FEDERAL BANK vs MS Maharaja Timbers on 11 August 2026

1. M/s.Maharaja Timbers,

XX/1, Pulloot, Kodungallur.

2. E.S.Abdul Nazar,

S/o.late E.K.Saidu Mohamed,

Edavanakatt House,

Methala Village,

Kodungallur Taluk.

3. E.S.Shamsudheen,

S/o.late E.K.Saidu Mohamed,

Edavanakatt House,

Edavilangu P.O.

4. E.S.Mohammed Sheriff,

S/o.E.S.Shamsudeen,

Edavanakatt House,

Edavilangu P.O.,

Kodungallur.

5. E.S.Abdul Gafoor,

S/o.late E.K.Saidu Mohamed,

Edavanakatt House,

Methala Village,

Kodungallur Taluk.

6. E.S.Mohammed Shegin,

S/o.E.S.Shamsudheen,

Edavanakatt House,

Edavilangu P.O., Kara,

Kodungallur Taluk.

7. P.C.Thahira,

W/o.Abdul Gafoor,

Edavanakatt House,

Methala, Kodungallur.

8. Khadeeja,

W/o.late E.K.Saidu Mohammed,

Edavanakatt House,

Methala Village,

Kodungallur Taluk.

…Defendants

This Original Application having been heard on 08.07.2026 in the presence of Advocate Smt.Keerthi K.Narayan for the applicant bank and Advocate Sri.Akash George, representing counsel for M/s.Sheriff Associates, for defendants 2, 5, 7 and 8 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.90,20,064.30 due under cash credit account together with future interest on the sum of Rs.81,61,646.30 @16% per annum with monthly rests and penal interest @2% per annum from the defendants jointly and severally and by sale of item Nos.2, 3 and 4 properties scheduled to the OA. Facts of the case:

2. The applicant is a banking company registered under the Companies Act, 1956 having its registered office at Aluva and a branch among other places at Kodungallur in Thrissur District. 3.1 The 1st defendant is a partnership firm and defendants 2 to 5 are its partners. The defendants 1 to 5 applied for a cash credit facility of Rs.75 lakhs which was sanctioned by the bank. Defendants 6 to 8 are the co-obligants to the loan availed by defendants 1 to 5. Having sanctioned the facility, the defendants have executed necessary security in favour of the bank. As primary security for the loan, the defendants have hypothecated stock of all types of timbers, wooden furniture etc. with the bank. Towards collateral security, defendants 2 to 8 have created equitable mortgage over their respective properties scheduled to the OA and executed letters dated 21.12.2002 confirming the deposit of title deeds with the applicant bank. The defendants operated the account and availed the facility but committed default in repayment. Despite lawyer notice dated

19.03.2005 was issued to the defendants calling upon them to repay the outstanding dues, they did not settle the liability. 3.2 Consequently, the applicant-initiated recovery proceeding under the provisions of the SARFAESI Act and 27 cents in Sy.No.561/1 (OA schedule item No.1 property) and 20 cents in Sy.No.561/1 (OA schedule item No.5 property) were sold for Rs.26 lakhs and Rs.19.50 lakhs respectively. The applicant has also recovered an amount of Rs.2.25 lakhs by sale of the hypothecated movables by proceeding under the SARFAESI Act. After appropriation of the sale proceeds, an amount of Rs.92,80,795/- (which is inclusive of the capitalized portion of penal interest) is due as on 24.04.2008. Being unable to recover the said amount, the applicant was constrained to file the OA claiming the following reliefs:

(i) To recover the sum of Rs.90,20,064.30 together with pendente lite and post-decree interest on the sum of Rs.81,61,646.30 from the defendants jointly and severally and by sale of item Nos.2, 3 and 4 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. Despite service of summons, the 1st defendant did not appear in this case and it was set exparte on 01.07.2008. Defendants 3, 4 and 6 entered appearance and sought adjournment for filing written statement but they did not file written statement and remained absent from the proceeding and hence they were set exparte on 18.03.2014. 5.1 Defendants 2, 5, 7 and 8 filed written statement contending inter alia that once the proceedings were initiated under the SARFAESI Act and some of the properties were sold, the remedy available to the applicant is to file an application under S.13(10) of the SARFAESI Act, 2002 and hence the OA filed under S.19 of the Recovery of Debts and Bankruptcy Act, 1993 is not maintainable. It is claimed that the 1st defendant firm had availed an overdraft facility of Rs.75 lakhs from the applicant bank and five items of properties were mortgaged to the bank. As the entire funds and materials of the 1st defendant firm were diverted by defendants 3, 4 and 6 for the benefit of another firm viz., Mahima Timbers, the 1st defendant sustained huge financial loss and it affected the repayment of the credit facility granted by the applicant bank. 5.2 It is also contended by defendants 2, 5, 7 and 8 that the applicant bank initiated recovery proceeding under the SARFAESI Act and the sale notice issued by the bank was challenged by filing SA No.35/2006 under S.17 of the SARFAESI Act but the same was dismissed by holding that the appeal is time barred. Thereafter tenders submitted by the mother-in-law of the 4th defendant was accepted in respect of three items of properties in the sale notice. Aggrieved by the same, defendants 2 and 5 filed W.P.(C) No.16379/2007 before the Hon'ble High Court of Kerala but the writ petition was dismissed by judgment dated 19.07.2007. Thereafter, the auction purchaser deposited the balance consideration amount in respect of two items of properties, wherein the firm was functioning and the sale was confirmed. The timbers were brought to sale for a meagre sum of Rs.2,24,125/-. These defendants have managed to obtain a valuation report from Divisional Forest Officer, Perumbavoor and on comparison of the same with the valuation taken by the bank, the illegality committed by the bank was revealed. If the applicant has conducted sale of the properties after giving due publicity and after taking proper valuation, the entire liability could have been wiped off. In the above circumstance, the OA may be dismissed with compensatory costs to these defendants. Proof Affidavit:

