FEDERAL BANK vs K.M BIJU on 29 May 2026

1. K.M.Biju (Died),

S/o.Mani,

Kizhakkethil House,

Annyartholu P.O.,

Vandanmedu,

Idukki District – 685 551.

2. Shyja Biju,

W/o.late K.M.Biju,

Kizhakkethil House,

Annyartholu P.O.,

Vandanmedu,

Idukki District – 685 551.

…Defendants

3. Ananthakrishnan,

S/o.late K.M.Biju,

Kizhakkethil House,

Annyartholu P.O.,

Vandanmedu,

Idukki District – 685 551.

4. Nandhakrishnan,

S/o.late K.M.Biju,

Kizhakkethil House,

Annyartholu P.O.,

Vandanmedu,

Idukki District – 685 551.

…Additional defendants [Additional defendants 3 and 4 were impleaded as legal heirs of deceased 1st defendant as per order dated 26.05.2016 in IA No.2162/2014]

This Original Application having been heard on 06.05.2026 in the presence of Advocate Sri.Vinod Jabar for the applicant bank 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.9,24,590.82 due under federal housing loan account together with further interest thereon @22.70% per annum with monthly rests from the defendants jointly and severally and by sale of ‘A’ to ‘C’ schedule properties; and the sum of Rs.7,88,290/- due under agricultural cash credit loan account together with further interest thereon @16% per annum with quarterly rests from the defendants jointly and severally and by sale of ‘A’ to ‘C’ schedule properties.

Facts of the case:

2. The applicant is a banking company registered under the Companies Act, 1949 having its registered office at Aluva and one of its branches at Puttadi in Idukki District.

3. At the request of the defendants, applicant bank sanctioned a federal housing loan (FHS) of Rs.10,27,348/- which was availed by them on 01.10.2007 after executing demand promissory note, security delivery letter and housing loan agreement in favour of the bank. As security for the FHS loan, the 1st defendant created mortgage over ‘A’ to ‘C’ schedule properties and executed letter dated 03.10.2007 confirming the deposit of title deeds with the applicant bank on 01.10.2007. In December, 2008, the defendants approached the applicant bank for an agricultural cash credit (ACC) loan of Rs.3 lakhs for seasonal agricultural operations which was sanctioned by the bank. The said facility was renewed and enhanced to Rs.6 lakhs on 03.12.2009. The defendants availed the enhanced facility after executing necessary security documents. The 1st defendant extended the benefit of mortgage already created over ‘A’ to ‘C’ schedule properties to secure the enhanced ACC limit. After availing the loans, the defendants failed to remit the installments in terms of the loan agreements. Hence the applicant issued a lawyer notice dated 20.10.2011 calling upon the defendants to settle the entire liability due under the loan accounts but they did not remit the dues. In such premises, the applicant was constrained to file the OA claiming the following reliefs:

(i) To recover an aggregate sum of Rs.17,12,880.82 together with pendente lite and post-decree interest thereon from the defendants jointly and severally and by sale of ‘A’ to ‘C’ 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. The defendants filed written statement disputing the interest charged in the housing loan account. It is claimed that they had already remitted Rs.13,77,053/- in the housing loan account as against the loan amount of Rs.10,27,348/-. The agricultural loan was sanctioned to adjust the said amount towards the housing loan account and no payment was made to the defendants. The agreed rate of interest was only 11% per annum and the claim for future interest @22.70% per annum and @16% per annum is totally illegal and unsustainable. The applicant is not entitled to get any of the reliefs claimed in the OA and the same is liable to be dismissed with costs.

5. Pending the OA, the 1st defendant died and additional defendants 3 and 4 were impleaded as his legal heirs as per order dated 26.05.2016 in IA No.2162/2014.

6. Subsequently, the learned counsel appearing for the 2nd defendant, who was appointed as guardian of minor additional defendants 3 and 4, reported ‘no instruction’ vide proceeding dated 03.10.2016. As there was no representation for the 2nd defendant, she was set exparte on 03.10.2016.

