CENTRAL BANK OF INDIA vs ALTUS PHARMA TECH PRIVATE LIMITED on 15 January 2024

J U D G M E N T

1. The Original Application has been filed by the Applicant before the Ld. DRT-III, Mumbai which stands transferred to this Tribunal on 22.11.2016 as per the Govt. Notification dated 26.09.2016 and registered as TA No.456 of 2016. The OA has been filed for recovery of the following amounts: a. Rs.80,16,074.21 (Rupees Eighty Lakhs Sixteen Thousand Seventy Four and paise Twenty One only) under the Cash Credit Facility, together with further interest thereon at as on 10.12.2011 with further interest @15.75% p.a. from 11.12.2011 till its realization. b. Rs.78,19,077/- (Rupees Seventy Eight Lakhs Nineteen Thousand Seventy Seven only) under the Overdraft against Book Debts Facility, with further interest @16% p.a. with monthly rests from the date of filing of the present OA till its realization.

2. Facts as succinctly set out in the OA are that the Defendant No.1 is the Principal Borrower and Defendant No.2 & 3 are the Directors as well as Guarantors. In or about July, 1989, the Defendants approached the Applicant for grant of certain working capital facility to meet their urgent business requirements. Upon the said request, the Applicant granted cash credit facility to Defendant No.1 Company against hypothecation of raw material, semi-finished goods and finished goods etc.

3. The Applicant stated that thereafter, in or about March, 1995, the Defendants again approached the Applicant for enhancement of the said cash credit facility and grant of overdraft facility for expansion of their business. Upon requests of the Defendants, the Applicant enhanced and granted to the Defendant No.1 the following credit facilities: Sr. No. Facility Amount

1. Cash Credit (Hypothecation) Rs.7,00,000/-

2. Over Draft against Book Debts, Rs.7,00,000/-

Total Rs.14,00,000/-

4. In consideration of sanction the Cash Credit Facility to the extent of Rs.7 lakhs as well as overdraft facility of Rs.7 lakhs, the Defendant No.1 executed the various loaning and security documents on 30.03.1995 such as respective Demand Promissory Note; respective Agreement of Hypothecation. The Defendant No.2 & 3 also executed the Form of Guarantee for Advances and Credit Generally dated 30.03.1995 respectively.

5. It is also stated that the Defendants have admitted and acknowledged Rs.15,13,218/- due and payable by them to the Applicants under the said facilities together with interest.

6. It is further stated that in or about October, 2015, the Defendants again approached to the Applicant and informed that they were having various exports orders for execution. In view thereof, the Defendants requested to enhance the existing credit facilities to meet their urgent business requirements. Upon the said request, the Applicant vide sanction letter dated 20.10.1995 sanctioned and enhanced the credit facilities as under: Sr. No. Facility Amount

1. Cash Credit (Hypothecation) Rs.10,00,000/-

2. Over Draft against Book Debts Rs.10,00,000/-

Total Rs.20,00,000/-

7. In consideration of sanction the above credit facilities, the Defendant No.1 executed the various loaning and security documents on 23.10.1995 such as respective Demand Promissory Note; Letter of

Continuing Security under the cash credit; respective Agreement of Hypothecation. The Defendant No.2 & 3 also executed Form of Guarantee for Advances and Credit Generally dated 23.10.1995 for Rs.20 lakhs.

8. It is further stated that upon request of the Defendants, the Applicants on or about 02.06.1996 reviewed and renewed the aforesaid credit facilities. In view thereof, the Defendant No.1 executed respective Demand Promissory Note dated 02.06.1996.

