INDIAN OVERSEAS BANK vs BULLU SIRAJ SAIDALI MULLA on 22 March 2024

J U D G M E N T

1. The Applicant has filed the present OA on 13.01.2010 against the Defendants before the Ld. DRT-II, Mumbai, which stands transferred to this Tribunal on 07.12.2016 as per Govt. Notification dated 26.09.2016 and registered as TOA No.468/2016. The Original Application has been filed for recovery of Rs.2,05,75,404/- (Rupees Two Crore Five Lakh Seventy Five Thousand Four Hundred Four only) with further interest @15% p.a. on Term Loans and @15.25% p.a. on Cash Credit Facility compounded on monthly basis from the date of filing of the present OA till its realization with penal interest @2% compounded on monthly basis.

2. Facts as succinctly set out in the OA are that the Defendant No.1 is the Sole Proprietor of Delux Book Binding Works and Defendant No.2 to 4 are the Guarantors. It is stated that at the request of the Defendants, the Applicant sanctioned the Term Loan of Rs.84 lakhs and Cash Credit of Rs.16 lakhs vide sanction letter dated 16.04.2004. The Defendant No.1 executed the various loaning and security documents on 13.05.2004 which includes Demand Promissory Note for Rs.84 lakh; Term Loan Agreement; Demand Promissory Note for Rs.16 lakh; Letter of Continuity; Letter of Hypothecation; Consent cum Authorization letter for CIBIL by Borrower; Hypothecation of Book Debts and Letter of Hypothecation. The Defendant No.2 to 4 also executed their personal guarantees on 13.05.2004 to secure the cash credit facility and further executed Consent Cum Authorization Letter for CIBIL dated 13.05.2004.

3. It is further stated that at the request of the Defendants, the Applicant enhanced the cash credit facility by an additional Rs.12 lakhs in November, 2004. The Defendant No.1 executed the various loaning and security documents on 01.12.2004 which includes Demand Promissory Note; Letter of Continuity; Letter of Hypothecation; Letter of Hypothecation (open advances); Hypothecation of Book Debts and Consent Cum Authorization Letter for CIBIL by Borrower.

4. It is further stated that the said credit facilities were again enhanced by another Rs.12 lakhs at the request of the Defendants vide sanction letter dated 22.11.2005. The Defendant No.1 executed the various loaning and security documents on 23.11.2005 which includes Demand Promissory Note; Letter of Continuity; Letter of Hypothecation; Letter of Hypothecation (open advances); and

Hypothecation of Book Debts. The Defendant No.2 to 4 also executed their personal guarantee on 23.11.2005.

5. It is further stated that at the request of the Defendants, the Applicant sanctioned to the Defendant No.1 another term loan of Rs.84,63,000/- vide sanction letter dated 24.01.2007. Accordingly, the Defendant No.1 executed the various loaning and security documents on 29.01.2007 which includes Demand Promissory Note; FORM F 378 Revised; Term Loan Agreement; Consent Cum Authorization Letter and Letter of Hypothecation etc. The Defendant No.2 to 4 also executed their personal guarantee on 29.01.2007.

6. It is also stated that to secure the credit facilities, the Defendant No.1 mortgaged the immovable property more specifically described in Exhibit K of Completion of Documents of OA with the Applicant by depositing the title deed. The said deposit was recorded by a registered memorandum of deposit of title deeds dated 13.05.2004. The Defendant No.1 vide letter dated 14.05.2004 confirmed the said deposit of title deeds. Subsequently, the said mortgage was extended to cover the enhanced credit facilities and new term loan from time to time and recorded by confirmation letters dated 15.10.2004, 23.11.2005 and 29.01.2007.

7. However, the Defendants failed to adhere to the financial discipline and neglected to regularize the account. Thereafter, the Applicant issued demand notice under Section 13(2) of the SARFAESI Act, 2002 dated 01.09.2009 and called upon the Defendants to pay the outstanding dues but they failed to pay the dues. Hence, the present OA has been filed.

8. Notices were issued to the Defendants. Defendant No.2 to 4 put their appearance through counsel and filed their joint written statement. Despite service of transfer notice, none appeared for Defendant No.1.

9. The Defendant No.2 to 4 in their written statement have raised the following objections that:

(i) This Tribunal has no jurisdiction to try and entertain the present OA;

(ii) The OA is barred by limitation;

(iii) No cause of action against these Defendants in the OA as the alleged Deed of Guarantee was not invoked as per express clause 7 of the Deed of Guarantee, therefore, these Defendants shall be discharged from the said guarantee ship.

(iv) The Applicant has not produced the statement of account duly certified under the Banker’s Book of Evidence Act;

(v) The OA is not signed by a duly authorized person;

(vi) The Applicant has charged the exorbitant rate of interest;

10. The Applicant has produced the original documents and relevant documents alongwith their claim affidavit filed through Sh. Ananth M N, Assistant General Manager of the Applicant as well as Additional Claim Affidavit through S. Ramachandran, Senior Manager of the Applicant.

11. The Defendant No.2 to 4 also filed their Affidavit in Defence through Sahajahan Mulla, Defendant No.2, however, no documents has been filed in support of their written statement.

12. I have heard the Ld. Counsel for the Applicant Bank and Defendant No.2 to 4 and perused the record. Now hereinafter, I would like to decide the issue raised by the Defendant No.2 to 4 in their written statements as well as during the arguments.

