STATE BANK OF INDIA vs RUCHITA GOLD PVT. LTD. on 27 March 2019

JUDGMENT

1. This is an application under sub-section (1) of section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (`The 1993 Act’ for short) for the

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[vsm] (OA No.1872/2016) Page 3 of 7 recovery of the dues in the sum of Rs.81,53,87,032.71ps. together with future interest thereon from the date of filing of the Original Application till repayment/realization & enforcement of the securities.

The factual matrix of the case is as under:

2. Defendant no.1 is the borrower, defendant nos.1 to 4 are the guarantors and defendant no.2 is also sued in the capacity as mortgagor.

3. In November, 2010 defendant no.1 approached the applicant seeking financial assistance by way of cash credit facility which was sanctioned by the applicant on 10th November, 2010 in the sum of Rs.30 crore.

4. On 12th November, 2010 defendant no.1 signed and executed the loan and security documents as set out in the Original Application.

5. In order to secure the cash credit facility in the sum of Rs.30 crore, defendant nos.2 to 4 signed and executed the guarantee agreement on 12th November, 2010.

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6. In order to further secure the cash credit facility in the sum of Rs.

7. After availing the aforesaid loan, defendant nos.1 and 2 did not adhere to the terms of sanction and the contract. The default committed by defendant was long and persistent. Therefore, the account of defendant was classified as Non- Performing Asset.

8. Thereafter, on 29th March, 2016 the applicant through its advocate sent a notice to defendant nos.1 and 2 calling upon them to liquidate the entire outstanding. Despite service of notice, defendant nos.1 and 2 failed and neglected to make the payment.

9. At the foot of the account there was owing, due and payable by defendant nos.1 and 2 to the applicant the aggregate sum of Rs.18,88,845.82ps. The applicant has maintained the loan ledger extract and entries posted therein are made in the usual and ordinary course of banking business which is supported by the certificate as required under the law. Since defendant failed and neglected to make the payment the applicant was left with no other alternate but, to file the

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[vsm] (OA No.1872/2016) Page 5 of 7 original application which was presented on 25th May, 2016.

10. Defendant nos.1 & 2 were duly served with the summons. Despite service of summons, defendant nos.1 & 2 did not choose to enter appearance either personally or through their advocate. Therefore, the matter proceeded ex-parte against defendant nos.1 & 2 on 21st March, 2017.

11. The applicant has filed evidence affidavit (Exhibit-15) of Mrs. Archini S Jadhav and list of documents (Exhibit-16) thereby adducing in evidence the documents at serial nos.AW-01 to AW-06 which are admitted in evidence, read, recorded and exhibited.

12. I have scrutinized and examined the allegations contained in the Original Application and analyzed the evidence adduced by the applicant which has gone unchallenged, uncontroverted and unrebutted.

13. Mrs. Anju Mishra, the learned counsel for the applicant has submitted that the loan was granted to defendant nos.1 and 2 without security. She further submits that the pendent lite and future interest @ 18% p.a. with monthly

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[vsm] (OA No.1872/2016) Page 6 of 7 rest be granted. I am not inclined to grant pendent lite and future interest @ 18% p.a. with monthly rest. The reason is simple that there are two documents showing two different rate of interest. The promissory note shows the interest @ 18% p.a. with monthly rest, whereas the agreement shows the interest @ 18% p.a. (simple). It appears that the applicant has already charged, debited and recovered the interest @ 18% p.a. with monthly rest. Recovering the exorbitant rate of interest is against the public policy. It is also pertinent to note that the Original Application was presented on 25th may, 2016. However, the applicant has argued the case today i.e. almost after more than 33 months. For the fault of the applicant, defendant nos.1 and 2 cannot be penalized. At the same time, I am conscious of the fact that defendant nos.1 and 2 did not come forward to make the payment even today. Since the applicant has already charged, debited and recovered the interest @ 18% p.a. with monthly rest, I grant the pendent lite and future interest @ 9% p.a. from today, the 25th March, 2019 till payment/realisation.

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14. Mrs. Anju Mishra further submitted that the applicant is also entitled for penal interest as claimed in prayer clause (a) of the Original Application. Upon termination of the contract, the applicant is not entitled for the penal interest. Be that as it may, there is no pleadings to claim penal interest at the higher rate and therefore, I am not inclined to grant the penal interest to the applicant.

15. As far as the prayer clause (c) of the Original Application is concerned, there is no pleadings with regard to the mortgage of any property and therefore, the question of granting the reliefs in terms of this prayer does not arise.

16. The applicant has pleaded and established the case of creation of mortgage by defendant nos.2 and 3 with regard to the immovable properties described in paragraph nos.5.6 & 5.7 of the Original Application. Under Section 60 of the Transfer of Property Act, defendant no.2 and 3 are entitled for redemption of the mortgage upon payment of money. I therefore, hold that defendant nos.2 and 3 have the right of redemption.

17. Upon careful scrutiny and the examination of the Original

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[vsm] (OA No.1872/2016) Page 8 of 7 Application, analyzing the evidence and giving due weightage to the documentary evidence adduced by the applicant, I am of the view that there is no reason to disbelieve the claim made by the applicant bank.

18. In view of the observations hereinabove, the Original Application filed by the applicant deserves to be granted. Hence, I pass the following order:

ORDER

(A) Original Application No.1872/2016 is allowed with cost. (B) Defendant nos.1 to 4 are ordered and directed to pay to the applicant either jointly or severally the aggregate sum of Rs.71,99,87,033/- (Rupees seventy-one crore ninety-nine lakhs eighty-seven thousand and thirty-three only) with pendent lite and future interest @ 9.30% p.a. from the date of filing of the Original Application i.e. 30th March, 2016 till payment/realization. (C) The aforesaid adjudicated amount is secured by the valid and subsisting mortgage of the

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[vsm] (OA No.1872/2016) Page 9 of 7 immovable property i.e. Shop no.2 situate in A Wing, Shripati Arcade, August Kranti Marg, Nana Chowk, Mumbai-400036. (D) Defendant no.2 is granted liberty to redeem the mortgage property within the period of three months from the date hereof, failing which the applicant shall become entitled to put the mortgage property for sale and appropriate the sale proceeds in accordance with law. (E) Issue Recovery Certificate. (F) The Registrar is directed to send the copy of Judgment and Recovery Certificate to the applicant and defendants.

Sd/- (Deepak M Thakkar) I/c Presiding Officer Debts Recovery Tribunal-1, Mumbai