FEDERAL BANK vs AJAYA KUMAR V on 20 April 2026

1. Ajaya Kumar.V,

S/o.Vasu Pillai,

Flat No.5, Charis Plaza,

Kattakada P.O.,

Thiruvananthapuram – 695 572.

Also at:

Lalitha Vilasam,

Kalipara, Neyyar Dam P.O.,

Thiruvananthapuram – 695 572.

2. Nithya.U,

W/o.Ajaya Kumar,

Flat No.5, Charis Plaza,

Kattakada P.O.,

Thiruvananthapuram – 695 572.

Also at:

Lalitha Vilasam,

Kalipara, Neyyar Dam P.O.,

Thiruvananthapuram – 695 572. …Defendants

This Original Application having been heard on 12.03.2026 in the presence of Advocate Sri.Peter Tharakan for the applicant bank and Sri.Lovewin Vinu, representing counsel for Advocate Sri.Zakir Hussain for the defendants, 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.17,15,512/- due under the agricultural cash credit account together with future interest @14% per annum with monthly rests from the defendants and by sale of ‘A’ and ‘B’ schedule properties. Facts of the case:

2. The applicant is a banking company constituted under the Companies Act, having its registered office at Aluva and a branch amongst other places at Amboori in Thiruvananthapuram.

3. During March, 2006 the defendants approached the Amboori Branch of the applicant bank seeking financial assistance for their agricultural activities. Considering their request, the applicant bank sanctioned an agricultural cash credit limit of Rs.8 lakhs on 27.03.2006 which was availed by them after executing demand promissory note for Rs.8 lakhs, security delivery letter and term loan agreement in favour of the applicant on 27.03.2006. Later, at the request of the defendants, the cash credit limit was renewed on 13.10.2009. As primary security for the loan, the defendants hypothecated the crops in described in ‘A’ schedule and towards collateral security, the 1st defendant created equitable mortgage over ‘B’ schedule property by deposit of title deed with the applicant bank on 27.03.2006. The 1st defendant executed letter dated 28.03.2006 confirming the creation of mortgage in favour of the applicant. The defendants executed balance confirmation letters on 12.03.2009 and 01.10.2012 thereby confirming the balance outstanding under the cash credit account as on 11.03.2009 and 30.09.2012 respectively. As the defendants failed to repay the loan amount as per the terms and conditions specified in the loan agreement, demand notice under S.13(2) of the SARFAESI Act was issued to the defendants on 11.01.2013 demanding repayment of the outstanding dues within 60 days. As they failed to settle the liability, applicant bank was constrained to file the OA claiming the following reliefs:

(i) To recover the sum of Rs.17,15,512/- together with pendente lite and post-decree interest thereon from the defendants and by sale of ‘A’ and ‘B’ schedule properties;

(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. Written statement 4.1 The defendants jointly filed written statement contending at the outset that the OA is not maintainable either in law or on facts. It is contended inter alia that the debt as well as the application is barred by time. The execution of equitable mortgage by the defendants in favour of the applicant is denied. It is claimed by the defendants that in the judgement reported in (2014) 1 SCC 105 in the case of State of Haryana v. Navir Singh, the Hon'ble Supreme Court held that instruments which are integral part of the transaction regarding the mortgage by deposit of title deeds are liable to be compulsorily registered and hence the applicant is not entitled to get any of the reliefs claimed in the OA on the basis of an unregistered loan agreement. The loan agreement was not renewed within three years of disbursement of the loan on 23.03.2006 and hence Annexures-A4 to A7 are of no legal consequence. Annexures- A11 and A12 documents presented as acknowledgement of debt are forged documents fraudulently drawn up on pre-signed blank forms obtained from the defendants by coercion. An application under S.19 of the Recovery of Debts and Bankruptcy Act, 1993 would lie only for recovery of debt due and hence the applicant has no right to include various charges such as tax, insurance etc. in the debt due. 4.2 It is contended by the defendants that the loan account turns NPA as early on 31.12.2009 and the balance as on that date was Rs.7,86,444/- only. As per the master circulars governing the subject matter issued by RBI, no interest shall be applied once the account has become NPA. Therefore, the act of the applicant in applying interest to the loan account after it becomes NPA runs contrary to the directives of RBI and hence the claim made by the applicant that the debt due is above Rs.10 lakhs is untenable. The averment in the application that a sum of Rs.17,15,512/- is due from the defendants is incorrect and hence denied. The application of interest as mentioned in Annexure-A15 is highly objectionable as it goes against the directives of RBI. The averment that the rate of interest applicable is 14% per annum with monthly rests is erroneous inasmuch it goes against subsequent master circulars of RBI stating that interest has to be calculated with yearly rests in the case of agricultural advances. The applicant has no right to initiate proceedings under S.19 of the Recovery of Debts and Bankruptcy Act, 1993 while proceedings initiated under the SARFAESI Act are pending in respect of the same cause of action. The application is devoid of any merit and hence the same is liable to be dismissed. Proof Affidavit:

5. In order to establish the claim on behalf of the applicant bank, one Mr.Thulaseedharan Pillai C., Senior Manager and Principal Officer of the applicant filed proof affidavit and produced loan documents, which are marked as Exts.A1 to A15. Despite time granted, the defendants did not file any counter proof affidavit nor adduced any documentary evidence to substantiate their case.

