FEDERAL BANK vs P B SURESHKUMAR on 24 July 2026

1. P.B.Suresh Kumar,

S/o.Sri.P.V.Bhanu Panicker,

Pushpamangalam House,

Punalur P.O.

2. P.B.Chandrababu,

S/o.Sri.P.V.Bhanu Panicker,

Pushpamangalam House,

Punalur P.O.

…Defendants

This Original Application having been heard on 09.07.2026 in the presence of Advocate Sri.Saju N.A. for the applicant bank and Advocate Smt.Vanaja Kumari 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.13,66,173/- due under IPS loan account together with future interest thereon @17.25% per annum and penal interest @2% per annum with monthly rests from the defendants jointly and severally and by sale of ‘A’ and ‘B’ schedule properties to the OA. 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 Punalur.

3. The defendants 1 and 2 were enjoying credit facilities from the applicant bank from 1983 onwards. In the year 1995, at the request of the defendants, the existing limits were rescheduled and granted two loans of Rs.7,78,491/- and Rs.1,11,933/- under the Installment Payment Scheme (for short ‘IPS’). The limits were availed by the defendants on 28.02.1995 after executing necessary security documents. The IPS loan of Rs.1,11,933/- was closed subsequently. Towards collateral security for the IPS loan of Rs.7,78,491/-, defendants 1 and 2

extended the mortgage already created over ‘A’ and ‘B’ schedule properties to the OA and executed letters dated 01.03.1995 confirming the deposit of title deeds with the applicant bank and the extension thereof. The defendants remitted the installments as per the agreement up to 2001 but thereafter they did not keep up the accounts in order. Despite lawyer notice was issued to the defendants calling upon them to repay the outstanding dues, they did not clear the liability. In such premises, the applicant was constrained to file the OA claiming the following reliefs:

(i) To recover the sum of Rs.13,66,173/- together with pendente lite and post-decree interest thereon from the defendants jointly and severally and by sale of the OA 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.

4. The defendants 1 and 2 filed separate written statements disputing the claim made by the applicant bank. It is contended that the applicant is neither entitled to receive any amount from the defendants nor entitled to hold the security documents and the OA is liable to be dismissed with costs. Proof Affidavit:

5. To establish the claim on behalf of the applicant bank, one Mr.Kunjappan P.V., Senior Manager of the bank has filed proof affidavit and additional proof affidavit and produced the loan documents marked as Exhibits A1 to A18. The availing of the loan is well established from the documents placed by the applicant bank.

6. The defendants filed counter proof affidavit denying all the averments and claimed that if the account is properly scrutinized and the amount receivable from the bank as rent of the building occupied by them is adjusted, there is no amount actually due to the bank under the loan account. Hence the OA may be dismissed.

7. Heard arguments advanced by the learned counsel for the applicant bank and defendants.

8. The sole issue arises for consideration is whether the applicant is entitled to recover the amount as claimed in this case?

9. On perusal of records, it could be discerned that the defendants had availed the subject loan of Rs.7,78,491/- from the applicant bank on 28.02.1995 after executing Ext.A3 demand promissory note, Ext.A4 security delivery letter and Ext.A5 installment payment agreement in favour of the bank. Further, it could be seen that defendants 1 and 2 had executed letters dated 01.03.1995 marked as Exts.A11 and A12 confirming the deposit of respective title deeds relating to the OA schedule properties with the applicant bank on 09.06.1983 and the extension thereof to secure the rescheduled limits aggregating to Rs.8,90,484/-. Thereafter, the defendants have executed Ext.A13 balance confirmation letter dated 29.10.2001 confirming the balance outstanding under the subject loan account i.e., Rs.8,02,009/- as on 29.10.2001 and acknowledging the securities furnished by them. No dispute is raised by the defendants regarding execution of the aforesaid documents.

10. Pending the OA, the defendants deposited Rs.27.25 lakhs by way of FDR with the applicant bank on 06.03.2007 pursuant to the order of the Hon'ble High Court of Kerala in W.P.(C) No.4411/2007 and the title deeds marked as Exts.A9 and A10 relating to the subject matter properties were returned to the applicant. In such backdrop, the defendants cannot claim and contend that no amount is due to the bank under the subject loan account on the date of filing of this case. A sum of Rs.13,66,173/-

(which includes Rs.3,064/- being the effect of capitalization of penal interest) is outstanding under the IPS loan account as on 17.08.2004, which is clearly established from the account statement marked as Ext.A15. Hence the applicant is entitled to recover the sum of Rs.13,63,109/- (i.e., after excluding the capitalized penal interest of Rs.3,064/- from the OA claim amount of Rs.13,66,173/-) from the defendants as on 17.08.2004. The issue is answered accordingly.

