CENTRAL BANK OF INDIA vs M/S ARYAN ENTERPRISES on 9 April 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 19.05.2009 **before the DRT Lucknow** against the defendant to recover its debts from defendant of Rs. 22,82,937/- alongwith pendentelite and future interest @ 15% per annum with monthly rest with costs till realization.

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 body Corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act No. V of 1970 having its Head Office at Chandermukhi, Nariman Point, Mumbai-400021 and a Branch Office amongst others at Pratapgarh Branch, District Pratapgarh, U.P.

The facts of the case as contained in its application are that defendant no. 1 is a partnership firm of defendant no. 2 & 3. The defendant no. 4 & 5 stood as guarantor for the credit facility availed by the defendant no. 2 & 3. The defendant No. 1 Firm through its partner defendant no. 2 & 3 approached the applicant bank to get sanction financial assistance in the shape of Cash Credit (H) Facilities to augment DRT, ALLAHABAD2TA 28 OF 2021 [J]

its business. The applicant bank after considering the proposal and worth of the security offered; sanctioned a Cash Credit (H) Facility of Rs. 12.00 lakhs on 17.06.2005 which was enhanced by the applicant on 24.10.2005 to Rs. 15.00 lacs. In consideration thereof and in order to avail the above sanctioned Credit facility, the defendant no. 2 & 3 as the partners of defendant no. 1 Firm and defendant no. 4 & 5 executed Bank's standard documents on 17.06.2005. The defendant no. 4,5 also executed guarantee agreement in favour of the applicant bank.

At the request of defendant no. 1 to 3 applicant bank enhanced the Cash Credit facility of Rs. 12.00 Lacs to Rs. 15.00 lacs on 24.10.2005. The defendant no. 2 & 3 as the partners of defendant no. 1 Firm and defendant no. 4 & 5 executed Bank's standard documents on 24.10.2005.

To secure the aforesaid credit facility defendant no.4 created equitable mortgage of his immovable properties i.e. (a) 1/3^rd Plot No. 1255, area 0.293 hectare situated at Sarsi Khan, Patti, Pratapgarh owned by Sri Girija Shanker having inherited the same from his father Late Yadunath Pandey and (b) Plot No. 52 & 53, area 1 Biswa situated at Karanpur Khas, Pargana Tehsil Sadar, District Pratapgarh is owned by Sri Girija Shanker in favour of the applicant bank.

The defendant No. 1 to 3 availed the aforesaid credit facility 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 defendant no. 1 became irregular and sticky and were declared NPA on 16.03.2012. The applicant Bank sent Legal/ demand notice on 30.06.2008 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. Accordingly the applicant bank has moved this TA. to recover public money.

The total outstanding due in the account comes to Rs. 22,82,937/- inclusive of interests which has been claimed by means of present T.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 31.10.2022, 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.

Despite the registered summons/notices, 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 09.04.2024.

5- To prove its case, the applicant Bank has referred attested copies of various documents filed before DRT Lucknow on 19.05.2009. The applicant bank has also given evidence on affidavit by way of affidavit of Shri S.N. Verma, ARM of Regional Office, 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>Power of Attorney</td> <td>04.08.2000</td> <td>...</td> <td>...</td> <td>A- 1</td> </tr> <tr> <td>2</td> <td>Loan Application</td> <td>07.06.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 2</td> </tr> <tr> <td>3</td> <td>Sanction Letter</td> <td>17.06.2005<br/>24.10.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 3</td> </tr> <tr> <td>4</td> <td>D.P. Note</td> <td>18.06.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 4</td> </tr> <tr> <td>5</td> <td>Letter of consideration</td> <td>18.06.2005</td> <td>12.00</td> <td>Def. 1,2,3</td> <td>A- 5</td> </tr> <tr> <td>6</td> <td>Letter of waiver</td> <td>18.06.2005</td> <td>12.00</td> <td>Def. 1,2,3</td> <td>A- 6</td> </tr> <tr> <td>7</td> <td>A copy of letter of continuity</td> <td>18.06.2005</td> <td>12.00</td> <td>Def. 1,2,3</td> <td>A- 7</td> </tr> <tr> <td>8</td> <td>Agreement of hypothecation to secure demand Cash Credit</td> <td>18.06.2005</td> <td>12.00</td> <td>Def. 1,2,3</td> <td>A- 8</td> </tr> <tr> <td>9</td> <td>A copy of understanding by borrower</td> <td>18.06.2005</td> <td>12.00</td> <td>Def. 1,2,3</td> <td>A- 9</td> </tr> <tr> <td>10</td> <td>A copy of understanding by guarantor</td> <td>18.06.2005</td> <td>12.00</td>

