CANARA BANK vs M/S SHRI RAM WAREHOUSE, on 4 October 2022

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 (here-in-after referred to as Act) on 28.07.2015, against the defendants to recover **Rs.70,90,000/- (Rs. Seventy lac ninety thousand only)** alongwith pendentelite and future interest @ 13.20% per annum with monthly rest plus penal interest @ 2% per annum from 28.07.2015 with costs till realization.

Subsequently, the case record of the present Original Application No. 615 of 2015 has been transferred from Debts Recovery Tribunal, Lucknow to this Tribunal in view of Notification of Govt. of India, Ministry of Finance dated 15.02.2017 thus the case has been re-numbered as TA 161 of 2018.

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 V of 1970, having its Head Office at 112, J.C. Road, Bangalore Karnataka and a branch amongst others known as Aligarh Main Branch at Apsara Complex, Railway Road, Aligarh – 202001.

The brief history of the case as gathered from the Original Application are that the defendant nos.2 to 5 are the partners of the defendant no. 1 firm. The defendant nos. 2 to 5 being partners of the defendant no. 1, approached the applicant bank for grant of financial assistance to meet out financial requirement. The applicant bank considered the request of the defendants and sanctioned a Term Loan of Rs. 38.50 lac together with interest thereon @ 9.75% per annum with monthly rest vide its sanction letter dated 06.05.2010. The said credit facility was repayable in 10 half yearly instalments of Rs. 1,25,000/- 3DRT, ALLAHABADTA 161 of 2018|JI

subsequently 18 half yearly instalments of Rs. 207025/0 + interest thereon commencing from July, 2010.

Upon sanctioning of the said credit facility, the defendant nos.1 as principal borrower and defendant nos. 2 to 6 in capacity of guarantors signed and executed bank's security documents on 22.05.2010 in favour of the applicant bank.

It is further submitted that the applicant bank had disbursed the loans amount in favour of defendants. It is further submitted that the defendant nos. 2 to 6 being guarantors of loans granted to defendant no. 1 executed and signed Agreement of Loans cum-Hypothecation and created charge over the assets of defendant no. 1 i.e. current assets including stocks, stocks in trade, receivables, consumables stores and spares and entire current assets and hypothecated movable plant and machinery as also the defendant nos., 2 & 6 mortgaged their immovable properties :- **Lot No. 1** Owned by defendant no. 2 0.230 hectare out of 2.502 hect. In Land bearing gata no. 296 in Khata No. 56 situated at Aliyaspur Bhanwra Pargana Hassangarh, Tehsil Iglas, District Aligarh .

**Lot No. 2** Owned by Defendant no. 6 Land measuring 100 sq. yards or 83.6 sq. metres out of Land bearing Khasra No. 3765, Gali No. 2, Saket Vihar Colony, Saray Harnarayan, Agra **LoT No. 3** Land measuring 0.399 hectare in land bearing Gata No. 296/2 in Khata No. 62 situated at Aliyaspur Bhanwra Pargana Hassangarh, Tehsil Iglas District : Aligarh owned by defendant no. 2 and 6 in favour of the Applicant Bank.

At further request of the defendants, the Applicant Bank sanctioned Overdraft Cash Credit Limit of Rs. 35.00 lac vide its sanction letter dated 10.12.2011 and inconsideration thereof the defendants executed and signed various loan and security documents on 16.12.2011 in favour of the Applicant Bank.

The defendants availed the said credit facilities but could not adhere with the terms and conditions of the said advance and failed to deposit the monthly instalment regularly and punctually as agreed. The defendants also failed to comply with the terms and conditions mentioned in guarantee agreement and as such a huge amount have become due against the defendants. As a result the account became very sticky in operation and became non performing assets on 29.09.2014. However the defendants have signed and executed various loan documents and confirmed the debt.

4. The applicant bank requested the defendants for adjusting the bank's dues but the defendants neither approached the bank nor paid the dues. Thus, the applicant bank sent Demand notice dated 10.11.2014. U/s

13(2) of Securitization Act but the defendants did not respond. Despite service of notices, the defendants failed to comply with the terms of the said notices.

