Central Bank of India vs Official Liquidator of The Gujarat Rubber Works Ltd & Ors. on 12 May 2026

**JUDGMENT**

1. 1. The present Transfer Application has been transferred from the Hon'ble High Court of Gujarat, filed as Civil Application No. 98/1988 in O.J. Suit No. 1/1988 for recovery of total sum of **Rs. 1,32,46,190.68/- (Rupees: One Crores, Thirty two Lakhs, Forty six Thousand, One hundred ninety and Sixty eight paise only)** together with further interest thereon for Cash Credit facility I of Rs.64,76,513.42/- @15.5%, plus Cash Credit facility II of Rs.38,94,377.26/- @15.5%; plus Term Loan facility I of Rs.17,76,557.60/- @15%; plus Term Loan facility II of Rs.10,98,742.40/- @13.5% with further interest at the rate of 17.5% from the date of the suit till date of realization and together with all costs, charge, expenses etc. .

2. 2. The brief facts of the case as placed before this Tribunal, at the time of hearing, in the light of pleadings are that, in the Year 1975 at the request of Respondent No. 1 Company the Applicant Bank had granted various loan facilities which were renewed from time to time and the latest renewal was done on 07.11.1985 by executing Demand Promissory Note, Hypothecation Agreement, Letter of Waiver, Letter of Continuity, Letter of Undertaking and Balance Confirmation letter dated 30.09.1985.

3. 3. The Respondent Company is under liquidation and the Applicant Bank filed Company Application No. 163/1986 in C.P. No. 62/1985 before the Hon'ble High Court of Gujarat to sought permission for filing recovery suit by being outside of the liquidation process and the Applicant Bank was permitted to file the suit in the Court of the Learned Civil

Judge(SD) at Baroda against the respondents and to have the same transferred to Hon'ble High Court of Gujarat. Accordingly, Civil Application No. 98/1988 in O.J. Suit No. 1/1988 for recovery of total sum of Rs. 1,32,46,190.68/- was registered before the Hon'ble High Court of Gujarat.

1. 4. As per record, Official Liquidator appeared before the court on 24.04.1988. Counsel for Defendant No. 4 filed vakalatnama on 20.04.1988 and Counsel for Defendant No. 5 & 6 filed vakalatnama on 13.06.1988. Subsequently Written Statement/Reply was filed by Official Liquidator on 10.04.1992 and Defendant No.5 filed Affidavit in Reply to bring on record the fact that he has resigned from the Borrower Company and did not signed subsequent guarantee agreements.

2. 5. During the pendency of the suit Defendant No. 2, 4 & 5 were deceased and have been substituted by Legal heirs. Applicant Bank produced Original documents on 08.03.1992 before the Hon'ble High Court of Gujarat.

3. 6. By virtue of Section 31, RDDB Act, 1993, Civil Application No. 98/1988 in O.J. Suit No. 1/1988 was transferred to Debts Recovery Tribunal I as Transfer Application (TA) No.271/1995 on or about 20.11.1995. Finally due to issue of local jurisdiction the present Transfer application was transferred to Debts Recovery Tribunal II on 22.11.2007.

4. 7. The Ld. Counsel for the Applicant Bank submitted that the secured property along with scrap/machinery and movables for Rs.53.00 lacs was sold through the Tribunal in favour of M/s Super Steel Corporation. After receipt of the sale proceeds, Defendant No. 1 through Official Liquidator submitted Official Liquidator Report at Ext R/218 on 04.08.2009 along with Order dated 15.07.2009 passed by the Hon'ble High Court of Gujarat in OLR No. 157/2007, which directed the Debts Recovery Tribunal to deposit Rs. 10.00 lacs from the sale proceeds so the Official Liquidator may disburse the said amount on adhoc basis to the workers of the Defendant Company. Further the amount of Rs. 43.00 lacs plus interest shall remain with the Tribunal subject to final order that may be passed by the Tribunal in the suit. However, if the suit is decreed and the recovery certificate is issued, any surplus amount is available towards workers' claim as per Company Act Section 529-A, the same shall also be distributed accordingly by the Tribunal and in the event there is failure, Official Liquidator shall be at the liberty to over appropriate application before the appropriate forum. The compliance for payment of Rs. 10.00 lacs was submitted by the Applicant Bank as Ext M/230 on 22.03.2013.

