KOTAK MAHINDRA BANK LIMITED vs YASHOVARDHAN BIRLA on 31 August 2026

Final Order

The present Transferred Original Application No.1816 of 2016, originally instituted as Original Application No.662 of 2015, is filed by Kotak Mahindra Bank Limited under section 19 of the Recovery of Debts and Bankruptcy Act, 1993 for recovery of its dues from the Defendants and for enforcement of the security described hereinafter. The Original Application was presented on

21.09.2015. The Applicant Bank seeks recovery of Rs.19,11,77,534.40 (Rupees Nineteen Crores Eleven Lakhs Seventy Seven Thousand Five Hundred Thirty Four and paisa Forty Only) as due on 01.09.2015 together with further interest at the rate of 24% per annum with monthly rests from 02.09.2015 till realization, enforcement and sale of the mortgaged property and costs. The Applicant claims as successor of ING Vysya Bank Limited under a scheme of amalgamation effective from 01.04.2015.

The Original Application was initially filed against Defendant Nos.1 and 2. By consent order dated 05.07.2023 passed in I.A. No.1108 of 2021, Defendant No.3 was joined as a party. The order dated 18.01.2024 records that no consequential averment or substantive prayer was thereafter incorporated against Defendant No.3. By order dated 23.04.2026 in Writ Petition (L) No.12215 of 2026, the Hon'ble Bombay High Court directed disposal of the Original Application and the pending applications on or before 31.08.2026. Accordingly, all rival contentions are being considered together in this Final Order.

The case of the Applicant Bank is that Defendant Nos.1 and 2 approached the erstwhile ING Vysya Bank Limited on 09.03.2012 for a Home Equity Loan facility. The facility of Rs.19,00,00,000/- was sanctioned on 19.03.2012 for a tenure of 180 months upon the terms recorded in the sanction advice and the loan documents.

It is further the case of the Applicant Bank that Defendant Nos.1 and executed the Loan Agreement dated 21.03.2012 and availed the facility. Defendant No.1 deposited title deeds and executed Registered Deed of Mortgage dated 27.03.2012 relating to the secured asset i.e. Row- House no. 10, on the Ground Floor, in the complex of Row Houses and building/s known as “Grand Paradi Co-operative Housing Society Ltd.” situated at August Kranti Marg, Mumbai 400026 and bearing cadastral S.no.519 of Malbar and Cumballa Hill Division. The creation of security was recorded in the registered Mortgage Deed dated 27.04.2012.

The Applicant Bank further states that Defendant Nos.1 and 2 failed to maintain repayment discipline and the loan account was classified as a non- performing asset on 30.04.2014. A demand notice dated 02.05.2014 under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, recalled the facility and demanded Rs.19,42,58,253.48 together with further contractual accruals.

In support of the claim, the Applicant Bank has filed the claim affidavit at Exhibit 10 and the original documents at Exhibits 11 to 23, including the loan application, sanction advice, Loan Agreement, disbursement request, deed of indemnity, title documents, registered Mortgage Deed, statutory demand notice, certified statement of account and particulars of claim. The certified account and the particulars of claim show Rs.19,11,77,534.40 as outstanding on 01.09.2015.

The Applicant Bank further states that under the sanctioned scheme of amalgamation, the undertaking, assets, liabilities, contracts, powers, authorities, employees and legal proceedings of ING Vysya Bank Limited stood transferred to and continued in Kotak Mahindra Bank Limited. Mr. Pranay Bharucha, who instituted the proceeding, continued as an employee of the transferee Bank. The Applicant has also relied upon the subsequent Board authority filed with the additional claim affidavit dated 26.03.2022.

An interim order was passed on 30.10.2015 restraining Defendant Nos.1 and from transferring, alienating or creating third-party rights in the mortgaged property. Summons were issued on 03.11.2015 and the service affidavit was filed on 08.01.2016. Defendant Nos.1 and 2 did not file their written statement and were set ex parte on 19.05.2016. After transfer of the proceeding from DRT-III, Navi Mumbai to DRT-II, Mumbai, they entered appearance through Advocates in April 2018 and thereafter participated in the proceeding.