5 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.

6. 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 20.11.2019 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.

7. 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 13.09.2022.

8. To prove its case, the applicant Bank has referred attested copies of various documents before this Tribunal with its Original Application on 28.07.2015. The applicant bank also filed Affidavit in Evidence of Shri Kanchhi Lal, Senior Manager. 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 crores]</th> <th>Signature of executants</th> <th>Ex./ Ann. No.</th> </tr> </thead> <tbody> <tr> <td>1</td> <td>Power of attorney</td> <td></td> <td></td> <td>Bank</td> <td>A1</td> </tr> <tr> <td>2</td> <td>Loan Application</td> <td></td> <td></td>

<td>A2</td> </tr> <tr> <td>3</td> <td>Sanction letter</td> <td>06.05.2010</td> <td>38.50</td> <td>Bank</td> <td>3</td> </tr> <tr> <td>4</td> <td>Partnership Deed</td> <td>20.03.2010</td> <td>38.50</td> <td>Def. No. 2 to 5 for Def. No. 1</td> <td>4</td> </tr> <tr> <td>5</td> <td>Term Loan Agreement</td> <td>22.05.2010</td> <td>38.50</td> <td>Def. No. 2 to 5 for Def. No. 1</td> <td>5</td> </tr> <tr> <td>6</td> <td>Partnership letters</td> <td>22.05.2010</td> <td>38.50</td> <td>Def. No. 2 to 5 for Def. No. 1</td> <td>6</td> </tr> <tr> <td>7</td> <td>Guarantee Agreement</td> <td>22.05.2010</td> <td>38.50</td> <td>Def. No. 2 to 6 for Def. No. 1</td> <td>7</td> </tr> <tr> <td>8</td>

<td>22.05.2010</td> <td>38.50</td> <td>Def. No. 2 &amp; 6 for Def. No. 1</td> <td>8</td> </tr> <tr> <td>9</td> <td>Sale Deed</td> <td>16.03.1988</td> <td>38.50</td> <td>Def. No. 2 for Def.</td> <td>9</td> </tr> </tbody> </table>

5DRT, ALLAHABADTA 161 of 2018[J]

<table border="1"> <tr> <td></td> <td></td> <td></td> <td></td> <td>No. 1</td> <td></td> </tr> <tr> <td>10.</td> <td>Letter evidencing deposit of Title Deed</td> <td>22.05.2010</td> <td>38.50</td> <td>Def. No. 2 &amp; 6 for Def. No. 1</td> <td>10</td> </tr> <tr> <td>11.</td> <td>Affidavit</td> <td>22.05.2010</td> <td>38.50</td>

<td>11</td> </tr> <tr> <td>12.</td> <td>Loan Application</td> <td>07.11.2011</td> <td>35.00</td> <td>Defendant Nos. 2 to 5 for Def. No. 1</td> <td>12</td> </tr> <tr> <td>13.</td> <td>Sanction letter</td> <td>10.12.2011</td> <td>35.00</td> <td>Bank</td> <td>13</td> </tr> <tr> <td>14</td> <td>Request Letter</td> <td>16.12.2011</td> <td>35.00</td> <td>Def. No. 2 to 5 for Def. No. 1</td> <td>14</td> </tr> <tr> <td>15.</td> <td>Pronote</td> <td>16.12.2011</td> <td>35.00</td> <td>Def. No. 2 to 5 for Def. No. 1</td> <td>15</td> </tr> <tr> <td>16.</td> <td>Common Hypothecation Agreement</td> <td>16.12.2011</td> <td>35.00</td> <td>Def. No. 2 to 5 for Def. No. 1</td> <td>16</td> </tr> <tr> <td>17.</td> <td>Agreement of guarantee</td> <td>16.12.2011</td> <td>35.00</td> <td>Def. No. 2 to 6 for Def. No. 1</td> <td>17</td> </tr> <tr> <td>18.</td>

