PUNJAB AND SIND BANK vs M/S SHOE POINT, on 11 December 2020

**J U D G M E N T**

1. 1. Applicant Bank had filed this Original Application on 06.07.2016 under section 19(1) of the Recovery of Debts and Bankruptcy Act, 1993 (as amended from time to time) against the Defendants before the Debts Recovery Tribunal, Lucknow for recovery of Rs.10,08,76,016/- (Rs. Ten Crore Eight Lacs **Page 1 of 11**

T.A. No. 280 of 2018

(old O.A. No. 672 of 2016 of DRT, Lucknow)

Punjab & Sind Bank Vs M/s Shoe Point & Ors.

Seventy-Six Thousand and Sixteen only) along-with pendent-lite and future interest @14.70% per annum in accounts of M/s Shoe Point and @ 10.75% per annum in Housing Loan account with monthly rests along-with penal interest @ 2.00% from 11.06.2016 till the date of realization and costs.

1. The brief facts of case are that the Defendant No.1 is a Proprietorship Firm. The Defendant No.2 is Proprietor of the Defendant No.1 Borrower Firm. The Defendants No.3 stood guarantor for the Defendant No.1 the Defendant No.1 through its proprietor approached Applicant Bank for grant of financial assistance in the shape of Packing Credit Limit of Rs.5,50,00,000/-, FOBPF/FOUBP & FABC limit of Rs.3,50,00,000/-, Duty Drawback Facility of Rs.10,00,000/-, Overdraft Limit of Rs.7,50,00,000/- for business requirement and the Defendant No.2 approached for Housing Loan of Rs.17,53,117/-. Applicant Bank after considering the request on 30.01.2010 sanctioned a Packing Credit Limit of Rs.5,50,00,000/-, FOBPF/FOUBP & FABC limit of Rs.3,50,00,000/-, Duty Drawback Facility of Rs.10,00,000/-, Overdraft Limit Of Rs.7,50,00,000/- for business requirement to the Defendant No.1 and Housing Loan of Rs.17,53,117/- to the Defendant No.2 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.2 in favour of Applicant Bank. The Defendants executed and signed various loan and security documents on 10.02.2010 in favour of Applicant Bank. The rate of interest was agreed between the parties, applicable at that time @7.75% per annum, @13.50% per annum, @9.75% per annum, @13.50% per annum and @11.00% per annum

T.A. No. 280 of 2018

(old O.A. No. 672 of 2016 of DRT, Lucknow)

Punjab & Sind Bank Vs M/s Shoe Point & Ors.

respectively for aforesaid credit facilities with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

1. 3. Further, Defendant No.1 through its proprietor again approached Applicant Bank for renewal of existing credit facilities. Applicant Bank after considering the request on 23.05.2011 renewed existing Packing Credit Limit of Rs.5,50,00,000/-, FOBP/FOUBP & FABC limit of Rs.3,50,00,000/-, Duty Drawback Facility of Rs.10,00,000/-, Overdraft Limit of Rs.7,50,00,000/- for business requirement to the Defendant No.1 and reviewed Housing Loan of Rs. 17,53,117/- granted to the Defendant No.2 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.2 in favour of Applicant Bank. The Defendants again executed and signed various loan and security documents on 23.05.2011, 02.06.2011 in favour of Applicant Bank.

2. 4. Further, Defendant No.1 through its proprietor also approached Applicant Bank for grant of more financial assistance in the shape of enhancement of existing Packing Credit Limit, Duty Drawback Facility and for renewal of existing other credit facilities. Applicant Bank after considering the request on 02.06.2011 enhanced the existing Packing Credit Limit to Rs.7,00,00,000/- and Duty Drawback Facility to Rs.20,00,000/- renewed existing FOBP/FOUBP & FABC limit of Rs.3,50,00,000/-, Overdraft Limit of Rs.7,50,00,000/- for business requirement to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.2 in favour of Applicant Bank. The Defendants again executed and signed various loan and security documents on 02.06.2011 in favour of Applicant Bank.

1. 5. Further, Defendant No.1 through its proprietor also approached Applicant Bank for grant of more financial assistance in the shape of enhancement of existing Packing Credit Limit. Applicant Bank after considering the request on 11.01.2012 enhanced the existing Packing Credit Limit to Rs.7,50,00,000/- to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 and collateral security by way of extension of charge of already equitable mortgage of immovable properties owned by the Defendant No.2 in favour of Applicant Bank. The Defendants executed and signed various loan and security documents on 11.01.2012 in favour of Applicant Bank. The rate of interest was agreed between the parties, applicable at that time @11.25% per annum for aforesaid credit facility with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

2. 6. However, after availing the aforesaid Credit Facilities, the Defendant No.1 & 2 failed to maintain financial discipline as per terms and conditions of the loan agreement due to which loan accounts became irregular. Despite repeated reminders and persuasion, the Defendant No.1 & 2 failed to regularize the loan accounts. Consequently, the said accounts of the Defendant No.1 & 2 were classified as NPA on 30.06.2014 and recalled by Applicant Bank. Thereafter, Applicant Bank served Demand Notice to the Defendants to repay the outstanding **Page 4 of 11**