The Applicant Bank thereafter filed I.A. No.839 of 2023 seeking judgment on admission and an interim Recovery Certificate for Rs.38,22,38,948/- , apart from protective reliefs. By order dated 18.01.2024, the said application was directed to be considered with the Original Application at the final hearing. Defendant Nos.1 and 2 filed I.A. No.96 of 2024 seeking rejection of the Original Application by invoking Order VII Rule 11 of the Code of Civil Procedure, 1908 and I.A. No.105 of 2024 seeking acceptance of their belated written statement. The prayers and contentions raised in all the said applications are taken up in the course of this Final Order.

The Applicant Bank submits that the facility and security documents, default, certified account and outstanding dues stand proved by the original record. It is submitted that the amalgamation scheme continued the rights and authorities of the transferor Bank and that any defect in corporate authorization is, in any event, curable. It is further submitted that the Original Application is within limitation from the default, NPA classification and recall and that Defendant Nos.1 and 2 have not placed any proof of discharge on record.

Defendant Nos.1 and 2 submit that the service effected in January 2016 contained only the summons, show-cause notice and interim order and not the complete Original Application and paper-book as required by the applicable Rules. Reliance is placed upon Sunil Gupta v. Asset Reconstruction Company (India) Limited, 2022 SCC OnLine Bom 2159. They contend that their written statement should therefore be accepted notwithstanding the delay and also rely upon the Scindia House fire and the period excluded during the COVID-19 pandemic.

Defendant Nos.1 and 2 further submit that the Original Application is liable to be rejected since the power of attorney issued by ING Vysya Bank Limited in the year 2013 ceased to operate upon amalgamation; that the claim is barred by limitation; that no enforceable cause of action is disclosed; and that the Applicant has made false and contradictory statements regarding the account and payments. The alleged payment dated 30.01.2015 is disputed. Reliance is also placed upon Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Limited, (2019) 10 SCC 572 to submit that Article 62 of the Limitation Act applies to a suit and not to an application.

As regards I.A. No.839 of 2023, Defendant Nos.1 and submit that the qualified auditor's observation in the financial statements is not a clear, conscious and unconditional admission. It is also pointed out that the amount of Rs.38,22,38,948/- sought in that application is substantially beyond the principal amount claimed in the Original Application. Reliance is placed, inter alia, upon Himani Alloys Limited v. Tata Steel Limited, (2011) 15 SCC 273; Hari Steel and General Industries Limited v. Daljit Singh, (2019) 20 SCC 425; and Shantez v. Applause Bhansali Films Private Limited, 2009 SCC OnLine Bom 405.

Defendant No.3 submits that he is neither a borrower nor a guarantor nor a mortgagor and that he claims an independent undivided share in the secured asset. He relies upon the order dated 26.11.2021 passed in S.A. No.24 of 2015, whereby the SARFAESI measures were set aside to the extent of the share adjudicated in his favour. The appeal of the Applicant Bank against the said order is stated to be pending before the Debts Recovery Appellate Tribunal, Mumbai. He also relies upon the order dated 24.01.2025 in Interim Application No.3094 of 2024 in Suit No.255 of 2018 and seeks dismissal of the Original Application qua himself and the share claimed by him.

Heard the Learned Counsel for the parties and Perused the records. The contentions advanced in

the interlocutory applications are also considered while finally adjudicating the Original Application.

The objection of Defendant Nos.1 and 2 regarding service has been examined. Their receipt of the summons in January 2016 is admitted and they entered appearance in April 2018. The Applicant's chronology records that the papers and proceedings were supplied upon appearance and the Defendants thereafter participated through Advocates. Significantly, their own short submission in I.A. No.105 of 2024 leaves blank the dates on which the Original Application was received and the written statement was filed. No period-wise explanation is furnished for the delay after appearance in the year 2018.

The fire incident and the general exclusion granted during the COVID-19 period do not explain the entire delay. The written statement was sought to be tendered only in January 2024. Further, the order dated 19.05.2016 setting Defendant Nos.1 and 2 ex parte continues to operate and I.A. No.105 of 2024 does not seek its recall. Thus, even upon applying the wider discretion available under the unamended procedural regime, sufficient grounds are not made out to accept the written statement as a separate procedural relief.

