FEDERAL BANK vs M/s Seagul Enterprises Private Limited on 24 March 2026

1. M/s.Seagull Enterprises Private Limited, Registered office at ‘Dilshanoj’, O-15, Jawahar Nagar, Thiruvananthapuram – 695 003.

2. Manoj Thomas,

S/o.J.P.Thomas,

‘Dilshanoj’, O-15, Jawahar Nagar,

Thiruvananthapuram – 695 003.

3. J.P.Thomas (Dead. Rep. by his legal heirs, defendants 2 & 4), S/o.Johnson Thomas, ‘Dilshanoj’, O-15, Jawahar Nagar, Thiruvananthapuram – 695 003.

4. Diljith Thomas,

S/o.J.P.Thomas,

‘Dilshanoj’, O-15, Jawahar Nagar,

Thiruvananthapuram – 695 003.

5. Krishna Kumar,

S/o.Thankappan Pillai,

Nirmal, Vellalloor P.O.,

Kilimanoor,

Thiruvananthapuram – 695 601.

…Defendants

This Original Application having been heard on 09.03.2026 in the presence of Advocate Ms.Arya Satheesh, representing counsel for Advocate Sri.Sunil Shankar for the applicant bank and Advocate Smt.Thankom Mukundakrishnan for defendants 2, 4 and 5 and stood over to this day for consideration, the Tribunal delivered the following: F I N A L O R D E R

This Original Application has been filed under S.19(1) of the Recovery of Debts and Bankruptcy Act, 1993 for recovery of a sum of Rs.18,59,743.80 due under cash credit account together with future interest on the sum of Rs.18,07,821/- @22% per annum with monthly rests from the defendants jointly and severally and by sale of ‘A’ schedule property. Facts of the case:

2. The applicant is a banking company constituted under the Companies Act, 1956 having its registered office at Aluva and a branch among other places at Thiruvananthapuram/Palayam.

3. The 1st defendant is a private limited company carrying on the business in exports of marine products. The 2nd defendant is the managing director and defendants 3 to 5 are its directors. At the request of the 1st defendant, applicant bank sanctioned a cash credit limit of Rs.3 lakhs on 23.06.2006 which was availed by it after executing necessary security documents. The defendants 2 to 4 stood as guarantors for the loan. Thereafter, the cash credit limit was enhanced to Rs.7 lakhs on 06.11.2006 and defendants 2 to 5 executed guarantee agreement to secure the loan. Towards collateral security for the cash credit limit, the 5th defendant created equitable mortgage over ‘A’ schedule property and executed letter dated 18.09.2007 confirming the deposit of title deeds with the applicant bank on 17.09.2007. The defendants executed balance confirmation letters dated 17.09.2007 and 10.06.2010 acknowledging the liability under the loan account. Since the defendants failed to regularize the loan account, a lawyer notice was issued on 12.01.2011 calling upon them to repay the entire amount due under the cash credit account. As the defendants failed to settle the liability, the applicant was constrained to file the OA claiming the following reliefs:

(i) To recover the sum of Rs.18,59,743.80 together with pendente lite and post-decree interest on the sum of Rs.18,07,821/- from the defendants jointly and severally and by sale of ‘A’ schedule property;

(ii) To recover the costs, charges and expenses from the defendants;

(iii) To issue Recovery Certificate to the Recovery Officer with a direction to recover the amount and pay it to the applicant bank.

4. The defendants 2, 4 and 5 filed written statement admitting that the 1st defendant availed a cash credit limit of Rs.3 lakhs in June, 2006 which was enhanced to Rs.7 lakhs in October, 2006. It is contended that there is substantial difference in the amount claimed in the OA as on 06.06.2013 compared to Annexures-A17 and A18 balance confirmation letters dated 17.09.2007 and 10.06.2010 as well as lawyer notice dated 12.01.2011 which would show that the calculation made by the applicant is incorrect. The rate of interest mentioned in Annexure- A22 statement is higher than the rates prevailed at the relevant time. The amount availed is Rs.7 lakhs and the claim amount is Rs.18,59,743.80 which is almost twice the amount availed and the same is not legally recoverable. The balance confirmation letters are not executed properly and hence the OA is barred by limitation. The description of the mortgaged property is incorrect. In view of the above, the OA is liable to be dismissed with compensatory costs to these defendants.

