CENTRAL BANK OF INDIA vs M/S JAISHREE INDUSTRIES, on 20 March 2024

**JUDGMENT**

New Delhi, this OA bearing No. 74/2007 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 body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act V of 1970 having its Central Office at "Chandermukhi" Nariman Point Mumbai and Branches all over India including one at Sabzi Mandi Aligarh under Regional Office Agra, through S. C. Agarwal, Senior Manager and Constituted Attorney Central Bank of India Aligarh.

The facts of the case as contained in the application are that the defendant No.1 is a Proprietorship concern of which Smt. Anita Gupta is the sole Proprietor having its business office at 19/164 (S-8) Shantipuram A.D.A. Colony Aligarh. The defendant No.1 is doing the business of manufacturing of hardware.

The defendant No.2 who is one of the Guarantors has given her immovable properties situated at Village Sahibabad Pala Pargana and Tehsil Kol District Aligarh in security by way of Equitable Mortgage by deposit of the original title deed. The details of the immovable property are given in security are enclosed in Schedule I Annexed with this application. The defendant No.2 to 4 being the guarantors their liability to pay the dues of the applicant Bank is coextensive with the principal borrower.

The defendant No.1 through its sole Proprietor Smt. Anita Gupta on 07.06.2004 applied to the applicant Bank for credit facilities as per details given below:- A). Cash Credit Limit to the tune of Rs.700000/- (Rupees Seven Lac only) against the security of Hypothecation of Goods.

B). Rs.500000/- (Rupees Five Lac only) by way of Term Loan against the security of Hypothecation of Machineries.

Besides collateral security in the form of Equitable mortgage of immovable property of third party.

Total Credit facilities of Rs. 1200000/-.

The said credit facilities were sanctioned by the applicant Bank to the defendant No. 1 vide sanction letter dated 10.6.2004.

In order to secure the aforesaid credit facilities the defendant No.1 as sole Proprietor of Defendants on 12.06.2004 signed, executed and delivered several security documents in favour of the Applicant Bank.

After executing the aforesaid documents the defendant No.1 started availing the credit facilities mentioned above sanctioned by the applicant Bank.

Right from the inception of the credit facilities the defendant No.1 was not running the Cash Credit Account properly and did not deposit the regular installments in Term Loan Account and committed regular defaults and failed to regularize the same inspite of repeated requests on the part of the applicant bank hence this application.

Since the defendant No.1 was not operating the two accounts mentioned above properly and there were huge debit balances in the aforesaid two accounts the applicant Bank on 19.01.2006 served the defendants Notice under Section 13(2) of the SARFAESI Act. And after serving the said Notice proceed further and on 20.9.2006 took symbolical possession of the Mortgaged property of the defendant No.2 detailed in Schedule "I" to the application. However the Mortgaged property mentioned above on account of some disputes could not be sold.

The defendant No.1 through its sole Proprietor Smt. Anita Gupta on 07.12.2006 acknowledged the debts in writing and admitted the balance due in the two accounts mentioned above.

Since the defendant No.5 and 6 are illegally claiming their rights over the Mortgaged property of the defendant No.2 over which the Applicant Bank has sole charge, and the defendants 5 and 6 have no right, title claim or interest, they are necessary parties to this application hence they have been impleaded as defendants in the case. The defendant No.5 has published Notice of Possession SARFAESI Act in News paper Dainik Jagran dated 13.05.2007 and the defendant No.6 has vide letter dated 20.03.2007 Ext. A-21 addressed to the Applicant has claimed right over the Mortgaged property of the defendant No.2 which is under the charge of the Applicant Bank.

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 30.09.2007. The applicant Bank sent Legal/ demand notice on 02.04.2007/19.01.2006 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 defendants 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 accounts comes to Rs. 15,28,646/- 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 10.10.2019, 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 10.10.2019, summons/notices were sent to the defendants, but the defendants have not appeared, hence, this Tribunal has ordered to publish the notice in newspaper and subsequently, substituted service by publication of notice by way of advertisement in newspaper was also made against the defendants on 19.10.2023 in "Hindustan", newspaper.

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 18.03.2024.