6. From the respective case of the applicant and defendants, the following issues are emerged for adjudication in this case:

(i) Whether the OA is maintainable as contended by the defendants?

(ii) Whether the 1st defendant has created valid mortgage over ‘B’ schedule property?

(iii) Whether the balance confirmation letters marked as Ext.A11 and A12 are forged documents as contended by the defendants?

(iv) Whether the applicant bank is entitled to charge interest in the loan account after it is declared as NPA?

(v) Whether the applicant is entitled to recover the amount as claimed in this case? Issue No.(i):

7. The materials on record would divulge the fact that the debt claimed as due from the borrowers as on the date of filing of the OA is Rs.17,15,512/-, which falls within the pecuniary jurisdiction of the Tribunal and the loan was sanctioned by applicant bank’s Amboori Branch, Thiruvananthapuram, which is within the territorial jurisdiction of this Tribunal. Therefore, this Tribunal is having pecuniary as well as territorial jurisdiction to entertain and try the present OA. Insofar as the period of limitation is concerned, the 1st defendant created equitable mortgage over the property described in ‘B’ schedule to the OA on 27.03.2006 and the defendants acknowledged the liability under the agricultural cash credit account as on 30.09.2012 by executing Ext.A12 balance and security confirmation letter dated 01.10.2012 and hence the OA filed on 11.12.2014 is within the period of limitation prescribed under the Act. In such backdrop, the above application is well maintainable before the Tribunal. Issue No.(i) is answered against the defendants.

Issue No.(ii)

8. On perusal of the documents produced by the applicant bank, it could be seen that the 1st defendant had deposited the original title deeds viz., Ext.A8 settlement deed No.193/2001 dated 06.02.2001 and Ext.A9 release deed No.409/2006 dated 21.03.2006 pertaining to the property described in ‘B’ schedule with the applicant bank’s branch at Neyyattinkara on 27.03.2006 towards security for the agricultural cash credit limit of Rs.8 lakhs availed by the defendants on 27.03.2006. The 1st defendant had also executed Ext.A10 letter dated 28.03.2006 confirming deposit of the aforesaid title deeds with the applicant on 27.03.2006 with the intention to create equitable mortgage as envisaged in S.58(f) of the Transfer of Property Act. By relying on the judgment of the Hon'ble Apex Court in the case of State of Haryana (supra), the defendants claimed that mortgage by deposit of title deeds is liable to be registered compulsorily and as the applicant is relying on an unregistered document, they are not entitled to get any relief as against the subject matter property. However, the Hon'ble Apex Court in the selfsame judgment had categorically held that ‘when the debtor deposits with the creditor title-deeds of the property for the purpose of security, it becomes mortgage in terms of Section 58(f) of the Transfer of Property Act and no registered instrument is required under Section 59 thereof as in other classes of mortgage’. In such backdrop, there is no merit in the contention raised by the defendants and there is valid equitable mortgage in favour of the applicant bank in respect of ‘B’ schedule property. Issue No.(ii) is answered in favour of the applicant bank. Issue No.(iii):

9. It is contended by the defendants that the balance confirmation letters marked as Exts.A11 and A12 are forged documents which are fraudulently drawn up on pre-signed blank forms obtained from the defendants by coercion. However, their case is not substantiated by any evidence except saying so. There is nothing on record to establish that the applicant bank had fabricated the documents after obtaining blank signed papers from the defendants. The case put forth by the defendants cannot be believed and the falsity of their case is seen from the original documents produced by the applicant in this case. Issue No.(iii) is answered against the defendants. Issue No.(iv):

10. Admittedly, the defendants availed an agricultural cash credit limit of Rs.8 lakhs from the applicant bank on 27.03.2006, which was subsequently renewed on 13.10.2009. It is also the

admitted case that since they lost cultivation and suffered huge loss due to natural calamities and bad monsoons experienced year-after- year, they failed to repay the loan. Further, it is claimed that as per the master circulars issued by RBI, no interest shall be applied once the account has become NPA and the act of the applicant in applying interest to the loan account after it becomes NPA runs contrary to the directives of RBI.