Proof Affidavit:

5. In order to establish the claim on behalf of the applicant bank, one Ms.Anjana, Assistant Vice President of the applicant has filed proof affidavit and produced the loan documents marked as Exhibits A1 to A22. The availing of the enhanced cash credit limit of Rs.7 lakhs and creation of mortgage over the schedule property are well established from the documents placed by the applicant bank.

6. The defendants 2, 4 and 5 filed counter proof affidavit reiterating the averments made in their written statement but no material is placed to substantiate their claim.

7. The sole issue arises for consideration is whether the applicant is entitled to get the claim amount?

8. Admittedly, the 1st defendant availed the subject loan from the applicant bank and the 5th defendant created mortgage over the schedule property to secure the loan. There is also no dispute about the execution of guarantee agreements by defendants 2 to 5.

9. Insofar as the dispute regarding the amount claimed and the rate of interest applied in the loan account is concerned, it appears from Exts.A5 and A10 cash credit agreements dated 12.06.2006 and 06.11.2006 that the borrower/1st defendant agreed to pay interest @14.75% per annum with monthly rests, subject to revisions by the bank or RBI from time to time. Further, it could be seen that the borrower undertakes to pay additional interest at such rates as may be prescribed by the bank and/or RBI from time to time over and above the rates mentioned above in case the borrower defaults in paying the periodic interest/installments or in violation of any of the terms of sanction. The account statement marked as Ext.A20 would show that there is no repayment of the amount towards the loan account after May, 2008 and the rate of interest is also seen enhanced from time to time. Consequently, the amount due as on 21.05.2008 i.e., Rs.6,97,746/- has swelled to Rs.19,36,550/- as on the date of filing of the OA on 05.06.2013 due to accrual of huge amount as interest, penal interest and other charges. The defendants have no case that they remitted the installments/interest regularly without any default. Admittedly, the defendants had executed Exts.A5 and A10 agreements while availing the loan and hence now they cannot turn around and contend about the rate of interest applied in the account and the amount due therein.

10. It is the further contention of defendants 2, 4 and 5 that the balance confirmation letters dated 17.09.2007 and

10.06.2010 marked as Exts.A17 and A18 are not executed by all the defendants and hence the OA filed on 06.07.2013 is barred by limitation and no personal liability can be fastened on these defendants. In the agreement of guarantee executed by defendants 2 to 5 marked as Exts.A13 and A14 at clause 17, it is agreed as follows:

I/We further agree that any admission or acknowledgement in writing by the Principal in relation to the subject matter of this guarantee or any judgement or award which you may obtain against the principal shall be binding on me/us and I/We accept the correctness of any periodical balance confirmations signed by the Principal and/or any statement of account served on the Principal which is duly certified by any Manager or Officer of the Bank shall be binding and conclusive against me/us also and I/We further agree that in making an acknowledgement or making a payment the Principal shall be treated as my/our duly authorized agent for the purpose of Limitation Act, 1963.

In the instant case, though all the defendants had not executed the balance confirmation letters, the principal borrower/1st defendant company through its managing director and the 5th defendant had executed Ext.A17 and A18 balance confirmation letters acknowledging the liability under the cash credit account. The document executed by the managing director of the 1st defendant company is binding on other directors of the company. Further, as the defendants have agreed in unequivocal terms that any admission made by the principal shall be binding on the guarantors and in making an acknowledgement, the principal shall be treated as their duly authorized agent for the purpose of Limitation Act, the contentions raised by the defendants on this aspect is not at all sustainable. The documents produced by the applicant bank would prove their claim made in this case. In such backdrop, the applicant is entitled to recover the amount claimed in the OA.

11. Considering the amount advanced and default committed and the component of interest in the principal sum adjudged on the date of filing of the OA is disproportionate with the component of principal sum actually advanced, I am of the view that the applicant bank is entitled to get pendente lite and post decree interest @10% per annum, which is reasonable in the facts and circumstances of the case.

