STATE BANK OF INDIA vs Polishing and Coatings on 11 March 2026

O R D E R

1. The applicant bank has filed the MA No.123/2024 seeking to issue a Recovery Certificate for the amount claimed in the Original Application in favour of the applicant.

2. The counsel for the applicant bank has filed the present petition stating inter alia that the above OA has been filed for realization of a sum of Rs.21,12,249.81 with future interest with monthly rests from the date of this application till date of realisation from the defendant and cost from the defendant and by sale of OA schedule property and other assets of the defendants.

3. Subsequently, the Original Application was referred to Lok Adalath organized by KELSA in Debts Recovery Tribunal – 1, Ernakulam on 20.01.2024 for settlement under Section 20(1)(i)(a) of The Legal Services Authorities Act and in pursuance of the compromise/settlement arrived at between the parties to the above case, an award came to be passed by the Lok Adalath on 20.01.2024 and as per the terms of compromise, the defendant was obliged to remit a sum of Rs.14,00,000/- to the applicant bank in three installments viz. Rs.5,000/- on 20.01.2024; Rs.2,45,000/- on or before 25.03.2024 and the balance amount of Rs.11,50,000/- on or before 30.07.2024. In the event of failure to pay the amounts, benefit of the compromise would be withdrawn and the bank was declared to be entitled to recover the entire amount as claimed in the OA by sale of the hypothecated/mortgaged properties shown in the OA and also from the other assets of the defendant as well as refund of the application fee paid by the applicant bank in accordance with law now in force. The relevant portion of the said award is as follows:- “Both parties agree that the applicant shall be entitled to seek refund of court fee in accordance with the law now in force.”

4. As per the award, the defendant had to pay an amount of Rs.14,00,000/- to the applicant bank. It was made clear in the award that in the event of failure to pay the amount as aforesaid, the defendant shall forfeit the benefits of compromise and they shall have no objection for issuance of Recovery Certificate for the entire amount claimed in the OA with interest and costs, less payments effected subsequent to passing of the award, on filing of necessary application before the Tribunal intimating the instance of such default.

5. According to the applicant bank, the defendant had paid only the 1st installment amount of Rs.5,000/- on 20.01.2024 and the defendant had not paid the 2nd and 3rd installment amounts as per the award dated 20.01.2024 and, therefore, they are entitled for a Recovery Certificate in terms of the default clause set out therein. Therefore, this Tribunal holds that the applicant bank is entitled for a Recovery Certificate in terms of the default clause set out therein.

6. The applicant bank has charged Rs.4,594/- as penal interest on the loan account No.38193865621 availed by defendant in terms of the agreement in sanction letter. It is well settled that penal interest cannot be capitalised and no interest can be charged on penal interest. The applicant bank, therefore, is not entitled to get any further interest on the aforesaid amount of penal interest, as laid down by the Hon'ble Supreme Court of India in Central Bank of India v. Ravindra [reported in AIR 2001 SC 3095].

7. In the light of the above, MA No.123/2024 stands allowed. The Registry is hereby directed to issue Recovery Certificate in terms of the award dated 20.01.2024. In the result, the Original Application is allowed in terms of the award dated 20.01.2024 of the Lok Adalath as per the following lines : “(i) The defendant is directed to pay to the applicant bank, a sum of Rs.10,16,597.24 (Rupees Ten Lakhs Sixteen Thousand Five Hundred Ninety Seven and Paise Twenty Four only) due under the Loan account No.38191758940 with future interest @12.40% per annum from 29.07.2023 till realisation;

(ii) The defendant is directed to pay to the applicant bank, a sum of Rs.2,37,519.57 (Rupees Two Lakhs Thirty Seven Thousand Five Hundred Nineteen and Paise Fifty Seven only) due under the Loan account No.38193865621 with future interest on the sum of Rs.2,32,925.57 (Rupees Two Lakhs Thirty Two Thousand Nine Hundred Twenty Five and Paise Fifty Seven only) @12.40% per annum from 29.07.2023 till realisation;

(iii) The defendant is directed to pay to the applicant bank, a sum of Rs.2,59,668/- (Rupees Two Lakhs Fifty Nine Thousand Six Hundred Sixty Eight only) due under the Loan account No.39374190869 with future interest @9.25% per annum from 29.07.2023 till realisation;

(iv) The defendant is directed to pay to the applicant bank, a sum of Rs.4,48,819/- (Rupees Four Lakhs Forty Eight Thousand Eight Hundred Nineteen only) due under the Loan account No.40352504985 with future interest @12.40% per annum from 29.07.2023 till realisation; and

(v) The defendant is directed to pay to the applicant bank, a sum of Rs.1,49,646/- (Rupees One Lakh Forty Nine Thousand Six Hundred Forty Six only) due under the Loan account No.40609704395 with future interest @9.25% per annum from 29.07.2023 till realisation.”

8. On failure to pay the above said debts to the Applicant Bank, the Applicant Bank is directed to bring the OA schedule property, for sale to realize its dues and its proportionate costs.

9. The Registry is directed to prepare DRC in terms of this final order. The Applicant Bank shall file memo of costs within 10 days from the date of this order. Registry is directed to communicate the copy of this order to both parties as provided in Rule 16 of the Debts Recovery Tribunal (Procedure) Rules, 1993, as amended in 2003. Typed by PS, transcribed, corrected and pronounced by me in the open court this the 11th day of March, 2026. (Su. WILLYAHM)

SCHEDULE A Hypothecation of stocks and receivables.

(Su. WILLYAHM)