At the same time, an ex parte claim cannot be decreed mechanically. To avoid prejudice and to bring the entire controversy to rest, all material defences disclosed in the proposed written statement, the interlocutory applications and the written submissions have been examined on merits in this Final Order. The rejection of the procedural request therefore does not result in exclusion of any substantive contention urged by Defendant Nos.1 and 2.

Section 22 of the Recovery of Debts and Bankruptcy Act, 1993 provides that this Tribunal is not bound by the Code of Civil Procedure and is guided by the principles of natural justice. The Tribunal may regulate its own procedure and may pass orders necessary to prevent abuse of its process and to secure the ends of justice. Thus, Order VII Rule 11 of the Code is not directly binding as a procedural provision; however, the principles underlying it may be applied while examining whether an Original Application is plainly untenable at the threshold.

For such limited examination, the Original Application is required to be read as a whole and its material averments are taken to be true. The defence and disputed evidence cannot be weighed and rejection can follow only where no cause of action is disclosed or a bar of law is apparent from the Applicant's own pleading. The principles stated in Saleem Bhai v. State of Maharashtra, (2003) 1

SCC 557 and Dahiben v. Arvindbhai Kalyanji Bhanusali, (2020) 7 SCC 366 are relevant in this regard.

In the present case, the Original Application contains clear averments regarding the application for the loan, sanction and disbursement of Rs.19,00,00,000/-, execution of the facility documents, creation of mortgage, default, classification of the account as NPA, recall notice, certified account and the quantified outstanding. These averments disclose a complete cause of action. The objections regarding individual account entries, interest calculation, NPA classification and alleged falsity require examination of evidence and do not warrant rejection at the threshold.

The contention that the Original Application is barred by limitation is also not substantiated. The sanction of a loan for 180 months in March 2012 did not make the entire debt due on the date of sanction. The account is pleaded and proved to have been classified as NPA on 30.04.2014 and the facility was recalled on 02.05.2014. The Original Application filed on 21.09.2015 was within three years from those events. It is therefore unnecessary to depend upon the disputed payment dated 30.01.2015, the later settlement proposals or Article 62 of the Limitation Act for holding the Original Application to be within limitation.

The objection regarding authorization is equally without merit. The clauses of the sanctioned amalgamation scheme transfer and vest the undertaking of ING Vysya Bank Limited in the Applicant Bank and preserve the contracts, powers, authorities, employees and pending proceedings. The subsequent Board authority placed with the additional claim affidavit also affirms the institution and prosecution of the proceeding. In any event, a defect in corporate authorization of this nature is curable and does not extinguish an otherwise subsisting debt. The principle in United Bank of India v. Naresh Kumar, (1996) 6 SCC 660 applies to the present objection.

The allegations of false statements and contradictory account entries do not constitute an independent ground for rejection of the Original Application. Hence, none of the grounds urged for rejection of the Original Application is made out.

The Applicant Bank is nevertheless required to prove its claim on the evidence filed. The decisions in Balraj Taneja v. Sunil Madan, (1999) 8 SCC 396 and Hari Steel and General Industries Limited (supra) caution that relief cannot follow merely because no written statement is on record. The claim affidavit and the original documents at Exhibits to have therefore been independently scrutinized.

The loan application, sanction advice, Loan Agreement and disbursement request prove sanction and availment of the facility by Defendant Nos.1 and 2. The title documents and registered Mortgage Deed dated 27.04.2012 prove creation of security by Defendant No.1 over such right, title and interest in the secured asset as was lawfully held and capable of being mortgaged by him.

The certified statement of account, read with the particulars of claim and the facility documents, shows Rs.19,11,77,534.40 as due on 01.09.2015. Defendant Nos.1 and 2 have not produced any receipt, bank statement or other material proving discharge of the said dues. Their interlocutory objections do not contain a categorical denial of execution of the principal facility documents. Thus, the Applicant Bank has proved that Rs.19,11,77,534.40 was due from Defendant Nos.1 and 2 on 01.09.2015 and their liability is joint and several.

The Applicant Bank has claimed further interest at 24% per annum with monthly rests from 02.09.2015. Award of pendente lite and future interest is discretionary. The sanction material discloses a lending structure materially below the rate claimed and the record does not justify continuation of a penal rate with monthly capitalization throughout the long pendency of the proceeding. Having regard to the commercial nature of the transaction, the continuing default and the overall facts, interest at 12% per annum simple interest on the adjudged amount from the date of filing of O.A. till realization would be just and reasonable. Credit shall be given for every amount recovered or appropriated after 01.09.2015 on the date of its realization.