11. It could be discernible from the additional proof affidavit filed by the applicant bank that while the secured assets were taken possession by the bank under S.13(4) of the SARFAESI Act, the defendants preferred W.P.(C) No.4411/2007 before the Hon'ble High Court of Kerala wherein the Hon'ble High Court has passed the following order on 01.03.2007: “The petitioner undertakes to deposit the entire outstanding under protest and subject to the result of this Writ Petition. Such deposit shall be made within one week from now, to the Federal Bank Ltd. The Registrar/Officer-in-charge, DRT will, on production of a copy of this order and proof of deposit as aforesaid, release the documents to the Bank, for such documents to be released to the petitioner, without prejudice to the contention of the Bank.”

Pursuant to the aforesaid order, the defendants deposited an FDR No.4465823 for Rs.27,25,000/- with the applicant bank on 06.03.2007. The applicant bank issued a letter dated 06.03.2007 to the Registrar, DRT, Ernakulam which reads as follows:

“This is to certify that the Bank has received in deposit of an amount of Rs.2725000/- (Twenty seven lakhs twenty five thousand only) being the outstanding dues till date under the captioned suit pending at DRT, as per FDR No.4465823 dated 6/03/2007 for Rs.27,25,000/- in compliance of the Hon'ble High Court Order No.4411/07 dt. 1/3/07.”

On production of the order dated 01.03.2007 of the Hon'ble High Court and on receipt of the letter dated 06.03.2007 of the applicant bank, the Tribunal returned sale deed No.3085/1972 and sale deed No.1831/1980 marked as Exts.A9 and A10 respectively to the applicant bank on 13.03.2007 in compliance with the direction of the Hon'ble High Court.

12. Subsequently, the writ petition bearing W.P.(C) No.4411/2007 was closed by the Hon'ble High Court vide judgement dated 08.07.2010 wherein it is held as follows: “The learned counsel for the Bank submits that, pursuant to the interim orders passed by this Court, the entire amount has already been deposited by the petitioners and title deeds have already been returned. It is also brought to the notice of this Court that the matter is pending further consideration before the DRT with regard to the dispute over `interest'.

2. In the above circumstances, nothing further requires to be considered in the present writ petition, which is closed accordingly, however reserving the rights and liberties of the parties to move the DRT in accordance with law, if any grievance is still subsisting.”

13. Thereafter, as per the direction of the Tribunal, the applicant bank filed a memo on 13.10.2014 along with a statement dated 07.10.2014 which would reveal that ‘deposit closure proceeds’ of Rs.45,50,389/- was credited into the subject loan account on 28.09.2013 and further claimed therein that balance due as on 30.09.2014 is Rs.39,29,494/-. As per the letter dated 06.03.2007 of the applicant bank, FDR for Rs.27,25,000/- was deposited by the defendants on 06.03.2007 in compliance with the order dated 01.03.2007 in W.P.(C) No.4411/2007 of the Hon'ble High Court of Kerala; and the writ petition was closed on 08.07.2010. The applicant has not stated any reason for giving credit of the ‘deposit closure proceeds’ on a later date on 28.09.2013.

14. The statement marked as Ext.A16 would show that the applicant bank has charged a sum of Rs.22,541/- by way of penal interest in the IPS loan account and Rs.3,064/- as further interest thereon in view of capitalization in the said 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 recover the aforesaid sum of Rs.3,064/- debited as interest on capitalization of penal interest in the IPS loan account and cannot claim any pendente lite and post-decree interest on the aforesaid penal interest of Rs.22,541/- charged in the loan account.