<td>29.08.2011</td> <td>35.00</td> <td>Def. No. 6 for Def. No. 1</td> <td>18</td> </tr> <tr> <td>19</td> <td>Letter evidencing deposit of Title Deed</td> <td></td> <td></td> <td>Def. No. 6</td> <td>A19</td> </tr> <tr> <td>20..</td> <td>Request letter</td> <td>15.12.2012</td> <td></td> <td>Bank</td> <td>19A</td> </tr> <tr> <td>21/</td> <td>Letter of renewal</td> <td>17.04.2015</td> <td>35.00<br/>30.00</td> <td>Def. No. 2 to 5 for Def. No. 1</td> <td>20</td> </tr> <tr> <td>22.</td> <td>Renewal of credit facility</td> <td>17.04.2013</td> <td></td> <td>Def. Nos. 2 to 6 for def no. 1</td> <td>21</td> </tr> <tr> <td>23.</td> <td>Letter of Acknowledgment</td> <td>17.04.2013</td> <td></td> <td>Defendants</td> <td>22</td> </tr> <tr> <td>24.</td> <td>Recall Notice</td> <td>17.09.2014</td> <td></td> <td>Bank</td> <td>23</td> </tr> <tr> <td>25.</td> <td>Demand Notice</td> <td>18.10.2014</td> <td></td> <td>Bank</td> <td>24</td> </tr> <tr> <td>26.</td> <td>Demand Notice</td> <td>10.11.2014</td> <td></td> <td>Bank</td> <td>25</td> </tr> <tr> <td>27.</td> <td>Statement of accounts</td> <td></td> <td></td> <td>Bank</td> <td>26 &amp;<br/>27</td> </tr> </table>

10. Ld. Counsel of applicant bank submitted that the defendants have taken the loans and utilized the same and also executed the various loans documents to secure the loans. 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.

11. 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.

12. 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.

13. On the issue of Limitation, to prove it, the applicant bank has submitted that the applicant bank has declared that the account as NPA on 29.09.2014, whereas the present application has been filed on 28.07.2015. 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.

14. In the affidavit of Shri Kanchhi Lal, 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.

15. The documents as stated above reveal that the defendant nos.1 to 6 have applied for the loans and the bank had sanctioned the loans and to secure the loans and for repayment of loans amount with interests etc., the defendants have executed various loans documents, which strengthen the case of the applicant bank.

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

17. Since, the defendants were proceeded exparte, 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 Accounts, 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.

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

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

20. The applicant bank has sought for recovery of following sum with costs till realization:

- (i) **Rs. 42,36,380/- outstanding in Term Loan Account ; and**

- (ii) **Rs. 28,53,620/- outstanding in Cash Credit Account** along with pendentelite and future interest @ 13.20% per annum with monthly rest plus penal interest @ 2% per annum from 28.07.2015 till date of recovery/payment of entire dues. (Against defendant nos.1 to 6).

**Total amounting to Rs.70,90,000/-**

21. Learned Advocate appearing for the 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.

22. 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.

23. 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.

24. 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 loans 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."*

25. In my view, the case of the bank is well proved by evidence of the applicant bank. The applicant bank is entitled to receive **Rs.70,90,000/- (Rs. Seventy lac ninety thousand only)** from the defendants jointly and severally alongwith pendentelite and future interest @10% simple from 28.07.2015 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 **Rs.70,90,000/- (Rs. Seventy lac ninety thousand only)** from the defendants jointly and severally alongwith pendentelite and future interest @10% simple from 28.07.2015 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 & mortgaged properties of the Defendant nos.1 to 6 in execution proceedings. The amount, if any, already recovered by sale of hypothecated and 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 and 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.

Parties are directed to appear before the Recovery Officer, DRT, Allahabad on 06.12.2022. The order be communicated accordingly.

Judgment signed, sealed, dated and pronounced in the open court on this 4^th Day of October, 2022.

Dictated & Corrected by me

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

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

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