<td>A- 10</td> </tr> <tr> <td>11</td> <td>A copy of deed of partnership between Vineet Tiwari and Smt. Malti Devi</td> <td>09.02.2004</td> <td>.....</td> <td>Def. 2,3,</td> <td>A- 11</td> </tr> <tr> <td>12</td> <td>Notorized Affidavit signed by Anurag Pandey, Vineet Tiwari, Malti Pandey and Girija Shanker Pandey</td> <td>11.06.2005</td> <td>.....</td> <td>Def. 2 to 5</td> <td>A- 12</td> </tr> <tr> <td>13</td> <td>Copy of legal opinion by Santosh Kumar Pandey</td> <td>07.02.2005<br/>07.06.2005</td> <td>...</td> <td>Bank</td> <td>A- 13</td> </tr> <tr> <td>14</td> <td>A copy of visiting slip with memorandum for title deed.</td> <td>18.06.2005</td>

<td>.....</td> <td>A- 14</td> </tr> <tr> <td>15</td> </tr></tbody></table>

4DRT, ALLAHABADTA 28 OF 2021 [J]

<table border="1"> <tr> <td>16</td> <td>A copy of visiting slip and memorandum of title deed and sale deed</td> <td>24.10.2005</td> <td>...</td> <td>Def. 2</td> <td>A- 15</td> </tr> <tr> <td>17</td> <td>A copy of D.P. Note</td> <td>24.10.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 16</td> </tr> <tr> <td>18</td> <td>A copy of letter of continuity</td> <td>24.10.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 17</td> </tr> <tr> <td>19</td> <td>A copy of letter of consideration</td> <td>24.10.2005</td> <td>15.00</td>

<td>A- 18</td> </tr> <tr> <td>20</td> <td>A copy of letter of understanding by borrower</td> <td>24.10.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 19</td> </tr> <tr> <td>21</td> <td>A copy of letter of understanding by guarantor</td> <td>24.10.2005</td> <td>15.00</td> <td>Def. 4,5</td> <td>A- 20</td> </tr> <tr> <td>22</td> <td>A copy of agreement of hypothecation to secure demand cash credit against goods</td> <td>24.10.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 21</td> </tr> <tr> <td>23</td> <td>A copy of interest variation dated 24.10.2005</td> <td>24.10.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 22</td> </tr> <tr> <td>24</td> <td>A copy of letter of authority partnership account</td> <td>24.10.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 23</td> </tr> <tr> <td>25</td> <td>A copy of letter of waiver</td> <td>24.10.2005</td> <td>15.00</td> <td>Def. 1,2,3</td> <td>A- 24</td> </tr> <tr> <td>26</td> <td>A copy of letter of partners</td> <td>24.10.2005</td> <td>...</td> <td>Def. 1,2,3</td> <td>A- 25</td> </tr> <tr> <td>27</td> <td>A copy of argument for non-diversion of fund</td>

<td>...</td> <td>Def. 1,2,3</td> <td>A- 26</td> </tr> <tr> <td>28</td> <td>A copy of deposit of slip dated 29.11.2006.</td> <td>29.11.2006</td> <td>....</td> <td>Def. 5</td> <td>A- 27</td> </tr> <tr> <td>29</td> <td>A copy of SARAFESI Notice Under section 13(2) of the Act.</td> <td>30.06.2008</td> <td>1973138 /-</td> <td>Bank</td> <td>A- 28</td> </tr> <tr> <td>30</td> <td>A copy of possession letter dated 05.11.2008</td> <td>05.11.2008</td> <td>...</td> <td>Bank</td> <td>A- 29</td> </tr> <tr> <td>31</td> <td>A copy of relevant ledger extract of the said account relating to Cash Credit Hypothecation Limit facility.</td> <td>.....</td>

<td>Bank</td> <td>A- 30</td> </tr> <tr> <td>32</td> <td>Statement of Account.</td> <td>.....</td> <td>...</td> <td>Bank</td> <td>A- 31</td> </tr> </table>

6- Opportunity of hearing has been fully given to both the parties, but despite several opportunities given to defendants

5DRT, ALLAHABADTA 28 OF 2021 [J]

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 16.03.2012, whereas the present application has been filed on 19.05.2009. 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.N. Verma, ARM of Regional Office 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. 22,82,937/- with cost and further interest @ 15% per annum with monthly rest 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 Jagers 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. 22,82,937/- alongwith pendentelite and future interest @ 10% simple per annum from the date of filing of O.A. i.e. 19.05.2009 with costs 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 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, its debts with interest, amounting to Rs. 22,82,937/- alongwith pendentelite and future interest @ 10% simple per annum from the date of filing of O.A. i.e. 19.05.2009 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, also disposed off.

Parties are directed to appear before the Recovery Officer, DRT, Allahabad on 12.06.2024. The order be communicated accordingly.

Judgment signed, sealed, dated and pronounced in the open court on this 09^th Day of April, 2024.

Dictated & Corrected by me.

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

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

mks