BANK OF BARODA HOUSING FINANCE LTD ( ERSTWHILE BANK OF BARODA) vs DEWAN RUBBER INDUSTRIES LTD on 23 August 2024

JUDGMENT

1. 1. This Transferred Application has been filed by the applicant bank under Section 19 of the Recovery of Debts & Bankruptcy Act, 1993, against defendants for the recovery of Rs.1,17,53,204.00 (Rupees One Crore, Seventeen Lac, Fifty Three Thousand, Two Hundred and Four Only) together with pendentelite and future interest, costs and other reliefs etc.

2. 2. The brief facts of the case are that the defendant No.1 is a company incorporated and registered under the companies Act, 1956 carrying business in Manufacturing of Cycle Tyres and tubes being undertaking through employee and workers employed by the defendant No.1 well as hold on residential accommodation and defendant Nos.2 to 4 are guarantors, defendant Nos.5 to 7 are legal heirs successors of Late Shri Balwan Rai Dewan similarly defendant Nos.8 to 10 are the legal heirs of V.S. Dewan in the O.A. The defendant No.1 through loan application dated 07.03.1991 approached the applicant-bank for Housing loan facility to the 3T.A.02 of 2011

extent of Rs.150.00 Lac under project housing loan Scheme for the construction of dwelling units(Residential Houses) as the defendant Nos.2 to 4 and Late Shri Balwan Rai Dewan and Late Shri V.S. Dewan are guarantors since housing loan facility, as subsequent stood revised to Rs.100.00 Lac which was duly considered and sanctioned by the applicant-bank vide its sanction letter dated 07.03.1991 on certain terms and conditions as mentioned to this transferred application.

3. To secure the aforesaid Housing loan facility of Rs.150.00 Lac, the defendant Nos.1 to 4 with Shri Balwan Rai Dewan & Shri V.S. Dewan signed and executed various necessary security documents i.e. Loan agreement, General Power of attorney for converting equitable mortgage dated 28.03.1994 into English/simple mortgage, Affidavit dated 28.03.1994 of Shri Vidya Sagar Dewan and Indmenity Bond for A/c defendant No.1 and General Form of Guarantee by with defendant Nos.2 to 4 along with Late Shri Balwan Rai Dewan and Late Shri V.S. Dewan on 28.03.1994 in favour of the applicant-bank, till date the fact is that the Shri B.R. Dewan and Shri V.S. Dewan have already expired as defendant Nos.5 to 7 are the legal heirs and successor of Shri B.R. Dewan and similarly defendant Nos. 8 to 10 are the legal heirs and successor of Shri V.S. Dewan therefore in that way defendant Nos.5 to 10 are liable as guarantors/successors legal heirs to the total indebtedness of defendant No.1 for the repayment of outstanding amount jointly and severally as any amendment incorporated during the pendency of O.A. is to be taken for consideration to this transferred application.

4. Further in order to secure the repayment of the bank dues the defendant No.1 created the equitable mortgage all the pieces and parels of his immovable properties as collateral securities I.e. bearing Nos.1429, 1430, 8753, 8754, 3943, 11497, 11496, 11499 and 11498 by depositing the original title deed in favour of applicant F.I. detailed as Sale deed bearing No.1429 relating to 3/8 Share in Khasra No. 58 A dated 31.08.1982/01.09.1982 in the name of defendant No.1 which was registered in the office of Sub Registrar Delhi in additional book No.1 Vol No.364 on pages 191 to 195 on 04.09.1989, as Sale deed bearing No.1430 dated 04.09.1982 relating to 3/8 Share in Khasra No.58/1 in the name of defendant No.1 which was registered in the 4T.A.02 of 2011

