BANK OF BARODA vs M S SPARSH ENGINEERS on 4 September 2019

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

1. 1. Applicant Bank has filed this Original Application on 12.09.2016 under section 19(1) of the Recovery of Debts and Bankruptcy Act, 1993 (as amended from time to time) against the Defendants for recovery of total Rs. 16,02,446/- ( Rupees Sixteen Lac Two Thousand Four Hundred Forty Six only) being Rs. 11,66,843/- in Cash Credit Limit and Rs. 4,25,603/- in Term Loan facility) alongwith pendentite-lite and future interest @ 13.25% per annum with monthly rests and @16%

per annum within monthly rests in Cash Credit Limit & Term Loan account respectively till the date of realization and costs.

1. 2. 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. 2 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 Cash Credit Limit of Rs. 5.00 Lac for Working Capital and submitted loan application. Applicant Bank after considering the loan application on 22.12.2007 sanctioned a Cash Credit Limit of Rs. 5.00 Lac to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, Plant & Machinery, personal guarantee of the Defendant No. 2 in favour of Applicant Bank. The Defendants executed and signed various loan and security documents on 22.12.2007 in favour of Applicant Bank. The rate of interest was agreed between the parties @ 13.25% per annum with monthly rests subject to change from time to time as per RBI Guidelines.

2. 3. On the request of defendant no. 2 for defendant no. 1, applicant Bank enhanced the existing Cash Credit Limit of Rs. 5.00 Lac to Rs. 8.00 Lac on 10.11.2009. The Defendants again executed and signed various loan and security documents on 10.11.2009 in favour of Applicant Bank..

3. 4. The Defendant No.1 through its proprietor also approached Applicant Bank for grant of Term Loan of Rs. 2.75 Lac for and submitted loan application. Applicant Bank after considering the loan application on 25.02.2011 sanctioned Term Loan of Rs. 2.75 Lac for Plant & Machinery to the Defendant No.1 against primary security of hypothecation of entire stocks,

Book Debts, Plant & Machinery, personal guarantee of the Defendant No. 2 in favour of Applicant Bank. The Defendants executed and signed various loan and security documents on 25.02.2011 in favour of Applicant Bank. The rate of interest was agreed between the parties @ 3.25% over BPLR of the bank i.e. 12.75% per annum with monthly rests subject to change from time to time as per RBI Guidelines.

1. 5. However, after availing the aforesaid Loan/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 account became irregular. Despite repeated reminders and persuasion, the Defendant No.1 & 2 failed to regularize the loan account. Consequently, the said account of the Defendant No.1 was classified as NPA on 30.06.2012 and recalled by Applicant Bank. Thereafter, Applicant Bank served Demand Notice to the Defendants to repay the outstanding dues but the Defendants failed to make the payment of outstanding dues. Hence, the present Original Application has been filed by Applicant Bank against Defendants for recovery of Rs. 11,66,843/- (Rupees Eleven Lac, Sixty Six Thousand Eight Hundred Forty Three only) alongwith pendentite-lite, future interest, costs and for issuance of Recovery Certificate for the said amount.

2. 6. 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.

3. 7. The summons were issued to the Defendants. Despite service, none appeared for the Defendants. Hence, the Defendants were proceeded ex-parte.

1. 8. Applicant Bank filed its evidence by way of affidavit of Sh. Rakesh Kumar Singh, Branch Manager of Applicant Bank as AW-1/1 who proved the various loan and security documents which are marked as Exhibit- AW-1/1 to Exhibit- AW-1/34.

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

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

4. 11. Section 17(1) of the RDB 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.10.00 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. 12. Further, Applicant Bank has fully corroborated the averments made in the O.A. against the Defendants through evidence of witness Sh. Rakesh Kumar Singh, Branch Manager of Applicant Bank as AW-1/1. The Applicant Bank has also established its case through documentary evidence being Exhibit- AW-1/1 to Exhibit- AW-1/34. On a careful scrutiny of the evidence on affidavit and exhibits marked as Exhibit- AW-

1/1 to Exhibit- AW-1/34, it is proved that Defendant No.1 through its Proprietor had availed the Cash Credit Limit & Term Loan facility from the Applicant Bank under CGTMSE Guarantee Cover against primary security of hypothecation of entire stocks, Book Debts, Plant & Machinery, third party guarantee of 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 had utilized the above loan facility as granted to it.

13. However, after availing the aforesaid Cash Credit Limit & Term Loan, 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 30.06.2012 and recalled by Applicant Bank. Thereafter, Applicant Bank served final Legal Notice dated 30.01.2014 Exhibit- AW-1/32 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.

14. Further, on perusal of Exhibits AW- 1/34 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 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

IN THE DEBTS RECOVERY TRIBUNAL, ALLAHABAD

(9/2-A, Panna Lal Road, Allahabad-211002, U.P.) (Jurisdiction - Part of Uttar Pradesh)

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. Exhibits AW-1/ 34.

1. 15. Moreover, Applicant Bank has been able to prove that the Defendant No.1 availed the Cash Credit Limit & Term Loan Facility 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 12.09.2016 i.e. within three years from the date of Acknowledgment of Debt & Balance Confirmation Letter dt. 10.12.2015 & 20.11.2014 admitting debt liability for the purpose of limitation as reflected from Account Statement Exhibit AW-1/30 & 1/31. 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. 16. Applicant Bank has claimed interest @ 13.25% per annum with monthly rests and @ 16% per annum with monthly rests in Cash Credit Limit & Term Loan account respectively 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 pendentelite and future interest. I am 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 pendent-lite and future interest is granted @ 12% per annum simple rate on reducing balance from the date of filing of the O.A. till the date of realization with costs.

17. In the light of above discussion, the Original Application deserves to be allowed against the Defendants with costs.

**ORDER**

- (i) The Original Application is allowed declaring that the Defendants are liable to pay jointly and severally a total sum of Rs. 16,02,446/- ( Rupees Sixteen Lac Two Thousand Four Hundred Forty Six only) to Applicant Bank alongwith pendent-lite and future interest @ 12% per annum simple rate of interest on reducing balance from the date of filing of the O.A. i.e. 12.09.2016 till the date of realization with costs.

- (ii) Applicant Bank is entitled to recover aforesaid amount by sale of hypothecated assets. 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. Applicant Bank is at liberty to enforce the claim through due process of law.

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

- (iv) 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.

- (v) 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 08.11.2019.

- (vi) The Defendants are hereby restrained by means of injunction from depleting, transferring, encumbering, alienating, selling or otherwise dealing with their properties/estates without first paying the above claim of Applicant Bank.

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

- (viii) Copy of this Judgment and Recovery Certificate be given Dasti to Applicant Bank and be sent to the Defendants free of cost by Registered Post 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.

18. 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 04^th Day of September, 2019.

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

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