STATE BANK OF INDIA vs M/S GULSHAN BUSINESS CENTRE AND PCO on 28 February 2024

**JUDGMENT**

1. 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 16.06.2016, against the defendants to recover its debts from defendants of Rs. 25,00,430/- upto 31.05.2016 alongwith pendentelite and future interest @ 12.80% per annum with monthly rest along with penal interest @ 2% per annum with costs till realization.

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

3. 3- The brief facts of the case of the applicant bank as stated in the application are as under- The applicant bank is a body corporate constituted under the State Bank of India Act, 1955, having its corporate Centre at Madame Cama Road, Nariman Point, Mumbai – 400021, Maharashtra and having one of its Branch at State Bank of India, Rudauli, District

The brief facts of the case as contained in its original application are that the Defendant No. 1 is a proprietorship firm of which Defendant No. 2 is the sole proprietor and borrower of the Defendant No. 1 firm and Defendant No. 3 to 5 stood as guarantors for the credit facility. The Defendant No. 2 for self and on behalf of Defendant No. 1 approached the Applicant Bank for grant of financial assistance in the shape of Cash Credit Limit facility and submitted loan application.

After considered the request of the Defendant No. 2 for self and on behalf of Defendant No. 1 and verification of the loan documents, the applicant Bank had sanctioned Cash Credit Limit of Rs. 2.00 Lacs for working capital together with interest vide sanction letter dated 06.06.2009.

Upon sanction of the aforesaid Cash Credit Limit, the Defendant No. 1 & 2 as borrowers and defendant No. 3 to 5 as guarantors, had executed and signed several security loan documents and guarantee agreement on 06.06.2009 in favour of the Applicant Bank.

In order to secure the due repayment in respect of the aforesaid Cash Credit Limit, the defendant No. 3, created equitable mortgage of his immovable property i.e. Plot of Land Survey No. 290 situated in Mohalla – Rasoolabad, Ward No. 1, Nariapur, Kasba, Pargana and Tehsil – Rudauli, District Faizabad, Uttar Pradesh by deposit of title deed in favour of the Applicant Bank.

Further, the defendant No. 2 for self and on behalf of defendant No. 1 approached the applicant bank and requested for enhancement of existing credit facility from Rs. 2.00 Lacs to Rs. 15.00 Lacs. The Applicant Bank considering the same and sanctioned Rs. 13.00 Lacs together with interest vide enhancement sanction Letter dated 23.04.2011 and in consideration thereof, the defendant No. 1 & 2 as borrower and defendant No. 3 to 5 as guarantors had executed and signed Bank's Standard Loan documents and guarantee agreement on 04.06.2011 in favour of the Applicant Bank.

In order to further secure the due repayment in respect of the aforesaid Cash Credit Limit, the defendant No. 4, created mortgage of his immovable property i.e. Part of Gata No. 407Aa, 407Ba and 404Ka having an admeasuring area of 0.191 Hectare, situated at Mauza – Koora Sadat Qusba, Post – Bhelsar Pargana and Tehsil – Rudauli, District Faizabad, U.P. by deposit of title deed in favour of the Applicant Bank.

Further, the defendant No. 2 for self and on behalf of defendant No. 1 approached the applicant bank and requested for enhancement of existing credit facility from Rs. 15.00 Lacs to Rs. 24.00 Lacs. The Applicant Bank considering the same and sanctioned Rs. 9.00 Lacs together with interest vide enhancement sanction Letter dated 15.07.2013 and in consideration thereof, the defendant No. 1 & 2 as borrower and defendant No. 3 to 5 as guarantors had executed and signed Bank's Standard Loan documents and guarantee agreement on 15.07.2013 in favour of the Applicant Bank.

The Defendants availed the aforesaid loan/credit facility but failed to maintain financial discipline as per terms and conditions of the loan agreement due to which loan account become irregular. Despite repeated reminders and persuasion, the defendants failed to regularize the loan account. Consequently, the said account of the Defendants were classified as NPA on 01.02.2016 and recalled by Applicant Bank. Thereafter, Applicant Bank served Legal Notice dated 25.10.2014 to the Defendants to repay the outstanding dues but the defendants failed to make the payments of outstanding dues. Accordingly, the applicant Bank has moved this O.A. to recover public money.

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 22.03.2023, 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.

Against the registered summons/notices, the defendant No. 2 have appeared before this Tribunal to contest the case and filed vakalatnama. 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 21.02.2024.

5- To prove its case, the applicant Bank has referred attested copies of various documents before this Tribunal on 16.06.2016. The applicant bank has also given evidence on affidavit by way of affidavit of Shri Pankaj Kumar, Branch Manager of the applicant bank. The details of documents are as follows. :- <table border="1"> <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 Application Form</td> <td>06.06.2009</td> <td>Rs. 2.00</td> <td>Def. No. 1 to 5</td> <td>A- 1</td> </tr> <tr> <td>2</td>