(Jurisdiction – Part of Uttar Pradesh)

dues but the Defendants failed to make the payment of outstanding dues. Applicant Bank has also initiated action under the S.A.R.F.A.E.S.I. Act, 2002 against the secured assets & mortgaged property but no secured asset has been sold till date. Hence, the present Original Application has been filed by Applicant Bank against Defendants for recovery of Rs. 10,08,76,016/- (Rs. Ten Crore Eight Lacs Seventy-Six Thousand and Sixteen only) along-with pendentite-lite, future interest, costs and for issuance of Recovery Certificate for the said amount.

1. 7. The averments of Applicant Bank are set out in detail in its Original Application which is supported by affidavit. Therefore, these are not being stated here afresh to avoid a repetition of facts.

2. 8. The summons were issued to the Defendants. After due service, the Defendants appeared through their counsel but did not file any written testament within statutory period. Subsequently, vide order dated 04.05.2018 case was transferred from Debts Recovery Tribunal, Lucknow to this Tribunal in view of change of jurisdiction vide Gazette Notification 411, S.O.454 (E) dated 15.02.2017, 692, S.O.784 (E) dated 23.02.2018 and corrigendum Gazette Notification 719 S.O. 816(E) dated 27.02.2018. The case was re-numbered as T.A. No.280/2018

3. 9. Thereafter, the Defendants were again ordered to be served through ordinary process as well as through publication mode. However, after due service the Defendants neither appeared nor filed any Written Statement within statutory period of 30-45 days in terms of section 19(5)(i) of the RDB Act, 1993 read-with Rule 12(i) & 5 of Debts Recovery Tribunal **Page 5 of 11**

T.A. No. 280 of 2018

(old O.A. No. 672 of 2016 of DRT, Lucknow)

Punjab & Sind Bank Vs M/s Shoe Point & Ors.

(Procedure) Rule, 1993. Hence, the Defendants were proceeded **ex-parte** vide order dated 27.11.2020.

1. 10. Applicant Bank filed its evidence by way of affidavit of Sh. Kaldeep Kaul, Chief Manager & Sh. Bachoo Singh, Senior Manager of Applicant Bank as AW-1/1 & AW-1/2 who proved the various loan and security documents which are marked as Exhibit- AW-1/1 to Exhibit- AW-1/109.

2. 11. I have heard the ex-parte arguments of Ld. Counsel for Applicant Bank and perused the material on record.

3. 12. The point for consideration is whether Applicant Bank is entitled to recover the claim as prayed for?

4. 13. Section 17(1) of the RBD Act of 1993 vests a Tribunal constituted under the Act with the jurisdiction, powers and authority to entertain and decide applications from the Banks and Financial Institutions for recovery of debts due to such Banks and Financial Institutions. 'Debt' is, defined in Section 2(g) of the Act, 1993. The RDB Act, 1993 creates a complete code for the adjudication of matters referred to in Section 17 and provides for the procedure in respect thereof. The jurisdiction of the Civil Courts to try cases in respect of recovery debts of Rs.20.00 Lac and above due to Banks and financial institutions was stands ousted by the Act. Hence, Original Application filed U/s 19(1) of the Recovery of Debts and Bankruptcy Act, 1993 is within the jurisdiction and legally maintainable before this Tribunal.

5. 14. Further, Applicant Bank has fully corroborated the averments made in the O.A. against the Defendants through evidence of witness Sh. Kaldeep Kaul, Chief Manager & Sh. Bachoo Singh, Senior Manager of Applicant Bank as AW-1/1 & AW-1/2. The

Applicant Bank has also established its case through documentary evidence being Exhibit- AW-1/1 to Exhibit- AW-1/109. On a careful scrutiny of the evidence on affidavit and exhibits marked as Exhibit- AW-1/1 to Exhibit- AW-1/109, it is proved that Defendant No.1 through its Proprietor had availed the credit facilities from the Applicant Bank against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 and collateral security by way of equitable mortgage of immovable owned by the Defendant No.2 by executing various loan & security documents detailed as above in favour of the Applicant Bank. A perusal of Original Application, evidence and documents relied upon clearly show that Defendant No.1 & 2 had utilized the above loan facility as granted to them.

1. 15. However, after availing the aforesaid credit facilities Defendant No.1 & 2 failed to maintain financial discipline as per terms and conditions of the loan agreement. Consequently, the said accounts were rightly classified as NPA on 30.06.2014 and recalled by Applicant Bank. Thereafter, Applicant Bank served Demand Notice dated 19.09.2015 Exhibit- AW-1/100 to the Defendants to repay the outstanding dues but the Defendants failed to make the payment of outstanding dues. The whole case of the Applicant Bank is based on documentary evidence and the witness has duly proved all these documents. In my view there is no question of disbelieving the evidence lead by the Applicant Bank and Applicant Bank has proved its case beyond reasonable doubts.