office of Sub Registrar Delhi in additional book No.1 Vol No.364 on pages 196 to 200 serial No.1430 on 04.09.1989, **as Sale deed bearing No.8753** dated 01.10.1990 relating to land ad measuring 992.50 Sq. Yards in Khasra No.58/1 in the name of defendant No.1 which was registered in the office of Sub Registrar Meerut in book No.1 Vol No.197 on pages 381 to 412 at Serial No.8753 on 01.10.1990, **as Sale deed bearing No.5754** dated 01.10.1990 for land measuring 992.50 Square Yards of Khasra No.58/1 in the name of defendant No.1 which was registered in the office of Sub Registrar Meerut in book No.1 Vol No.198 at Serial No.8754 on 01.10.1990 **as Sale deed bearing No.3943** dated 28.04.1990 relating to land ad measuring 1390 Sq. Mt in Khasra No.62/2 and 73 in the name of defendant No.1 which was registered in the office of Sub Registrar Meerut in book No.1 Vol No.121 on pages 73 to 84 at Serial No.3943 on 28.04.1990 **as Sale deed bearing No.11497** dated 18.12.1991 relating to land ad measuring 1010 Sq. Mt. in Khasra No.75 in the name of defendant No.1 which was registered in the office of Sub Registrar Meerut in additional book No.1 Vol No.466 on pages 393 to 412 on Serial No.11497 dated 18.12.1991 **as Sale deed bearing No.11498** relating to land ad measuring 1010 Sq. Mtr. in Khasra No.75 registered in the office of Sub Registrar Meerut in additional book No.1 Vol No.467 on pages 1 to 18 at serial No.11498 on 18.12.1991 **as Sale deed bearing No.11496** dated 18.12.1991 relating to land ad measuring 756.25 Sq. Mtr. in Khasra No.58/2 registered in the office of Sub Registrar Meerut in additional Book No.1 Vol No.466 on pages 377 to 392 at Serial No. 11496 dated 18.12.1991 **as Sale deed bearing No.11499** relating to land at measuring 907.5 Sq. Mtr. in Khasra No.76/1 registered in the Office of Sub Registrar Meerut in additional Book No.1 Vol No.467 on pages 19 to 38 at serial No. 11499 on dated 18.12.1991 as mentioned to this Transferred application.

5. For availing aforesaid Credit loan facility the applicant bank opened a loan account in the name of defendant No.1/Limited Industries.

6. After availing the aforesaid credit facility, the defendants fails to maintain financial discipline also failed to comply with the terms and conditions of loan agreement as required in the matter the applicant bank made all possible efforts 5T.A.02 of 2011

through oral persuasion through various letters etc as the defendants were reminded times to times by several applications to regularize the loan account but the defendants kept mum and have not come forward to make any efforts regarding payment of dues but the loan account of defendant remained irregular as the defendants did not care to deposit the amount to adjust/regularize the loan account despite giving various assurances, in the meantimes the defendant No.1/company had acknowledged the dues in its balance sheets year after year in the account for the year ending as 30.06.1996, 30.06.1997, 30.06.1998, 30.06.1999, 30.06.2000, 31.03.2001, 31.03.2002 and 31.03.2003 by acknowledgment outstanding, as has been extended in the limitation thereafter the applicant-bank issued Legal Notice dated 22.07.2004 on dues of Rs.1,17,53,204/- to the defendants, requesting them to liquidate but failed as the loan account of the defendant No.1/company is still un-liquidated hence, the application has been instituted and became the Transferred Application.

7. As per books of the bank maintained in the usual and ordinary course of banking business, an outstanding of Rs.1,17,53,204.00(Rupees One Crore, Seventeen Lac, Fifty Three Thousand, Two Hundred and Four Only) including interest up to 28.02.2005 were lying due for payment, for which the defendants are jointly and severally liable to repay the same, which they did not pay despite repeated requests and demands. The applicant Bank has filed the copy of Statement of Account as mentioned to this Transferred application.

8. The cause of action for in filing of the present Transferred application arose firstly when Credit/Housing loan facility was sanctioned by the applicant bank on 07.03.1991 as the same were availed by defendants/borrowers on the execution of necessary security documents and mortgage on 28.03.1994. The cause of action further arose every year endings on 30.06.1996 to 30.06.1999 and on 31.03.2001 to 31.03.2003 with balance sheet mentioned their liabilities of loan account the cause of action arose finally on 22.07.2004 when the applicant bank had issued sent Legal Notice to the defendants recalling the entire outstanding dues as they failed to repay the same.