15. Considering the amount advanced, interest and penal interest applied and default committed and also the applicant has admitted in their letter dated 06.03.2007 addressed to the Registrar, DRT, Ernakulam that ‘bank has received an amount of Rs.27.25 lakhs being the outstanding dues till date’ and submitted before the Hon'ble High Court of Kerala that the matter is pending before the DRT only with regard to the dispute over ‘interest’ vide judgement dated 08.07.2010 in W.P.(C) No.4411/2007, I am of the view that the applicant bank is entitled to get a sum of Rs.13,63,109/- (i.e., after excluding the capitalized penal interest of Rs.3,064/- from the OA claim amount of Rs.13,66,173/-) in the IPS loan account together with pendente lite and post decree interest @10% per annum on the sum of Rs.13,40,568/- (i.e., after excluding the penal interest of Rs.22,541/- from Rs.13,63,109/-), which is reasonable in the facts and circumstances of the case and the applicant bank is not entitled to get pendente lite and future interest @19.25% per annum with monthly rests as per the memo filed on 13.10.2014 which is unreasonable and unjustifiable.

16. 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.13,63,109/- (Rupees thirteen lakhs sixty-three thousand one hundred and nine only) due under the IPS loan account, less the ‘deposit closure proceeds’ of Rs.45,50,389/- (Rupees forty five lakhs fifty thousand three hundred and eighty nine only) appropriated by the applicant bank in the loan account on 28.09.2013, from the defendants jointly and severally;

(ii) pendente lite and post-decree interest @10% per annum on the sum Rs.13,40,568/- (Rupees thirteen lakhs forty thousand five hundred and sixty-eight only) from 18.08.2004 till realization from the defendants jointly and severally; and

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

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. The Recovery Officer shall direct the applicant bank to file a fresh calculation sheet based upon the interest awarded in this TA (OA). If there is any amount in excess after full satisfaction, the RC be returned to this Tribunal to pass order for refund of the excess amount to the defendants. The process shall be completed within two months from the date of receipt of RC.

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 24th day of July, 2026)

[SOVAN KUMAR DASH] PRESIDING OFFICER

A P P E N D I X Witness for Applicant: AW1: Sri.Kunjappan P.V., Senior Manager of the applicant bank. Witness for Defendant(s): Nil

Applicant’s Exhibits

Ext.No Date Particulars of documents

A1 10.06.1983 Letter executed by the 1st defendant confirming the deposit of title deed with the applicant bank. A2 10.06.1983 Letter executed by the 2nd defendant confirming the deposit of title deed with the applicant bank. A3 28.02.1995 Demand promissory note for Rs.7,78,491/- executed by the defendants. A4 28.02.1995 Security delivery letter executed by the defendants. A5 28.02.1995 Instalment payment agreement executed by the defendants A6 28.02.1995 Demand promissory note for Rs.1,11,993/- executed by the defendants. A7 28.02.1995 Security delivery letter executed by the defendants. A8 28.02.1995 Instalment payment agreement for Rs.1,11,993/- executed by the defendants A9 22.12.1972 Sale deed No.3085/1972 [Returned to the applicant bank]. A10 29.05.1980 Sale deed No.1831/1980 [Returned to the applicant bank]. A11 01.03.1995 Letter executed by the 1st defendant confirming the deposit of title deeds with the applicant bank and the extension thereof. A12 01.03.1995 Letter executed by the 2nd defendant confirming the deposit of title deeds with the applicant bank and the extension thereof. A13 29.10.2001 Balance confirmation letter executed by the defendants acknowledging the liability under the IPS loan account.

A14 13.07.2004 Copy of lawyer notice issued to the defendants by the applicant bank. A15 … Certified copy of the statement of account relating to the IPS loan. A16 14.08.2004 Statement showing the penal interest charged in the loan account and capitalization value thereof. A17 14.08.2004 Statement showing the rate of interest applied in the loan account from time to time. A18 01.11.1987 Copy of letter issued to the applicant bank by the defendants.

Defendants’ Exhibits – Nil

PRESIDING OFFICER

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

Dated the 24th July, 2026

TA No.1269/2016 (OA NO.309/2004)

Between

The Federal Bank Ltd., Registered Office: Aluva, Branch: Punalur. Also at: Asset Recovery Branch, Federal Towers, Marine Drive, Ernakulam, Kochi.

…Applicant

And

P.B.Suresh Kumar, S/o.Sri.P.V.Bhanu Panicker, Pushpamangalam House, Punalur P.O. & another.

…Defendants

F I N A L O R D E R