5- To prove its case, the applicant Bank has referred attested copies of various documents before this Tribunal on 11.06.2007. The applicant bank has also given evidence on affidavit by way of affidavit of Shri S. C. Agarwal, Senior 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 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 Application for Cash Credit &amp; Loan</td> <td>07.06.2004</td> <td>--</td> <td>--</td> <td>A- 2</td> </tr> <tr> <td>3</td> <td>Copy of the Sanction Letter</td> <td>10.06.2004</td> <td>12.00</td> <td>--</td> <td>A- 3</td> </tr> <tr> <td>4</td> <td>Copy of the D. P. Note</td> <td>12.06.2004</td> <td>7.00</td> <td>Def. 1 &amp; 2/2</td> <td>A- 4</td> </tr> <tr> <td>5</td> <td>Copy of the Letter of Interest</td> <td></td> <td>12.00</td> <td>Def. 1 &amp; 2/2</td> <td>A- 5</td> </tr> <tr> <td>6</td> <td>Copy of the Letter of Waiver</td> <td>12.06.2004</td> <td>7.00</td> <td>Def. 1 &amp; 2/2</td> <td>A- 6</td> </tr> <tr> <td>7</td> <td>Copy of the Letter of Continuity</td> <td>12.06.2004</td> <td>7.00</td> <td>Def. 1 &amp; 2/2</td> <td>A- 7</td> </tr> <tr> <td>8</td> <td>Copy of the Hypothecation Agreement to secure Demand Cash Credit</td> <td>12.06.2004</td> <td>7.00</td> <td>Def. 1 &amp; 2/2</td> <td>A- 8</td> </tr> <tr> <td>9</td> <td>Copy of the Loan cum Hypothecation Agreement (Machinery)</td> <td>12.06.2004</td> <td>5.00</td> <td>Def. 1 &amp; 2/2</td> <td>A- 9</td> </tr> <tr> <td>10</td> <td>Copy of the Loan Agreement</td> <td>12.06.2004</td> <td>5.00</td> <td>Def. 1 &amp; 2/2</td> <td>A- 10</td> </tr> <tr> <td>11</td> <td>Copy of the Consent Clause</td> <td>--</td> <td>12.00</td> <td>Def. 1 &amp; 2/2</td> <td>A- 11</td> </tr> <tr> <td>12</td> <td>Copy of the Letter of Understanding</td> <td>12.06.2004</td> <td>12.00</td> <td>Def.</td></tr></tbody></table>

<table border="1"> <tr> <td>16</td> <td>Copy of the Letter of Understanding</td> <td>12.06.2004</td> <td>12.00</td> <td>Late Baikunthi Devi, def. 3 &amp; 4</td> <td>A-16</td> </tr> <tr> <td>17</td> <td>Copy of the Letter of deposit of Original Title Deed</td> <td>--</td> <td>--</td> <td>Late Baikunthi Devi</td> <td>A-17</td> </tr> <tr> <td>18</td> <td>Copy of the Title Deed</td> <td>31.05.1990</td> <td>--</td> <td>--</td> <td>A-18</td> </tr> <tr> <td>19</td> <td>Copy of the Letter by Smt Anita Gupta</td> <td>07.12.2006</td> <td>--</td> <td>Def. 1 &amp; 2/2</td> <td>A-19</td> </tr> <tr> <td>20</td> <td>Copy of the Possession Notice published in Dainik Jagran</td> <td>12.04.2007</td> <td>15.48</td> <td>--</td> <td>A-20</td> </tr> <tr> <td>21</td> <td>Copy of the Letter from Bank</td> <td>20.03.2007</td> <td>--</td> <td>Bank</td> <td>A-21</td> </tr> <tr> <td>22</td> <td>Copy of the Statement of Account of Cash Credit 14.06.2004 to 17.03.2007</td> <td>--</td> <td>--</td> <td>Bank</td> <td>A-22</td> </tr> <tr> <td>23</td> <td>Copy of the Certificate of Interest Cash Credit Account up to 31.05.2007</td> <td>--</td> <td>--</td> <td>Bank</td> <td>A-23</td> </tr> <tr> <td>24</td> <td>Copy of the Statement of Term Loan up to 06.03.2007</td> <td>--</td> <td>--</td> <td>Bank</td> <td>A-24</td> </tr> <tr> <td>25</td> <td>Copy of the Certificate of Interest Term Loan up to 31.05.2007</td> <td>--</td> <td>--</td> <td>Bank</td> <td>A-25</td> </tr> <tr> <td>26</td> <td>Copy of the Notice under SARFAESI Act, 2002</td> <td>19.01.2007</td> <td>13.52</td> <td>Bank</td> <td>A-26</td> </tr> <tr> <td>27</td> <td>Copy of the Possession Notice</td> <td>20.09.2006</td> <td>13.52</td> <td>Bank</td> <td>A-27</td> </tr> <tr> <td>28</td> <td>Copy of the Notice from C. K. Seth, Advocate to defendants</td> <td>02.04.2007</td> <td>15.06</td> <td>--</td> <td>A-28</td> </tr> <tr> <td>29</td> <td>Copy of the Four Postal Receipts of above Notice</td> <td>--</td> <td>--</td> <td>--</td> <td>A-29</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 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 30.09.2007, whereas the present application has been filed on 11.06.2007. 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 S. C. Agarwal, Senior 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. 15,28,646/- with cost and further interest @ 13% per annum with monthly rest 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 its debts from defendants, jointly and severally Rs. 15,28,646/- alongwith pendentelite and future interest @10% Simple per annum from the date of filing i.e. 11.06.2007 till realization. So the final order may be passed accordingly, to meet the ends of justice. The liability of defendant No. 2/1, 2/2, 2/3 & 2/4 is limited to the extent of inheritance of the property inherited by them from their deceased mother.

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. 15,28,646/- alongwith pendentelite and future interest @10% Simple per annum from the date of filing i.e. 11.06.2007 till realization of the entire sum due and recoverable with costs. The liability of defendant No. 2/1, 2/2, 2/3 & 2/4 is limited to the extent of inheritance of the property inherited by them from their deceased mother.

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.

Parties are directed to appear before the Recovery Officer, DRT, Allahabad on 24.05.2024. The order be communicated accordingly.

Judgment signed, sealed, dated and pronounced in the open court on this 20^th Day of March, 2024.

Dictated & Corrected by me.

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

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

AD