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9. It is pertinent to mention here that the defendant Nos.2,3&4 are died leave behind their legal heirs who have been substituted and arrayed as defendants to this transferred application, and as amendment incorporated dated 12.09.2012 in compliance of order dated 26.03.2012 adding the names of LRs of deceased co-borrower Shri B.R.Dewan and deceased co- borrower Shri V.S. Dewan therefore array of parties impleaded the LRs Neelam Mahajan(defendant No.11) adult daughter of Late B.R. Dewan Madhu Mahajan,(defendant No.12) adult daughter of Late B. R. Dewan, Meera Dewan(defendant No.13) adult daughter of Late B.R. Dewan all resident of 68, Saket Meerut and impleaded the LRs one of deceased co-borrower Shri V.S. Dewan Garima Dewan(defendant No.14) adult daughter of Late V.S. Dewan resident of 62 Shivaji Road by the applicant bank, further after the long period amendment incorporated in compliance of order dated 07.01.2021 deleting the names of defendant Nos.2&4 from the array of parties impleaded on 02/02/2021 by the LRs.2/1, 2/2, 2/3, 2/4, 2/5 & 2/6 and impleaded the LRs. 4/1,4/2 & 4/3. the loan account of defendant Nos.1/company was classified as NPA he further stated that during the pendency of T.A. all the guarantors along with the arrays of parties as defendant Nos.2,3&4 were died.

10. In application dated 25.03.2015 and OTS proposal cum sale proposal is on record too in which The Hon'ble Tribunal was pleased to fix 10.03.2015 for submitting the OTS cum sale proposal before the Hon'ble Tribunal on account of continuous losses the borrower company was unable to run the factor and hence it was registered in BFIR during 2002 and continued to be registered upto 2011 the amount of Rs.100.00 Lac was sanctioned and disbursed on 27.01.1996 at one stage loan was Only Rs.40.00 Lac @9.00% as on 28.02.2006 as proposed to pay in one month by the borrower company proposal letter issued by defendant No.2 however by adding the unemployed interest penal interest and other expenses the total liability became Rs.1,58,56,694/-

11. In order dated 07.01.2021 again applicant bank counsel has moved the substitution application of LRs of the deceased defendants in T.A from the circumstance of case substitution application moved by the bank is allowed the bank 7T.A.02 of 2011

is directed to incorporate the substitution in the T.A. as take steps to for service upon the newly added defendants, **In order dated 27.01.2021** again applicant bank seeks time to comply order dated 07.01.2021 passed by tribunal with regard to substitution of LRs of the deceased defendants in T.A is here by allowed and **In order dated 25.11.2022** the T.A. is place the records with connected cases. i.e. TA 473/2002, TA 385/2002, and TA 03/2011

12. The summons were served upon defendants through registered posts as well as paper publication as the defendants appears in regular hearing of the matter.

13. Learned counsel for defendants appears on 02.08.2024 and prays to took the matter into consideration, application dated 23/07/2024 by Mohd. Murtza Hasan counsel of defendant No.4 is already on record.

14. **Prayer allowed** therefore the matter heard against defendant No.4, on record application dated 23/07/2024 filed by Mohd. Murtza Hasan counsel of defendant No.4 along with joint and several liabilities of defendant Nos.1,2,3,5 to 14

15. The defendants appearing in proceedings from the record it is reflected that counsel for LRs.4/1 to 4/3, have filed their written statement on :