2. 16. Further, on perusal of Exhibit AW-1/106 to AW-1/109 show that Applicant Bank has maintained the Books of account in the ordinary course of banking business showing disbursal of the loan amounts as per provisions of Bankers Books Evidence **Page 7 of 11**

Act, 1891 and Guidelines of RBI under Banking Regulation Act, 1949. It further shows that Applicant Bank had regularly credited the amount if any, paid by the defendants in the books of account. Applicant Bank had also charged interest from time to time and the entries are relevant U/s 4 of the Bankers Books Evidence Act, 1891 as reflected from A/c Statements attached with O.A. Exhibit AW-1/106 to AW-1/109.

1. 17. Moreover, Applicant Bank has been able to prove that the Defendant No.1 & 2 availed the credit facilities and failed to repay the same in terms of loan documents. Since, the transactions are of commercial nature between the parties, the Defendants are bound to repay the loan amount with interest as agreed upon and Applicant Bank is entitled to recover suit amount with interest as claimed by it. The Original Application has been presented on 06.07.2016 i.e. within three years from the date of execution of last Revival Letter made on 30.04.2014 admitting debt liability for the purpose of limitation as reflected from Exhibit AW-1/102. Thus, it is proved that the Defendants are jointly and severally liable to pay the claim made in the O.A. to the Applicant Bank.

2. 18. Applicant Bank has claimed interest @14.70% per annum in accounts of M/s Shoe Point and @ 10.75% per annum in Housing Loan account with monthly rests along-with penal interest @ 2.00% w.e.f.11.06.2016 till the date of realization and costs. The contract between Applicant Bank and the Defendants comes to an end and after filing of the O.A. as per the provisions of Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993 (as amended from time to time) which is analogous to Section 34 of the CPC, the Tribunal/Court has discretion in awarding pendentite-lite and future interest. I am **Page 8 of 11**

T.A. No. 280 of 2018

(old O.A. No. 672 of 2016 of DRT, Lucknow)

Punjab & Sind Bank Vs M/s Shoe Point & Ors.

also supported in my view by the **Hon'ble Supreme Court** in a case titled ***Central Bank of India Vs. Ravindra and others reported in AIR 2001 SC page 3095***. On the basis of the foregoing discussion, interest of justice will be served if pendentite-lite and future interest is granted @ 10.75% per annum compounded monthly from the date of filing of the O.A. till the date of realization with costs.

19. In the light of above discussion, the Original Application deserves to be allowed against the Defendants with costs. The hypothecated assets & mortgage properties are liable to be sold for recovery of amount due along-with the personal movable & immovable properties/assets of the Defendants.

**ORDER**

(i) The Original Application is allowed declaring that the Defendants are liable to pay jointly and severally a total sum of **Rs.10,08,76,016ps.** (Rs. Ten Crore Eight Lacs Seventy-Six Thousand and Sixteen only) to Applicant Bank along-with pendentite-lite and future interest @ 10.75% per annum compounded monthly from the date of filing of the O.A. i.e. 06.07.2016 date of filing of the OA/TA till the date of realization in full, jointly or severally.

(ii) 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

T.A. No. 280 of 2018

(old O.A. No. 672 of 2016 of DRT, Lucknow)

Punjab & Sind Bank Vs M/s Shoe Point & Ors.

*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.*

- (iii) *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.*

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

- (v) *Applicant Bank is directed to file revised statement of accounts from the date of filing of O.A. along-with interest as granted by this Tribunal before the Recovery Officer of this Tribunal.*

- (vi) Any other application pending stands disposed of.

- (vii) Recovery Certificate be issued forthwith in above terms U/s 19(22) of the Recovery of Debts and Bankruptcy Act, 1993 (as amended from time to time) and be sent to the Recovery Officer, DRT, Allahabad for execution.

- (viii) Applicant Bank is directed to file revised statement of account before the Recovery Officer of the Tribunal. Parties are directed to appear before the Recovery Officer, DRT, Allahabad on 25.01.2021.

- (ix) In case, any of the Defendants expire, the legal representatives shall be liable to pay in proportion to the inheritance.

- (x) Copy of this Judgment and Recovery Certificate be given to Applicant Bank as well as to the Defendants free of cost by Registered Post and scanned copy through e-mail in terms of section 19(21) (i) of the RDB Act, 1993 (as amended from time to time) and Rules as well as to the Recovery Officer and after due compliance file be consigned to record room.

20. Applicant Bank is directed to file a Memo of Cost, if not filed earlier, for preparing Recovery Certificate U/s 19(22) of the Recovery of Debts and Bankruptcy Act, 1993 (as amended from time to time).

Judgment pronounced in the open court on this 11^thDay of December, 2020.

(SHAMMI KHAN) Presiding Officer, DRT, Allahabad Additional Charge

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