9. It is further stated that the aforesaid credit facilities again reviewed and renewed on 01.02.1999. In consideration of Applicants reviewing/renewing the said cash credit facility of Rs.10 lakhs, the Defendant No.1 executed and delivered the various documents such as Demand Promissory Note dated 01.02.1999

10. It is further stated that upon request of the Defendants, the aforesaid credit facilities again reviewed and renewed on 01.02.1999. In consideration of Applicants reviewing/renewing the said cash credit facility of Rs.10 lakhs, the Defendant No.1 executed and delivered the various documents on 01.02.1999 such as respective Demand Promissory Note; respective Letter of Continuing Security; respective Letter of Interest Variation; respective Agreement of Hypothecation. The Defendant No.2 & 3 also executed Forms of Guarantee for Advances and Credit Generally dated 01.02.1999.

11. It is also stated that the Defendants by their various letters of acknowledgment dated 21.12.2000, 02.12.2003 and 22.06.2006 admitted and acknowledged their dues.

12. It is also stated that by letter dated 02.02.2001, the Defendant No.1 submitted One Time Settlement offer for Rs.20 lakhs towards full and final settlement of their dues. The said offer was found to be unreasonable in view of huge outstanding of the Bank.

13. It is further stated that the Applicant by various letters dated 26.10.1996, 11.12.1996, 10.01.19997 and 31.07.1997 requested the Defendants to repay the dues of the Applicants. Despite receipt of the said letters, the Defendants deliberately and dishonestly failed and neglected to pay the dues of the Applicant. Hence, the present OA.

14. Notices were issued to the Defendants. Defendant No.1 & 2 filed their respective written statement. Despite service, none appeared for the Defendant No.3 thus, he was proceeded ex-parte vide order dated 08.06.2010. Thereafter, the Defendant no.3 moved an application for setting aside the ex-parte order which was allowed by this Tribunal vide order dated 11.08.2011 subject to cost of Rs.5,000/-, which was duly paid by the Defendant No.3 therefore, the WS filed by the Defendant No.3 taken on record.

15. In the written statement, the Defendant No.1 & 2 have raised the following objections that:

(i) The OA is barred by limitation;

(ii) The OA has not been signed by a duly authorized person;

(iii) This tribunal has no jurisdiction to try and entertain the present OA;

(iv) The statement of account is incorrect and not certified as per the Banker’s Book of Evidence Act;

(v) The Applicant has charged exorbitant rate of interest;

(vi) The Defendant No.3 had never been a Director of and Guarantor for the Defendant No.1

16. In the written statement, the Defendant No.3 has raised objection that the Form of Guarantee referred to and relied upon by the Applicant itself does nowhere mention the name of the Defendant No.3 and also the alleged Guarantee not signed by the Defendant No.3. It is also stated that the Applicant has never issued any letters as well as demand notice to the Defendant No.3.

17. The Applicant Bank has filed all the original documents as well as relevant documents alongwith their Claim Affidavit filed through A.S. Sarkate, Manager of the Applicant Bank.

18. The Defendant No.1 filed their CAOD through V. Sheshadri, Defendant No.2 being the Authorized Representative of the Defendant No.1.

19. I have heard the Ld. Counsel for the Applicant and perused the record and perused the record. Now hereinafter, I would like to decide the issue raised by the Defendant No.1 & 2 in their written statement and during the arguments.

(i) The first objection raised by the Defendant No.1 & 2 is that the OA is barred by limitation.

The loan documents were executed on 23.10.1995, 02.06.1996 and 01.02.1999 by the Defendants. The Defendants by their letters of acknowledgment dated 12.11.1997, 21.12.2000, 21.12.2000, 02.12.2003, 24.05.2006 admitted and acknowledged the dues. The present OA is filed on 05.05.2009. Thus, the same is within the period of limitation from the date of last acknowledgment. Therefore, the objection raised by the Defendant No.1 & 2 is hereby rejected.

(ii) The next objection raised by the Defendant No.1 & 2 is that the OA has not been signed by a duly authorized person.

The OA has been signed and verified by Sh. Satish Dhuri, Assistant Manager of the Applicant Bank who is fully conversant with the facts of the case and competent to sign, verify and institute the present OA. Even otherwise, the OA cannot be dismissed on this technical ground as held by Hon’ble Supreme Court in UBI Vs Naresh Kumar & Ors., AIR 1997 SC 3. Therefore, the objection raised by the Defendant No.1 & 2 is hereby declined.

