, and after deducting the total recovered amount of Rs. 68,48,531/- the remaining dues comes to Rs. 2,56,38,145/- (Rs. 3,24,86,676/- – Rs. 68,48,531/-) for which defendants are liable.

14- Learned Advocate appearing for applicant bank submits that the applicant bank has charged interest in terms of the agreements and that interest has been charged at such rates, and capitalized at such periodical rests as are permitted by and do not run counter to the directives of Reserve Bank of India.

15- On consideration of the arguments and on perusal of the pleadings, documents and affidavit, it is proved that the applicant has charged interest against defendants in terms of documents and as per directives of R B I, but keeping the facts and circumstances of the case in mind, the defendants deserve some leniency in the rate of interest.

16- None of the defendants appeared before the Tribunal to contest the claim made by the applicant, therefore, it necessarily goes to establish that the claim made by the applicant bank is genuine and true. It is manifest that the defendants have not disputed the claim, therefore, the claim referred to the Tribunal is recoverable till full and final realization of the claim.

17- In Indian Bank Vs. Blue Jaggers Estates Limited and others [2010] 8 SCC 129, the Hon'ble Supreme Court of India has observed as under- "The Court cannot lose sight of the fact that the bank is a trustee of public fund. It cannot compromise the public interest for benefiting private individuals. Those who take loan and avail financial facilities from the bank are duty bound to repay the amount strictly in accordance with the terms of the contract. Any lapse in such matters has to be viewed seriously and the bank is not only entitled but duty bound to recover the amount by adopting all legally permissible methods. Parliament enacted the act because it was found that legal mechanism available till then was wholly insufficient for recovery of the outstanding dues of the banks and Financial Institutions."

18- Facts of the case, in my view, are well proved by evidence of the applicant bank. The applicant bank is entitled to receive its debts from defendants, jointly and severally Rs. 2,56,38,145/- (Rs. 3,24,86,676/- – Rs. 68,48,531/-) alongwith pendentelite and future interest @10% Simple per annum from the date of filing i.e. 15.07.2016 till realization. So the final order may be passed accordingly, to meet the ends of justice.

9DRT, ALLAHABADTA 296 of 2018 |J|

ORDER

In the result, the application of the applicant bank is, allowed and debt is determined with costs against the defendants and it is, hereby, ordered that the applicant bank is entitled to receive its debts from defendants, jointly and severally, it's debts with interest, amounting to Rs. 2,56,38,145/- (Rs. 3,24,86,676/- – Rs. 68,48,531/-) alongwith pendentelite and future interest @10% Simple per annum from the date of filing i.e. 15.07.2016 till realization of the entire sum due and recoverable with costs.

In case of failure to repay the aforementioned adjudicated amount within 30 days, same shall be recovered from the sale of the *hypothecated assets /mortgaged properties of the Defendants except of sold property in execution proceedings*. The amount, if any, already recovered by sale of any *hypothecated assets /mortgage properties or otherwise shall be adjusted towards the debt and only the balance amount shall be recoverable*. If the dues of Applicant Bank still remain unsatisfied, the same shall be recovered by attachment and sale of the personal movable and immovable assets of the Defendants jointly or severally. The cost of litigation be also borne by the Defendants.

The Defendants are hereby restrained by means of injunction from depleting, transferring, encumbering, alienating, selling or otherwise dealing with *hypothecated assets/ mortgage properties or their other immovable/movable properties/estates without first paying the above claim of Applicant Bank/Certificate Holder*.

*In case, any of the Defendants expire, the legal representatives shall be liable to pay in proportion to the inheritance.*

Let a certificate of recovery be drawn up forthwith and put up for signatures in terms of provisions contained in Section 19(22) of the Act to be issued, on the basis of the order of the Tribunal to the Recovery Officer. The Recovery Officer shall realize the amount as per the certificate in the manner and mode prescribed under the Act from the defendants.

Pending I. As. if any, stands disposed off.

Parties are directed to appear before the Recovery Officer, DRT, Allahabad on 16.03.2024. The order be communicated accordingly.

Judgment signed, sealed, dated and pronounced in the open court on this 10^th Day of January, 2024.

Dictated & Corrected by me.

[R. M. Kushawaha] Presiding Officer Debts Recovery Tribunal, Allahabad

[R. M. Kushawaha] Presiding Officer Debts Recovery Tribunal, Allahabad

AD