12. The applicant bank, therefore, is entitled to get a final order on the following lines: In the result, the applicant bank is given a final order allowing it to recover:

(i) the sum of Rs.18,59,743.80 (Rupees eighteen lakhs fifty nine thousand seven hundred and forty three and Paise eighty only) due under the cash credit account from defendants 1, 2, 4 and 5 jointly and severally and by sale of ‘A’ schedule property; in case of any shortfall, the same shall be recovered from the assets, if any, inherited by defendants 2 and 4 from the deceased 3rd defendant;

(ii) pendente lite and post-decree interest @10% per annum on the sum of Rs.18,07,821/- (Rupees eighteen lakhs seven thousand eight hundred and twenty one only) from 06.06.2013 till realization from defendants 1, 2, 4 and 5 jointly and severally and by sale of ‘A’ schedule property; in case of any shortfall, the same shall be recovered from the assets, if any, inherited by defendants 2 and 4 from the deceased 3rd defendant; and

(iii) costs and expenses borne by it for realization of the loan from defendants 1, 2, 4 and 5.

13. ‘A’ schedule to the OA shall be appended to this final order.

14. The applicant bank shall file memo of costs within ten days from the date of this final order.

15. Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of the final order.

16. Communicate copy of this order to both parties as provided in R.16 r/w R.2(c) of the Debts Recovery Tribunal (Procedure) Rules, 1993. (Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 24th day of March, 2026)

[SOVAN KUMAR DASH] PRESIDING OFFICER

A P P E N D I X Witness for Applicant: AW1: Ms.Anjana, Assistant Vice President and Principal Officer of the applicant bank.

Witness for Defendant(s): Nil

Applicant’s Exhibits

Ext.No Date Particulars of documents

A1 14.05.1999 Certificate of incorporation of the 1st defendant company. A2 15.05.2006 Extracts of the board meeting held at the registered office of the 1st defendant company. A3 23.06.2006 Demand promissory note for Rs.3 lakhs executed by defendants 1, 2 and 4 in favour of the applicant bank. A4 23.06.2006 Security delivery letter executed by defendants 1, 2 and 4 in favour of the applicant bank. A5 23.06.2006 Agreement of cash credit executed by defendants 1, 2 and 4 in favour of the applicant bank. A6 23.06.2006 Agreement of guarantee executed by defendants 2 to 4. A7 30.10.2006 Board resolution of the 1st defendant authorizing defendants 2 and 4 to avail loan from the applicant bank and execute the documents. A8 06.11.2006 Demand promissory note for Rs.7 lakhs executed by defendants 1, 2 and 4. A9 06.11.2006 Security delivery letter executed by defendants 1, 2 and 4. A10 06.11.2006 Agreement of cash credit executed by defendants 1, 2 and 4. A11 06.11.2006 Application for continuance of the cash credit facility executed by the 1st defendant. A12 06.11.2006 Revival letter executed by the 1st defendant. A13 06.11.2006 Agreement of guarantee executed by defendants 2 to 4.

A14 06.11.2006 Agreement of guarantee executed by the 5th defendant. A15 07.12.2006 Partition deed No.4776/2006 of Nedumangad SRO. A16 18.09.2007 Letter executed by the 5th defendant confirming the deposit of title deeds with the applicant bank. A17 17.09.2007 Balance confirmation letter executed by defendants 1, 2 and 5. A18 10.06.2010 Balance confirmation letter executed by defendants 1, 2 and 5. A19 12.01.2011 Copy of lawyer notice issued to the defendants calling upon them to repay the entire dues. A20 … Certified copy of the statement of account relating to the cash credit facility. A21 … Statement showing the penal interest charged in Ext.A20 account and capitalized portion thereof. A22 … Statement showing the rate of interest applied in Ext.A20 account from time to time.

Defendants’ Exhibits – Nil

PRESIDING OFFICER

PRESIDING OFFICER

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

Dated the 24th March, 2026

TA No.1065/2016 (OA NO.272/2013)

Between

The Federal Bank Ltd., Registered Office: Aluva, Branch: Thiruvananthapuram/Palayam, Thiruvananthapuram District. …Applicant

And

M/s.Seagull Enterprises Private Limited, Registered office at ‘Dilshanoj’, O-15, Jawahar Nagar, Thiruvananthapuram & 4 others.

…Defendants

F I N A L O R D E R