<td>06.06.2009</td> <td>Rs. 2.00</td> <td>Def. No. 1 to 5 and Bank</td> <td>A- 2</td> </tr> <tr> <td>3</td> <td>Copy of Agreement of Loan cum Hypothecation</td> <td>06.06.2009</td> <td>Rs. 2.00</td> <td>Def. No. 1 &amp; 2</td> <td>A- 3</td> </tr> <tr> <td>4</td> <td>Copy of Guarantee agreement</td> <td>06.06.2009</td> <td>Rs. 2.00</td> <td>Def. No. 3</td> <td>A- 4</td> </tr> <tr> <td>5</td> <td>Copy of Letter of Acknowledging fact of creation of Mortgage by Deposit of Title Deeds</td> <td>06.06.2009</td> <td>Rs. 2.00</td> <td>Def. No. 3</td> <td>A- 5</td> </tr> <tr> <td>6</td> <td>Copy of Title Deed-1</td> <td>07.05.2009</td> <td>-----</td> <td>Def. No. 3</td> <td>A- 6</td> </tr> <tr> <td>7</td> <td>Copy of Request Letter</td> <td>23.04.2011</td> <td>-----</td>

<td>A- 7</td> </tr> <tr> <td>8</td> <td>Copy of Letter of Arrangement</td> <td>04.06.2011</td> <td>Rs. 15.00</td> <td>Def. No. 1, 2, 4 &amp; 5</td></tr></tbody></table>

4DRT, ALLAHABADTA 33 of 2021 [J]

<table border="1"> <tr> <td></td> <td>Loan Cum Hypothecation</td> <td></td> <td></td> <td>2</td> <td></td> </tr> <tr> <td>10</td> <td>Copy of Guarantee agreement</td> <td>04.06.2011</td> <td>Rs. 15.00</td> <td>Def. No. 4 &amp; 5</td> <td>A- 10</td> </tr> <tr> <td>11</td> <td>Copy of Letter of Acknowledging fact of creation of Mortgage by Deposit of Title Deeds</td> <td>04.06.2011</td> <td>-----<br/>-</td> <td>Def. No. 4</td> <td>A- 11</td> </tr> <tr> <td>12</td> <td>Copy of Title Deed-1</td> <td>15.05.2006</td> <td>-----<br/>-</td> <td>Def. No. 4</td> <td>A- 12</td> </tr> <tr> <td>13</td> <td>Copy of Affidavit – Assets and Liabilities</td> <td>27.05.2013</td> <td>-----<br/>-</td> <td>Def. No. 4</td> <td>A- 13</td> </tr> <tr> <td>14</td>

<td>15.07.2013</td> <td>Rs. 24.00</td> <td>Bank</td> <td>A- 14</td> </tr> <tr> <td>15</td> <td>Copy of Agreement of Loan Cum Hypothecation</td> <td>15.07.2013</td> <td>Rs. 24.00</td> <td>Def. No. 1 &amp; 2</td> <td>A- 15</td> </tr> <tr> <td>16</td> <td>Copy of Guarantee agreement</td> <td>15.07.2013</td> <td>Rs. 24.00</td> <td>Def. No. 4 &amp; 5</td> <td>A- 16</td> </tr> <tr> <td>17</td> <td>Copy of Legal Notice</td> <td>25.10.2014</td> <td>Rs.<br/>30,89,041/<br/>-</td> <td>Bank</td> <td>A- 17</td> </tr> <tr> <td>18</td> <td>Copy of Acknowledgement of Total outstanding amount</td> <td>31.03.2015<br/>&amp;<br/>31.03.2016</td> <td>Rs.<br/>23,99,456/<br/>-</td> <td>Bank</td> <td>A- 18</td> </tr> <tr> <td>19</td> <td>Copy of Statement of Account</td> <td>31.05.2016</td> <td>Rs.<br/>25,00,430/<br/>-</td> <td>Bank</td> <td>A- 19</td> </tr> </table>

6- Opportunity of hearing has been fully given to both the parties, but despite several opportunities given to defendants, the defendants have not appeared to contest the case, hence, the exparte arguments of learned counsel for applicant bank were heard. Perused the case record and considered.

Ld. counsel of applicant bank submitted that the defendants have taken the loan and utilized the same and also executed the various loan documents to secure the loan. Further submitted that the claim of the bank has been proved by documentary and oral evidence. Ld. Counsel for the applicant bank further submitted that the defendants have not deposited any amount, after filing of the OA.

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.20 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 01.02.2016, 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 Pankaj Kumar, Branch 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 unrebutted 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 facility, documents were executed by the defendants and facility was 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. 25,00,430/- with cost and further interest @ 12.80% per annum along with penal interest @ 2% per annum with costs till realization.

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 it's debts with interest, from defendants, jointly and severally **Rs. 25,00,430/-** alongwith pendentelite and future interest @ 10% simple per annum from the date of filing of OA i.e. 16.06.2016 till realization. So the final order may be passed accordingly, to meet the ends of justice.

**ORDER**

In the result, the application of the applicant bank is, allowed exparte and debt is determined with costs against the defendants and it is, hereby, ordered that the applicant bank is entitled to receive it's debts with interest, from defendants, jointly and severally, amounting to **Rs. 25,00,430/-** alongwith pendentelite and future interest @ 10% simple per annum from the date of filing of OA i.e. 16.06.2016 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 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 in the light of Judgment.

Parties are directed to appear before the Recovery Officer, DRT, Allahabad on 06.05.2024. The order be communicated accordingly.

Judgment signed, sealed, dated and pronounced in the open court on this 28^th Day of February, 2024.

Dictated & Corrected by me.

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

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