No loan document, guarantee, undertaking or mortgage executed by Defendant No.3 is pleaded or proved. He was joined in July 2023, but no consequential averment seeking personal liability against him was introduced. Therefore, he cannot be made liable to pay the dues adjudicated in the present O.A..

The order dated 26.11.2021 passed in S.A. No.24 of 2015 cannot be treated as having no effect merely because the Applicant Bank has preferred an appeal. Unless stayed, modified or set aside, the said order binds the parties to the extent of its operative directions and the matters directly adjudicated concerning the SARFAESI measures and the share claimed by Defendant No.3. This Tribunal, while deciding the present Original Application, cannot pass an enforcement direction inconsistent with that subsisting order.

However, a proceeding under section 17 of the SARFAESI Act examines the legality of measures taken under section 13(4) of the SARFAESI Act, 2002, whereas an application under section 19 of the Recovery of Debts and Bankruptcy Act determines the debt and the liability for which a Recovery Certificate will be issued. The remedies under the two enactments may operate in parallel, as explained in Transcore v. Union of India, (2008) 1 SCC 125. The order in S.A. No.24 of 2015, therefore, does not extinguish the proved debt or bar a personal Recovery Certificate against Defendant Nos.1 and 2. Its binding effect remains confined to the matters and reliefs actually adjudicated therein, subject to the result of the pending appeal.

Accordingly, at present the mortgage can be recognized only over such right, title and interest as Defendant No.1 lawfully possessed and was competent to create in the secured asset. No finding is recorded enlarging the mortgage over the independent share claimed by Defendant No.3 or deciding the inter se title dispute. The Recovery Officer shall act in conformity with the subsisting order in S.A. No.24 of 2015 and every order passed by the Debts Recovery Appellate Tribunal or a superior Court bearing upon enforcement against the secured asset.

As regards the prayer for judgment on admission, the qualified auditor's observation relied upon by the Applicant carries explanations and requires inferential interpretation. It is not a clear, unambiguous and unconditional admission within the principles laid down in Himani Alloys Limited (supra) and Shantez (supra). Further, the interim Recovery Certificate of Rs.38,22,38,948/- sought in I.A. No.839 of 2023 exceeds the principal amount claimed in the Original Application and cannot be granted without a corresponding amendment of the pleading and prayer. The debt having now been finally determined upon the original evidence, no separate relief on the alleged admission survives.

Thus, on an overall consideration of the pleadings, evidence, documents and submissions, the Applicant Bank has proved its debt against Defendant Nos.1 and 2. No ground is made out to reject the Original Application. No personal liability is established against Defendant No.3. The Original Application is therefore liable to be allowed in the following terms.

ORDER

Transferred Original Application No.1816 of 2016 is allowed with costs.

Defendant Nos.1 and 2 are jointly and severally liable to pay to the Applicant Bank a sum of Rs.19,11,77,534.40 (Rupees Nineteen Crore Eleven Lakh Seventy-Seven Thousand Five Hundred

Thirty-Four and Paise Forty only) with pendent lite and future interest at the rate of 12% per annum simple interest from the Original Application’s presentation date, that is 02.09.2015 till full realization. Further, in respect of Defendant No.3, there shall be no liability against the present adjudicated dues.

The Recovery Certificate shall be executable, in accordance with the provisions of the Recovery of Debts and Bankruptcy Act, 1993. The Recovery Certificate shall be executable only against the respective right, title and interest therein of the Defendant No.1 in Row-House no. 10, on the Ground Floor, in the complex of Row Houses and building/s known as “Grand Paradi Co-operative Housing Society Ltd.” situated at August Kranti Marg, Mumbai 400026 and bearing cadastral S.no.519 of Malbar and Cumballa Hill Division.

Issue Recovery Certificate accordingly

The learned Registrar is directed to send a copy of the present judgment and recovery certificate to the applicant and defendants by post and email.

Sd/-

(Harish Kumar Kaushik) Presiding Officer, DRT-2, Mumbai