7. The court guardian of minor defendants 3 and 4 filed written statement admitting the availing of loans by the father of these defendants. It is claimed that proceeds of the loans were not utilized for the exclusive benefit of the minor children and hence they are not liable to repay the loan. In view of the above, additional defendants 3 and 4 may be exonerated from the liability and the OA may be dismissed as against them.

8. After attaining majority, additional defendants 3 and 4 were served with summons but they did not appear and nor were they represented in this proceeding.

Proof Affidavit:

9. To establish the claim on behalf of the applicant bank, one Mr.Nagendra Pillai P. and Mr.P.T.Abraham, Senior Managers of the bank have filed proof affidavit and additional proof affidavit respectively and produced the loan documents marked as Exhibits A1 to A19. The proof affidavit filed by AW1 and the documents produced in this case are not challenged by the defendants.

10. Heard arguments advanced by the learned counsel for the applicant and perused the records of the case. The sole issue arises for consideration is whether the applicant is entitled to recover the amount claimed in this case from the defendants?

11. The materials on record would show that defendants 1 and 2 availed the subject loans from the applicant bank after executing the security documents marked as Exts.A1 to A3 and A8 to A10. The title deeds relating to the subject matter properties marked as Ext.A4 to A6 were deposited by the 1st defendant with the applicant bank on 01.10.2007 to secure the federal housing loan and thereafter the benefit of mortgage created over the said properties was extended to secure the agricultural cash credit limit of Rs.6 lakhs vide letters of extension of mortgage dated 02.12.2008 and 04.12.2009 marked as Exts.A11 and A12. While availing the housing loan, rate of interest applicable for the federal housing loan was 12% per annum with monthly rests vide Ext.A3 and 11% per annum with quarterly rests in respect of the agricultural cash credit facility vide Ext.A8 which is seen enhanced from time to time and now the applicant is claiming interest @22.70% per annum with monthly rests in respect of the housing loan and @14% per annum with quarterly rests for agricultural loan. According to the applicant bank, rate of interest specified above was applied on account of revision in the prime lending rate of the bank and there is no illegality in applying such interest rates in the loan accounts.

12. There is no dispute with regard to the availing of the subject loans from the applicant bank. Evidently, the security documents were executed by defendants 1 and 2 and mortgage was created over ‘A’ to ‘C’ schedule properties to secure the loans. Though the defendants had raised the contention of charging of exorbitant rate of interest as against the agreed rate, they have not adduced any documentary evidence to contradict the claim of the applicant. It is claimed by the applicant that an aggregate sum of Rs.17,12,880.82 is outstanding under the loan accounts as on 27.06.2012, which is established from the account statements marked as Exts.A15 and A16. In the above circumstance, the applicant is entitled to recover the said amount from the 2nd defendant and by sale of the mortgaged properties.

13. The statement marked as Ext.A19 would show that the applicant bank has charged a sum of Rs.4,388/- by way of penal interest in the FHS loan account. It is well settled that penal interest cannot be capitalized and no interest can be charged on penal interest and hence the applicant bank is not entitled to get any pendente lite and post-decree interest on the aforesaid amount charged in the loan account.

14. Considering the amount advanced, interest and penal interest applied, repayments effected and default committed and also the facilities granted being housing loan and agricultural loan, I am of the view that the applicant bank is entitled to get pendente lite and post decree interest @9% per annum on the sum of Rs.9,20,202.82 (i.e., after excluding the penal interest of Rs.4,388/- from the OA claim amount of Rs.9,24,590.82) in the FHS loan account and @6% per annum on the sum of Rs.7,88,290/- (no penal interest is charged in this account) in the ACC loan account, which is reasonable in the facts and circumstances of the case. The issue is answered accordingly.