16. Mr. Mohd. Murtza Hasan representing the LRs, 4/1, 4/2 and 4/3 filed his written statement and written submission stating that **LR.4/1, Smt. Raj Rani Dewan expired on 29.08.2023** As such her name is to be deleted from the array of parties further legal heir of deceased defendant No.4 have neither any connection with the borrower company M/s Dewan Rubbers industries Ltd. in any capacity what so ever nor they have executed any documents with the applicant financial institution or given any acknowledgement of any liabilities/dues of the financial institution they have not inherited any movable or immovable property of late defendant No.4, application moved after the death of defendant No.4 dated 03.03.2020 for deleting their names from the array of defendants that the late defendant No.4 has 1/5^th Share in the property 62, Shivaji Road, Meerut defendant Nos.2&4 had taken a housing loan as co- applicant in July 1997 from BOB housing finance Ltd. which was later merged with Bank of Baroda and defendant Nos.2&4 mortgaged their share in the property 62 Shivaji Road, with erstwhile BOB housing finance Ltd. for recovery of their loan BOB Housing finance Ltd. filed a civil suit in district court Meerut which was transferred to this Hon'ble Tribunal and registered as T.A. No.3 of 2011 and the share of defendant No.4 in the property not devolved. As the defendant No.4 had 87400 Shares in the borrower company 8T.A.02 of 2011

but neither claimed the share not received any share and further relinquish his right nor they claim the same in future, and also the share of 7400 in Dewan Tyres Ltd, 900 Share in the name of defendant No.4(M/s Kasturi Lal & Sons HUF), share of 58800 in Dewan Steels Ltd and 3700 Share in the name of defendant No.4(M/s Kasturi Lal & Sons HUF) nor the share were came in the possession or transferred in name of defendant No.4 as such the personal guarantee of defendant No.4 would not extent to the legal heirs, it has been argued that in T.A. No.473 of 2002 this Tribunal has after considering the application of legal heirs of late Kasturi Lal Dewan has exempted them from any liabilities arising out of the personal guarantee of late Late Kasturi Lal Dewan (*para 18 of Judgment of TA 473 of 2002 order passed dated 24.04.2023*).

17. The defendant Nos.4/1 to 4/3 have also filed one application dated 24.05.2024 for deleting their name from the array of the defendants they also filed short written statement stating therein that after the death of defendant No.4 Kasturi Lal Dewan expired on 03.03.2020 the applicant financial institution impleaded them as legal heirs as defendant No.4/1(Smt. Raj Rani Dewan, Wife), 4/2 (Puneet Dewan, Son) and 4/3( Ritu Dewan Daughter) as mention in para 6 of moved application, legal Heirs(i.e. 4/2, 4/3) of the deceased defendant No.4 neither have executed any documents with the applicant F.I. nor given any acknowledgment of any liabilities/dues He relied upon the Judgment passed by the **Hon'ble NCLT, kolkata bench in Bank of Baroda stressed Asset management Branch Vs. Ms. Divya Jalan CP(IB) No.363/KB/2021** where in the Hon'ble court has observed that as Under:

- (i) "Personal guarantee referred to an individual who given surety in a contract of guarantee on behalf of the corporate Debtor"

- (ii) "Application to adjudicating authority for insolvency Resolution process for personal Guarantee to corporate Debtor Regulation 2019, clears defines that a personal guarantee to a corporate debtor is person against whom guarantee has been involved and there is outstanding dues left party or fully. The definition does not include the "legal heirs"

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(iii) " In the instant case, the petition can take appropriate steps for recovery the guaranteed amount from the assets/estates of the deceased personal guarantee rather than the personal assets of the legal heirs of the personal guarantors, further the legislature is very much clear in defining the term "Personal Guarantor" the code talk about the estate/assets of the personal guarantor only"

(iv) " When the section 95 application is filed the asset of the personal guarantee is hit by moratorium and if we put the legal heirs of the deceased Personal Guarantor into the shoes of the personal Guarantor than their personal asset will also get automatically hit by moratorium, which will pause grave prejudice to the rights of the third party, however there is no provision in the code which envisage that the concept of legal heirs stepping into the shoes of the deceased personal Guarantor"

(v) Therefore, we hold that the instant application cannot be maintained against the legal heirs of the personal guarantor under the code, and the remedies may lie elsewhere, hence the clause 21 and clause 24(k) of the personal guarantee agreement is inconsistent with the definition of the personal Guarantor as defined in the code".