1. 8. In support of Original Application, Applicant Bank has filed affidavit in support of Suit Claim Exh.A/227 in support of its claim, duly sworn in by Mr. Dipakkumar Ambastha, Senior Manager, Central Bank of India dated 17.10.2012 and against it Counter Affidavit Ext-R/231 is filed by Defendant No. 5A wherein objections have been raised that the Tribunal does not have jurisdiction to hear the matter, the Suit claim is not substantiated by the with supporting documents and that Defendant No. 5 & 6 have resigned as Director from the Defendant Company on 01.02.1980 and the change was recorded with the Registrar of the Companies. In support of this claim Form No. 32 has been submitted before the Tribunal as Ext. 4/61. Mr. Dipakkumar Ambastha, Senior Manager, also verified all loan documents at Exh. A/234 to A/308 on 11.11.2014 at Exh.A/309.

2. 9. The learned Counsel for the Applicant Bank has submitted that bank has duly proved all the documents on file as required under "The Recovery of Debts and Bankruptcy Act, 1993". He further submitted that Defendants are willful defaulters, as Defendants availed the aforesaid credit facilities for their benefits, but failed to maintain the financial discipline of the Bank and prayed that Original Application may be allowed for the reliefs claimed. Further written statement/reply has been filed beyond the statutory period as such is not to be read for the purpose of adjudication.

3. 10. I have gone through the loan documents Exh. A/234 to A/308 and averments made in the Original Application and also considered the submissions made by learned Counsel for the Applicant Bank. All these documents have been proved by Applicant through the affidavit filed by the deponent and the documents have also been verified from original documents on 11.11.2014 and thus all loan documents have been proved in accordance with law. However for proper adjudication of the case the objections raised in the Counter Affidavit filed by Defendant No. 5A are being considered as follows. On the issue of jurisdiction it is observed that the Applicant Branch is based at Baroda and the issue of jurisdiction was duly considered when the present application was transferred from DRT I to DRT II, hence the said objection has no merit. Further the claim amount filed by the Applicant Bank is supported by documents, on one hand Respondent No. 5A claims that he has resigned on 01.02.1980 and is not involved in the affairs of the Defendant Company on the other hand he is contesting the suit claim amount without any supporting evidence, as such this objection has no merit. Finally as for the final objection that Defendant No. 5 & 6 have resigned as Director from the Defendant Company on 01.02.1980 it is observed that Bank has contested the claim by stating that once a person has signed the guarantee agreement the same will continue till the loan is closed. However, Applicant Bank failed to explain that if such is the case, then why there is need for periodical renewal of loan documents and why when loan was enhanced from time to time, signatures of Defendant No. 5 & 6 were not obtained on Guarantee agreements after 1980, whereas signatures of other guarantors were obtained on the Guarantee agreements. The conduct of the Applicant Bank shows that they were well aware that Defendant No. 5 & 6 are no longer directors of the Company, hence they did not take any steps to obtain their signatures on future Guarantee agreements. **Hence Applicant Bank has failed to establish liability of Defendant No. 5 & 6 as guarantors for the Defendant No. 1, i.e. Company under liquidation.**

1. 11. This Original Application has been filed by the Applicant Bank under Section 19 of RDB Act, 1993 to recover its dues against the borrowers/defendants in its ordinary course of banking business the amount recoverable is more than Rs.20.00 Lakhs and comes within the ambit of term 'debt' as defined under section 2(g) of the Act, 1993. The Defendants are working and residing for their gains within the territorial jurisdiction of this Tribunal. So, this Tribunal has territorial and pecuniary jurisdiction to entertain, try and adjudicate this Original Application.

2. 12. I have considered the claim of the Applicant Bank. The above OA appears to have been filed within limitation, the Defendants executed Security documents in favour of the Applicant Bank for the Cash Credit and Term Loan Facilities, the latest documentation is dated 07.11.1985. Applicant Bank obtained permission from Hon'ble High Court of Gujarat in Company Application No. 163/1986 in C.P. No. 62/1985 and on its basis filed Civil Application No. 98/1988 in O.J. Suit No. 1/1988 hence this Application is not barred by Law of Limitation.

3. 13. The Bank has proved availing of loan, execution of security documents, creation of mortgage, default and liability of the Defendants. The liability of the Defendants shall be joint and several and other personal movable and immovable properties of the defendants can also be sold for recovery of amount due, however the sale proceed of assets of Defendant No. 1 (Company under liquidation) will be subject to Order dated 15.07.2009 passed by the Hon'ble High Court of Gujarat in OLR No. 157/2007.