(i) The first objection raised by the Defendant No.2 to 4 is that this Tribunal has no jurisdiction to try and entertain the present OA. The jurisdiction clause given by the Applicant in the OA is extracted herein below: “The Applicant declares that the subject matter of the recovery of debt due falls within the jurisdiction of this Tribunal, as the credit facilities were disbursed to the Defendant No.1 at the Bandra Branch of the Applicant, the security documents were executed at the Bandra Branch of the Applicant and the outstanding amount is payable to the Applicant at the Bandra Branch of the Applicant. Bandra is located in H ward of MCGM. The dues payable to the applicant is more than Rupees Ten Lakhs. Therefore, the Application comes under the territorial and pecuniary jurisdiction of the Hon’ble Tribunal.” (emphasis supplied) It is important to note here that the OA was originally filed before the Ld. DRT-III, Mumbai, and the same was transferred to this Tribunal as per the Govt. Notification dated 26.09.2016. Thus, the objection raised by the Defendant No.2 to 4 is not sustainable hence, rejected.

(ii) The next objection raised by the Defendant No.2 to 4 is that the OA is barred by limitation.

Record reveals that the loaning and security documents were executed from time to time and lastly on 29.01.2007. The present OA is filed on 13.01.2010, therefore, the same is within limitation. Even otherwise, mortgage was created by deposit of title deeds therefore, as per Article 62 of the Schedule to the Limitation Act, 1963, the limitation period is twelve years, from the date when the money sued for becomes due thus, the present OA is well within the limitation period hence, the objection raised by the Defendant No.2 to 4 is hereby rejected.

(iii) The next objection raised by the Defendant No.2 to 4 is that no cause of action against these Defendants in the OA as the alleged Deed of Guarantee was not invoked as per express clause 7 of the Deed of Guarantee, therefore, these Defendants shall be discharged from the said guarantee ship. Record reveals that the Defendant No.2 to 4 executed their respective Guarantees dated 13.05.2004 (Exb.22 in Completion of Original Documents “COD”) for the payment upto Rs.1 crore alongwith Consent Cum Authorization Letter (Exb.24 in COD); Joint Guarantee dated 23.11.2005 (Exb.37 of completion of original documents) for Rs.1.38 crore; and Joint Guarantee dated 29.01.2007 (Exb.44 in COD) for Rs.1,24,63,000/-. Therefore, the Defendant No.2 to 4 are jointly and severally liable to pay the dues as guaranteed by them. Even otherwise, the Applicant issued demand notice dated 01.09.2009 and called upon the Defendants to pay the outstanding dues but they failed to pay the dues. Thus, the objection raised by the Defendant No.2 to 4 is not sustainable hence, declined.

(iv) The next objection raised by the Defendant No.2 to 4 is that the Applicant has not produced the statement of account duly certified under the Banker’s Book of Evidence Act. I have gone through the record. The Applicant has produced the Complete Statement of Account alongwith IT Certificate (Exb.46 & 47 in COD). Thus, the objection raised by the Defendant No.2 to 4 is baseless hence, declined.

(v) The next objection raised by the Defendant No.2 to 4 is that OA is not signed by a duly authorized person. Record reveals that the OA has been signed and verified by Sh. Ananth M N, Assistant General Manager of the Applicant who has also proved all the loaning and security documents alongwith claim affidavit. 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.2 to 4 is declined.

13. Insofar pendentelite and future interest is concerned, the Applicant is claiming future interest @15% p.a. on Term Loans and @15.25% p.a. on Cash Credit Facility compounded on monthly basis from the date of filing of the present OA till its realization with penal interest @2% compounded on monthly basis. The contract between the Applicant and the defendants comes to an end. After the filling of the OA as per the provisions of Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993, this Tribunal has discretion in awarding pendentelite and future interest. Section 19(20) of the DRT runs as follows:

“19(20) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due up to the date of realization or actual payment on the application is it thinks fit to meet the ends of justice.” 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 2001 SC page 3095. On the basis of the foregoing discussion and considering the present fall in rate of interest, I am of the opinion that interest of justice will be served if and future interest is awarded at the rate of 13% p.a. (simple). The penal interest @2% claimed by the Applicant is hereby declined.

14. The witness of the Applicant has fully corroborated the averments made in the OA, even otherwise the whole case of the Applicant is based on documents and the witness has duly proved all these documents as against the Defendant No.1 to 4. 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 Defendant No.1 to 4. The liability of the Defendant No.1 to 4 is joint and several.

15. It is reveals from the record that after filing of the present OA, the mortgaged property has been sold by the Applicant under the SARFAESI Act, 2002 on 19.04.2010 and an amount of Rs.76,51,000/- has been recovered from the sale of the mortgaged property and credited to the account on 31.05.2010.

16. It is informed by the Applicant, after adjusting the sale proceeds, a sum of Rs.1,29,24,404/- plus interest is due and payable by the Defendants from the date of filing of the present OA till its realization.

17. In the light of abovesaid discussions, the present OA deserves to be allowed against the Defendant Nos.1 to 4 for an amount of Rs.1,29,24,404/- (Rupees One Crore Twenty Nine Lakh Twenty Four Thousand Four Hundred Four only) with further interest @13% p.a. (simple) in respect of all the loan accounts, from the date of filing of the present OA till its realization.

O R D E R

(i) I allow the present O.A. and direct the Defendant Nos.1 to 4 to pay to the Applicant, jointly and severally, within a period of 60 days, a sum of Rs.1,29,24,404/- (Rupees One Crore Twenty Nine Lakh Twenty Four Thousand Four Hundred Four only) with further interest @13% p.a. (simple) in respect of all the loan accounts, from the date of filing of the present OA till its realization.

(ii) Failing which the aforesaid amount shall be recovered from the sale of hypothecated book debts as well as other personal moveable and immoveable assets of the Defendants.

(iii) The Defendants are hereby directed not to deal with their properties till further direction of this Tribunal.

(iv) The Defendants shall also pay the cost and expenses of the OA.

(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) Dated: 22.03.2024

Presiding Officer,

DRT-1, Mumbai

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