11. The liability to make payment of interest by the defendants arises strictly in accordance with the loan agreement. The liability to pay interest continues to subsist until the entire dues are cleared. The mere fact that the loan account has been declared as NPA would not absolve the defendants from their liability of payment of interest to the bank. The charging of interest on an account which was declared as NPA does not cease and for the convenience of the bank and particularly for the accounting purposes, the amount of interest due in such account is not shown therein and the details thereof are to be maintained in a separate account. However, recovery of interest from the defendants is not waived after classifying the account as NPA. As per S.2(g) of the Recovery of Debts and Bankruptcy Act, 1993, ‘debt’ means any liability which is inclusive of interest as well. Hence the contentions raised by the defendants are unsustainable. Issue No.(iv) is answered in favour of the applicant bank. Issue No.(v):

12. A perusal of the account statement marked as Ext.A14 would show that a sum of Rs.17,15,512/- is due as on 11.12.2014 in respect of the agricultural cash credit limit of Rs.8 lakhs availed by the defendants on 27.03.2006. Ext.A15 certificate produced by the applicant would reveal that rate of interest ranging from 11% to 16% was applied in the loan account. On perusal of the loan documents, it appears that the defendants agreed to pay interest @14.25% per annum with yearly rests or at such rate as may be prescribed by RBI and/or bank from time to time. The defendants could not prove that the interest charged in the account is against the terms and conditions of the loan agreement.

13. As per the provision of S.19(20) of the Recovery of Debts and Bankruptcy Act, 1993, which is analogous to S.34 of Civil Procedure of Code 1908, on filing of a suit/claim the contract between the parties comes to an end and the Court/Tribunal has a discretion to award rate of interest depending upon the circumstances of each case. The same principle has been laid down by the Hon'ble Apex Court in the case of Central Bank of India v.

Ravindra [(2002) 1 SCC 367]. Considering the amount advanced, interest applied, repayments effected and default committed and also the facility granted being an agricultural loan, it is conclusively held that the applicant bank is entitled to get the claim amount of Rs.17,15,512/- together with pendente lite and post decree interest thereon @6% per annum, which is reasonable in the facts and circumstances of the case. Issue No.(v) is answered accordingly.

14. 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.17,15,512/- (Rupees seventeen lakhs fifteen thousand five hundred and twelve only) due under agricultural cash credit account from the defendants and by sale of ‘A’ and ‘B’ schedule properties;

(ii) Pendente lite and post decree interest @6% per annum on the sum of Rs.17,15,512/- (Rupees seventeen lakhs fifteen thousand five hundred and twelve only) from 12.12.2014 till realization from the defendants and by sale of ‘A’ and ‘B’ schedule properties; and

(iii) costs and expenses borne by it for realization of the loan from the defendants.

15. ‘A’ and ‘B’ schedules to the OA shall be appended to this final order.

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

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

18. 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 20th day of April, 2026)

[SOVAN KUMAR DASH] PRESIDING OFFICER

A P P E N D I X Witness for Applicant: AW1: Sri.Thulaseedharan Pillai.C, Senior Manager and Principal Officer of the applicant bank.

Witness for Defendant(s): Nil

Applicant’s Exhibits

Ext.No Date Particulars of documents

A1 27.03.2006 Demand promissory note for Rs.8 lakhs executed by the defendants in favour of the applicant bank. A2 27.03.2006 Security delivery letter executed by the defendants in favour of the applicant bank. A3 27.03.2006 Agreement for agricultural loan executed by the defendants in favour of the applicant bank. A4 13.10.2009 Application for continuance of overdraft/cash credit/bill discounting facility submitted to the applicant by the defendants. A5 13.10.2009 Demand promissory note for Rs.8 lakhs executed by the defendants in favour of the applicant bank. A6

13.10.2009 Security delivery letter executed by the defendants in favour of the applicant bank. A7

13.10.2009 Agreement for agricultural loan executed by the defendants in favour of the applicant bank. A8

06.02.2001 Settlement deed No.193/2001. A9

21.03.2006 Release deed No.409/2006. A10 28.03.2006 Letter executed by the 1st defendant confirming the deposit of title deeds with the applicant bank. A11 12.03.2009 Balance confirmation letter executed by the defendants acknowledging the liability under the agricultural cash credit account. A12 01.10.2012 Balance confirmation letter executed by the defendants acknowledging the liability under the agricultural cash credit account.

A13 11.01.2013 Demand notice under S.13(2) of the SARFAESI Act issued to the defendants. A14 … Certified copy of the statement of account relating to the agricultural cash credit facility. A15 11.12.2014 Certificate showing the rate of interest applied in Ext.A14 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 20th April, 2026

TA No.810/2016 (OA No.624/2014)

Between

The Federal Bank Ltd., Registered Office: Aluva, Branch: Amboori, Powthil Building, Amboori.P.O., Thiruvananthapuram. …Applicant

And

Ajaya Kumar.V, S/o.Vasu Pillai, Flat No.5, Charis Plaza, Kattakada P.O., Thiruvananthapuram District. Also at: Lalitha Vilasam, Kalipara, Neyyar Dam P.O., Thiruvananthapuram & another. …Defendants