(iii) The next objection raised by the Defendant No.1 & 2 is that this tribunal has no jurisdiction to try and entertain the present OA.

Record reveals that the credit facilities were made at the branch office of the Applicant Bank situated at Bandra, (West), Mumbai and the same were disbursed by the Applicant from the said branch. The loan documents were also executed in the said branch of the Applicant at Bandra (West), Mumbai. Hence, this Tribunal has territorial jurisdiction to try and entertain the present OA. Therefore, the objection raised by the Defendant No.1 & 2 is hereby declined.

(iv) The next objection raised by the Defendant No.1 & 2 is that the Applicant has charged exorbitant rate of interest.

Record reveals that as per the Demand Promissory Note dated 01.02.1999 (Exb.22 in list of original documents of OA), the Defendants agreed to pay interest @19.75% p.a. in respect of Cash Credit Facility and @19.25% p.a. with quarterly rests in respect of the

Overdraft Facility. Therefore, I find no force in the objection raised by the Defendants thus, same is hereby rejected.

(v) The next objection raised by the Defendant No.1 & 2 is that the statement of account is incorrect and not certified as per the Banker’s Book of Evidence Act. It is submitted that, Statement of Accounts do not reflect the true and correct factual position, as all the transactions are not truly and correctly effected in its regular and ordinary course of Banking business, as complete details are not placed on record. It is stated that, at page No.142 of Statement of Account being Exhibit No.42, the last entry is dated 09.04.1997 and on page No.143, 1st entry is dated 31.05.2003 and on page 144, 1st entry is dated 10.06.2006 and the balance amount of Rs.11,05,980 is shown. Further, at page No.145 to 147 demonstrates the manipulated and manufactured Statement of Accounts, not being in compliance with the provisions of Bankers Book of Evidence Act.

The Defendant No.1 & 2 also stated that these Defendants were constrained to issue/execute letter of lien dated 24.09.1991. In the said letter of lien, details of collateral securities as deposited with the Applicant Bank at the instance of the Defendant No.1 and 2 are given. The fact regarding the deposit of collateral securities is confirmed by the Applicant by letter dated 23.12.2005 but the Applicant Bank has not liquidated all the collateral securities as were lying with the Applicant Bank.It is stated that the other correspondence exchanged by these Defendants with the Applicant Bank being letter dated 10.06.2006, 08.03.2007, 11.07.2008, 07.11.2008, 30.01.2009. The Applicant Bank duly received all the aforesaid correspondence of these Defendant however, deliberately and intentionally failed and neglected to respond to the same. The

Defendants have produced evidence by way of fixed Deposit Receipts which are lying with the Applicant Bank by way of Collateral Security. The Defendants have given Life Insurance Policies to the Applicant Bank. Further, the Defendants had deposited MMDC Receipts by way of Collateral Security. However, the Applicant Bank has miserably failed to liquidate the abovesaid collateral security.