4. 14. So far as rate of interest charged by applicant bank is concerned, it has charged rate of interest as per Terms and conditions of loan documents executed by the defendants. However, as per the provision of Section 19(20) of the Recovery of Debts Due to Banks and Financial Institution Act, 1993, now amended as The Recovery of Debts and Bankruptcy Act, 1993, which is analogous to Section 34 of Civil Procedure of Code 1908, on filing of the suit/claim, the contract between the parties comes to an end and the Court/Tribunal has a discretion to award the same depending upon the facts and circumstances of each case.

15. Hence, looking to the facts and circumstances of the case, I am of the opinion that it would be just and proper to award **Rs. 1,32,46,190.68/- (Rupees: One Crores, Thirty two Lakhs, Forty six Thousand, One hundred ninety and Sixty eight paise only)** together with further simple interest thereon for Cash Credit facility I of Rs.64,76,513.42/- @15.5%, plus Cash Credit facility II of Rs.38,94,377.26/- @15.5%; plus Term Loan facility I of Rs.17,76,557.60/- @15%; plus Term Loan facility II of Rs.10,98,742.40/- @13.5% from the date of filing suit. Thus, the T.A. 271 of 1995 deserves to be allowed.

16. In view of the aforesaid discussion, I deem it just and proper to allow the claim of the Applicant Bank for outstanding amount of **Rs. 1,32,46,190.68/- (Rupees: One Crores, Thirty two Lakhs, Forty six Thousand, One hundred ninety and Sixty eight paise only)** together with further simple interest thereon for Cash Credit facility I of Rs.64,76,513.42/- @15.5%, plus Cash Credit facility II of Rs.38,94,377.26/- @15.5%; plus Term Loan facility I of Rs.17,76,557.60/- @15%; plus Term Loan facility II of Rs.10,98,742.40/- @13.5% from the date of filing suit, being the contractual rate in respect of the said credit facilities against Defendant No. 1 to 4 subject to Order dated 15.07.2009 passed by the Hon'ble High Court of Gujarat in OLR No. 157/2007.

**ORDER**

1. The above O.A. filed by the Applicant Bank is hereby partially allowed and the Defendant no. 1 to 4 is directed to pay jointly and severally a sum of **Rs. 1,32,46,190.68/- (Rupees: One Crores, Thirty two Lakhs, Forty six Thousand, One hundred ninety and Sixty eight paise only)** together with further simple interest thereon for Cash Credit facility I of Rs.64,76,513.42/- @15.5%, plus Cash Credit facility II of Rs.38,94,377.26/- @15.5%; plus Term Loan facility I of Rs.17,76,557.60/- @15%; plus Term Loan facility II of Rs.10,98,742.40/- @13.5% from the date of filing suit, being the contractual rate in respect of the said credit facilities against Defendant No. 1 to 4, subject to Order dated 15.07.2009 passed by the Hon'ble High Court of Gujarat in OLR No. 157/20076.

1. 2. As the Applicant Bank has failed to prove liability of Defendant No. 5&6 as guarantors of Defendant No. 1 Company, i.e. Company under Liquidation, the Defendant No. 5&6 are hereby being discharged of any liability in this case.

2. 3. In case of failure to deposit the above amount within the stipulated period, the same shall be recovered from the mortgaged immovable property and movable property, which is more particularly mentioned in the schedule of the Application.

3. 4. If there is any shortfall, the same shall be recovered from the sale of other personal movable and immovable properties of the Defendants No. 1 to 4.

4. 5. Recovery Certificate be issued forthwith and be sent to Recovery Officer, Debts Recovery Tribunal-II, Ahmedabad.

5. 6. The Defendants No. 1 to 4 are hereby restrained by means of injunction from depleting, transferring, encumbering, alienating or in any way dealing with their properties/assets without first paying the claim of the Applicant Bank.

6. 7. The registry of this Tribunal is hereby directed to issue the free copy of the order and be sent to both the parties in compliance of Rule 16 of the Debt Recovery Tribunal Procedure Rule 1993.

7. 8. File be consigned to records.

Pronounced in Open Court on this **12th day of May, 2026** at Ahmedabad.

**(PANKAJ KUMAR UPADHYAY)** **PRESIDING OFFICER** **DRT-II, AHMEDABAD**