15. 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.9,24,590.82 (Rupees nine lakhs twenty four thousand five hundred and ninety and Paise eighty two only) due under the FHS loan account together with pendente lite and post-decree interest on the sum of Rs.9,20,202.82 (Rupees nine lakhs twenty thousand two hundred and two and Paise eighty two only) @9% per annum from 29.06.2012 till realization from the 2nd defendant and by sale of ‘A’ to ‘C’ schedule properties; in case of any shortfall, the same shall be recovered from the assets, if any, inherited by the 2nd defendant as well as additional defendants 3 and 4 from the deceased 1st defendant;

(ii) the sum of Rs.7,88,290/- (Rupees seven lakhs eighty eight thousand two hundred and ninety only) due under the ACC loan account together with pendente lite and post-decree interest thereon @6% per annum from 29.06.2012 till realization from the 2nd defendant and by sale of ‘A’ to ‘C’ schedule properties; in case of any shortfall, the same shall be recovered from the assets, if any, inherited by the 2nd defendant as well as additional defendants 3 and 4 from the deceased 1st defendant; and

(iii) costs and expenses borne by it for realization of the loans from the 2nd defendant.

16. ‘A’ to ‘C’ schedules to the OA shall be appended to this final order.

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

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

19. 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 29th day of May, 2026)

[SOVAN KUMAR DASH] PRESIDING OFFICER

A P P E N D I X Witness for Applicant: AW1: Sri.Nagendra Pillai P., Senior Manager of the applicant bank. AW2: Sri.P.T.Abraham, Senior Manager of the applicant bank.

Witness for Defendant(s): Nil

Applicant’s Exhibits

Ext.No. Date Particulars of documents

A1 01.10.2007 Demand Promissory Note for Rs.10,27,348/- executed by the defendants in favour of the applicant bank. A2 01.10.2007 Security delivery letter executed by the defendants in favour of the applicant bank. A3 01.10.2007 Federal housing scheme agreement executed by the defendants in favour of the applicant bank. A4 17.07.2007 Sale deed No.1312 of Udumbanchola SRO. A5 29.06.2007 Settlement deed No.1313 of Udumbanchola SRO. A6

29.06.2007 Settlement deed No.1314 of Udumbanchola SRO. A7

03.10.2007 Letter executed by the 1st defendant confirming the deposit of title deeds with the applicant bank. A8

03.12.2009 Demand Promissory Note for Rs.6 lakhs executed by the defendants in favour of the applicant bank. A9

03.12.2009 Security delivery letter executed by the defendants in favour of the applicant bank. A10 03.12.2009 Agreement for agricultural loans executed by the defendants in favour of the applicant bank. A11 02.12.2008 Letter executed by the 1st defendant confirming the deposit of title deed with the applicant bank and the extension thereof. A12 04.12.2009 Letter executed by the 1st defendant confirming the deposit of title deed with the applicant bank and the extension thereof.

A13 02.08.2011 Balance confirmation letter executed by the defendants confirming the balance under the loan accounts. A14 20.10.2011 Copy of lawyer notice issued to the defendants by the applicant bank calling upon them to pay the amounts due. A15 ... Certified copy of the statement of account relating to the FHS loan. A16 ... Certified copy of the statement of account relating to the ACC limit. A17 ... Statement showing the rate of interest applied in the FHS loan account from time to time. A18 ... Statement showing the rate of interest applied in the ACC loan account from time to time. A19 ... Statement showing the penal interest charged in the FHS loan account.

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 29th May, 2026

TA No.179/2017 (OA NO.290/2012)

Between

The Federal Bank Ltd., Puttadi Branch, Bank Junction, Puttadi, Vandanmedu – 685 551, Idukki District. …Applicant

And

K.M.Biju (Died), S/o.Mani, Kizhakkethil House, Annyartholu P.O., Vandanmedu, Idukki District – 685 551 & 3 others.

…Defendants

F I N A L O R D E R