It is further stated that the Defendant No.1 & 2 had given UTI- MEP 1992 as and by way of Collateral Security. The Defendant No.2 issued letter dated 03.02.2006 addressed to the Applicant Bank to record the abovesaid fact. The Applicant Bank issued purported Statement of Account of the Defendant No.1 in respect of Account CC/202987 standing in the name of the Defendant No.1. In the said statement of account, an entry dated 14.06.2006 for an amount of Rs.25,660/- is shown to have been effected. It is submitted that letter dated 03.02.2006 and relevant statement of account pertaining to CC/202987 as issued by the Applicant Bank are not in conformity with each other, so the cognizance of the same cannot be taken. It is further stated that the Defendant No.1 & 2 have given N.S.S. A/c No.201300, Mahim Post Office a Scheme of Indian Postal Department, as collateral security. On maturity of the said scheme of the maturity amount was required to be liquidated in the Accounts of these Defendants. These Defendants requested the Applicant for supply of statement of accounts which was supplied by the Applicant. After going through the contents of the statement of accounts, it reveals that the contents of purported statement of account as produced by the Applicant with the present OA is contrary, so the alleged claim of the Applicant Bank that the purported Statement of Accounts have been certified as per the Bankers Book of Evidence Act, are conclusive proof of the correctness of the sums allegedly claimed against these Defendants as false. The concerned Authority of the Applicant Bank has admitted and acknowledged the fact that statement of accounts pertaining to Defendant No.1 for the period 1st April 1991 to 1st April 1994 and 14th March, 1995 to 1st September, 1996 is not available with the Applicant Bank thus, it is stated that the Applicant Bank has made false and frivolous claim against the Defendants.

On the other hand, the Applicant has stated that the securities mentioned by the Defendant No.1 & 2 are already realized as mentioned in letter dated 23.12.2005 and due credit is given on 28.11.2005. For realization of units at Item No.1, 2, 3 and 5 of letter dated 23.12.2005 and shares the same was to be converted in demat form (electronic form) for which letter of authority was sought from Borrower. However, the Defendants failed co-operate therefore, those securities remained to be realized. It is also stated that the Applicant has produced statement of account both the facilities duly certified as per the Banker’s Book of Evidence Act. The Applicant has also given particulars of claim with supportive evidence and the Applicant made true and correct entries in the statement of accounts.

It is also stated that since the securities belong to the Defendants and those were realized as per consent of the Defendants thus, the contention of the Defendants for separate breakup of the amount is not maintainable.

I have gone through the record.

Availing of the loan facilities is not in dispute. The Defendant No.1 & 2 duly admitted and acknowledged the liability from time to time by their various letters of acknowledgment dated 21.12.2000, 02.12.2003 and 22.06.2006.

Record reveals that vide Letter of lien (Exb.A of the Completion of Documents of Defendant No.1 & 2) executed by Defendant No.1 & 2, they have provided the various collateral securities such as Insurance Policies, Post Office Saving Bank (National Saving Scheme); Units; Pfizer Shares and Fixed Deposit Receipts.

It reveals from the Letter dated 23.12.2005 (Exb.C of the completion of documents of Defendant No.1 & 2) that LIC policies, Post Office (NSS) and some fixed deposits has already been transferred by the Applicant Bank towards liquidation of bank’s dues and out of which deposits of Rs.98,559/- has been credited to the account of the Defendant No.1 on 28.11.2005 and the same is duly reflected in the statement of account filed by the Applicant.

By the said letter, it is requested from the Defendant No.1 & 2, to send Letter of Authority so the units and shares may be got converted in the Demat form and payment may be obtained.

According to the Defendant No.1 & 2, the Bank has not given break up of Rs.98,559/- credited in the account of Defendant No.1 and also the Bank has not credited the proceeds from LIC Policies No.12333241, 38603568 and 18932845 and FDR’s 39/10, 38/317 and 38/246 (as mentioned in letter dated 10.06.2006 and further in letter dated 08.03.2007, 11.07.2008). The said letter duly given reference to the Letter dated 24.05.2006 sent by the Applicant Bank however, same has not been produced by the Defendant No.1 & 2. Further, the letter dated 30.01.2009 (Exb.F-1) also given reference to Letter dated

26.12.2008 issued by the Applicant bank, same is also not produced by the Defendant No.1 & 2. Thus, I find merit in the contention of the Applicant that since the securities belong to the Defendants and those were realized as per consent of the Defendants therefore, breakup of the securities are not maintainable.

Further, in the Claim Affidavit, the Applicant Bank has admitted that the securities as mentioned at Item No.1, 2, 3 and 5 of letter dated 23.12.2005 and shares, remained to be realized, therefore, the Applicant Bank shall first recover their dues from the sale of the collateral securities of the Defendant No.1 for which Defendant No.1 & 2 shall also cooperate to the Applicant Bank for releasing the amount from the said securities.