Counsel for the LRs Nos.4/1 to 4/3 stated that the legal heir of the late defendant No.4 i.e. Smt.Raj Rani Dewan(wife), Shri Puneet Dewan(son) and Smt.Ritu Dewan (daughter) are not liable for any dues of the applicant-financial institution as they have not inherited any of the property/assets of defendant No.4 i.e. Late Kasturi Lal Dewan The share of defendant No.4 are not in the possession of them nor it has been transferred in their names, they stated that the said defendants will not claim any right over the share and properties mortgaged with the bank in future and they hereby relinquish their right if any, in the aforesaid Shares of the company. The right of recovery of debt from the legal heirs of the defendant No.4 arises only to the extent of assets they have 10T.A.02 of 2011

inherited from the deceased, but they have not inherited any assets what so ever hence T.A. may be dismissed against the legal heir of defendant No.4

Further in the amendment incorporated vide order dated 23/03/2009 that after the filing 7 in suit amalgamation scheme has been brought up by Bank of Baroda Housing Finance Ltd. for merger in the Bank of Baroda According to the company Act, the requisite permission approved by the Hon'ble High Court at Jaipur has been Obtained and according to the said order dated 23.03.2007 the said amalgamation /merger was final and binding through which all in liability of BOB Housing finance has been adopted by the Bank of Baroda since after the merger the Bank of Baroda in only entitled on prior for recovery lien dues, mortgage properties according with applied interest and costs.

18. It is pertinent to mention here that the defendant Nos.2,3&4 are died leave behind their legal heirs who have been substituted and arrayed as defendants to this transferred application, as adding the names of LR's of deceased co- borrower Shri B.R.Dewan Neelam Mahajan(defendant No.11), Madhu Mahajan,(defendant No.12) Meera Dewan(defendant No.13) all resident of 68, Saket Meerut and LR's one of deceased co-borrower Shri V.S. Dewan Garima Dewan(defendant No.14) resident of 62 Shivaji Road by the applicant bank,

19. In support of the case, Shri R.N. Malhotra Chief Manager of the applicant Bank affidavit and Sri Rajeev Garg affidavit is found on record.

20. On a careful scrutiny of the evidence on affidavit and marking to this transferred application, it is proved that defendants had availed the abovementioned open above credit facility from the applicant bank by executing loan and security documents detailed as above in favor of the applicant-Bank. A perusal of the application, evidence and documents relied upon clearly shows that defendants had utilized the above Credit loan facility granted to them. The applicant-bank had maintained the Books of account in the ordinary course of banking business showing disbursal of the loan amount. It further shows that bank had regularly credited the 11T.A.02 of 2011

amount paid by the defendants in the books of account. The Bank had also charged interest from time to time and the entries are relevant u/s 4 of the Bankers Books of Evidence Act. It is also proved that the applicant bank's claim is within limitation against the defendants.

21. As in regard the same, the defendant No.2/1 to 2/6 and defendant No.3/1 to 3/5 have file their respective written statement on the other hand from several application defendant Nos.4/1 to 4/3 filed in their respective written statement is on record and requesting for deleting the name of LRs.4/1 Smt. Raj Rani as expired on 29.08.2023 on the ground that they have not inherited any assets and properties from defendant No.4 to the extent of legal heirs, legal heir of defendant No.4 have relinquished their right in the share of the company had produced the documents, bank accounts and categorically stated that they have not inherited any kind of fixed and liquid assets from defendant No.4 Which provide liberty to the bank to recover the dues from the share of defendant No.4 as the LRs 4/1,4/2 & 4/3 have no objection, considering the undertaking and submission of relinquishment given by defendant Nos.4/1 to 4/3 the T.A. against the defendant Nos.4/1 to 4/3 is dismissed with the observation that they will not be able to raise any objection in future at the time of execution of the recovery certificate.

22. Accordingly, the defendants are directed to pay the balance dues to the applicant bank within a period of 2 months from the date of judgment failing which the applicant bank will be entitled to sell the personal assets/properties of defendants.

23. The applicant-bank has claimed interest @18.00% together with pendentelite and future interest per annum in the loan accounts till the date of its realization and costs. The contest between the applicant-bank and the defendants comes to an end and after filing of the T.A. as per the provisions of Section 19(2) of the Recovery of Debts and Bankruptcy Act, 1993 (as amended from time to time) which is analogous to Section 34 to the CPC, the Tribunal/Court has direction in awarding pendentelite and future interest. I am also supported in my vide by 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 12T.A.02 of 2011

served if pendentelite and future interest is granted @12.00% per annum in the loan accounts with monthly rate on reducing balance from the date of filing of the T.A. till the date of realization with costs.

24. In the result, the Transferred Application succeeds on contest against the defendant Nos.1,2,3,5 to 14 with costs and dismissed against defendant No.4 The bank has proved the loan execution of security loan documents in favour of the bank, the defendants are liable to pay the dues of the bank and hypothecated assets /mortgaged properties well as personal/properties of defendants are liable to be sold.

25. Pegasus Assets Reconstruction Put Ltd. had filed an application Dated 05/12/2018 as an intervenor wherein it has been stated that the bank of Baroda had sold out the plants and Machinery on 14/01/2011 and land of building on 02/02/2011 of the borrower company for Rs.306 Lac and Rs.1655 Lac Respectively further the bank is keeping Sale proceeds of a Sale of Rs.1.68 Crore since 2014 Be that as It May the entire accept of Money Received by the bank as per the consortium be distributed to its members.

26. It is, therefore, **ordered:-**

1. (i) That the **Transferred Application No.02 of 2011** of the applicant bank for issuance of Recovery Certificate to the tune of Rs.1,17,53,204.00(Rupees One Crore, Seventeen Lac, Fifty Three Thousand, Two Hundred and Four Only) together with pendentelite and future interest @12.00% per annum with monthly rest from the date of filing of the Transferred Application i.e. 19.01.2011 till the loan is fully liquidated and costs succeeds and is hereby allowed on contest against defendant Nos.1,2,3,5 to 14 jointly and severally.

2. (ii) The defendants are directed to pay the dues within a period of two months from the date of judgment, failing which the applicant bank will be entitled to recover the same from the personal movables and immovable assets of the defendants.

3. (iii) The applicant-Bank is entitled to recover aforesaid amount by the sale of Mortgaged properties/Hypothecations (If not sold earlier under the 13T.A.02 of 2011

provisions of the S.A.R.F.A.E.S.I. Act, 2002) the, amount, if any recovered by sale of mortgaged properties/hypothecated assets or otherwise shall be adjusted towards the debt and only the balance amount shall be recoverable. If the dues of the applicant bank still remain unsatisfied, the same be recovered by the attachment and sale of the personal movable and immovable assets of the defendants Nos.1,2,3,5 to 14 jointly and severally.

(iv) The defendant Nos.4/1 i.e. Smt Raj Rani Dewan (as expired on 29.08.2023 ), 4/2 Mr. Puneet Dewan and 4/3 Smt. Ritu Dewan, the legal heirs of the defendant No.4 is hereby exonerated from the liability of the applicant financial institution and T.A. is dismissed against them as they have not inherited and got any movable/immovable property/assets of defendant No.4 i.e. Kasturi lal Dewan and the legal heirs will not raised any objection in future at the time of execution of the recovery certificate If the applicant F.I. sell any of the properties/assets of late defendant No.4.

(v) The defendant Nos.1,2,3,5 to 14 are hereby restrained by means of injunction from depleting, transferring, encumbering, alienating or in any way dealing with their properties/estates without first paying the claim of the applicant bank.

(vi) Let Recovery Certificate be issued immediately u/s 19(22) of the Recovery of Debts and Bankruptcy Act, 1993 by fixing 23.11.2024, before R.O., DRT, Lucknow.

(vii) The applicant bank is directed to file a memo of cost for preparing Recovery Certificate u/s 19(22) of the Recovery of Debts & Bankruptcy Act, 1993.

Judgment is pronounced in the open court.

Dated: 23.08.2024

(A.H. Khan) Presiding Officer

(sg)