(vi) The Defendant No.1 & 2 and Defendant No.3 raised an objection that the Defendant No.3 has already resigned from the Defendant No.1 Company as a Director. It is also stated that the Form of Guarantee referred to and relied upon by the Applicant itself does nowhere mention the name of the Defendant No.3 and also the alleged Guarantee not signed by the Defendant No.3. It is also stated that the Applicant has never issued any letters as well as demand notice to the Defendant No.3 thus, it is stated that the claim of the Applicant against the Defendant No.3 is liable to be rejected.

In the present OA, the Defendant No.3 has been impleaded in the capacity of Director and Guarantor. The Defendant No.3 has already resigned from the Defendant No.1 Company as a Director.

Record reveals that in para Nos.5.7, 5.12, of the present OA, the Applicant has stated that the said Guarantee is continuing and valid, subsisting and binding upon Defendant Nos.2 and 3 and annexed as Exhibit-E, Exhibit-J. I have gone through original documents of these exhibits as the (Exb.26, 33 & 34 in the list of original documents of OA), admittedly, the said Guarantee Agreements, does nowhere mention the name and details of the Defendant No.3 and also not signed by the Defendant No.3. The Applicant has failed to produce any evidence on record to prove the claim against the Defendant No.3. Thus, the claim of the Applicant Bank against the Defendant No.3 is hereby rejected.

20. The witness of the Applicant has fully corroborated the averments made in the OA/TA, even otherwise the whole case of the Applicant is based on documents and the witness has duly proved the documents as against the Defendant No.1 & 2. In my view there is no question of disbelieving the evidence led by the Applicant and the Applicant has proved its case beyond reasonable doubt against the Defendant No.1 and 2. The liability of both the Defendant No.1 & 2 is joint and several.

21. In the light of above discussions, the Original Application deserves to be allowed against the Defendant No.1 & 2.

O R D E R

(i) The present O.A. is hereby allowed and Defendant No.1 & 2 are hereby directed to pay to the Applicant Bank, within a period of 60 days, the following sums: a. Rs.80,16,074.21 (Rupees Eighty Lakhs Sixteen Thousand Seventy Four and paise Twenty One only) under the Cash Credit Facility, together with further interest thereon at as on 10.12.2011 with further interest @15.75% p.a. from 11.12.2011 till its realization. b. Rs.78,19,077/- (Rupees Seventy Eight Lakhs Nineteen Thousand Seventy Seven only) under the Overdraft against Book Debts Facility, with further interest @16% p.a. with monthly rests from the date of filing of the present OA till its realization.

(Aggregating to sum of Rs.1,58,35,151.21 (Rupees One Crore Fifty Eight Lakhs Thirty Five Thousand One Hundred Fifty One and paise Twenty Two only) alongwith interest as mentioned above.

(ii) Failing which the aforesaid amount shall be recovered from the sale of hypothecated assets as well as other personal moveable and immoveable assets of the Defendant No.1 &

2.

(iii) It is made clear that the recovery shall be first be made from the collateral securities of the Defendant No.1, for which the Defendant No.1 & 2 are hereby directed to cooperate with the Applicant bank for releasing the amount of collateral securities. Thereafter, the remaining amount, if any, shall be recovered from the sale of hypothecated assets and other personal moveable and immoveable assets of the Defendant No.1 & 2.

(iv) Defendant No.1 & 2 shall also pay the cost and expenses of the OA/TA.

(v) Recovery Certificate be issued forthwith and be sent to the Recovery Officer of this Tribunal. Copy of this order be sent to the parties as per rules. File be consigned to record.

Place: Mumbai.

(Dr. Rekha G. Dhakar) Date: 15.01.2024

Presiding Officer,

DRT-1, Mumbai

SC/-