6. To establish the claim on behalf of the applicant bank, one Mr.Haridas T.T., Chief Manager and Mr.Akhil Babu, Associate Vice President of the bank have filed proof affidavit and additional proof affidavit respectively and produced the loan documents marked as Exhibits A1 to A16. The availing of the loan is well established from the documents placed by the applicant bank.

7. The defendants 2, 5, 7 and 8 filed counter proof affidavit reiterating the same averments in their written statement and the documents produced by them are marked as Exts.B1 to B8.

8. Heard arguments advanced by the learned counsel for applicant bank and defendants 2, 5, 7 and 8.

9. The sole issue arises for consideration is whether the applicant is entitled to get the relief as claimed in this case?

10. On careful consideration of the submissions and the materials available on record, it appears that the contesting defendants 2, 5, 7 and 8 have admitted the availing of the subject loan of Rs.75 lakhs from the applicant bank and creation of hypothecation charge over movable assets of the 1st defendant firm and equitable mortgage over five items of immovable properties. It is also their admitted case that due to some unforeseen circumstances, there occurred some default in repayment of the loan.

11. The contention of the defendants that the OA ought to have been filed under S.13(10) of the SARFAESI Act is not sustainable for the reason that the entire properties given as security for the subject loan were not sold under the SARFAESI Act. Sub-section (10) of Section 13 of the SARFAESI Act enables the secured creditor to file an application to the Debts Recovery Tribunal having jurisdiction or to a competent court, as the case may be, for recovery of the balance due if the outstanding debt is not satisfied by sale proceeds of the secured assets. In the instant case, admittedly, only the hypothecated assets and two items of mortgaged properties were sold and other three items of mortgaged properties were available at the time of filing of the OA. In such circumstance, the OA filed under S.19(1) of the Recovery of Debts and Bankruptcy Act is maintainable before the Tribunal. The securitization proceedings initiated by the Authorised Officer of the applicant bank cannot be challenged in a recovery application filed under S.19(1) of the Recovery of Debts and Bankruptcy Act. The documents produced by the defendants themselves would reveal that challenge made against the sale proceedings before the Tribunal as well as before the Hon'ble High Court of Kerala did not suceed. All the contentions raised by defendants 2, 5, 7 and 8 are quite misconceived and unfounded.

12. The documents marked as Exts.A1 to A15 would establish the claim made by the applicant bank in this case. As on 24.04.2008, a sum of Rs.90,20,064.30 (excluding the capitalized portion of penal interest of Rs.2,60,731/- from the total outstanding dues of Rs.92,80,795.30) is outstanding under the cash credit account as on 24.04.2008, which is clearly established from the account statements marked as Ext.A13 and A14. In view of the above, applicant bank is entitled to recover the aforesaid amount from the defendants and the issue is answered in favour of the bank.

13. Pending the OA, applicant bank filed IA No.2834/2018 claiming that the 5th defendant remitted Rs.81 lakhs on 30.08.2018 for release of item No.4 property scheduled to the OA and sought for release of sale deed No.218/1993 of Kodungallur SRO marked as Ext.A7. The said IA was allowed by the Tribunal on 06.12.2018 and the sale deed was returned to the applicant bank on 07.12.2018.

14. Considering the amount advanced, interest and penal interest applied, repayments effected and default committed, I am of the view that the applicant bank is entitled to get pendente lite and post decree interest @12% per annum, which is reasonable in the facts and circumstances of the case.

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.90,20,064.30 (Rupees ninety lakhs twenty thousand sixty-four and Paise thirty only) due under the cash credit account, less the sum of Rs.81,00,000/- (Rupees eighty-one lakhs only) received by the applicant bank on 30.08.2018, from the defendants jointly and severally and by sale of item Nos.2 and 3 schedule properties;

(ii) pendente lite and post-decree interest @12% per annum on the sum of Rs.81,61,646.30 (Rupees eighty-one lakhs sixty-one thousand six hundred forty-six and Paise thirty only) from 25.04.2008 till realization from the defendants jointly and severally and by sale of item Nos.2 and 3 schedule properties; and

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

16. Item Nos.2 and 3 schedule properties 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 11th day of August, 2026)

[SOVAN KUMAR DASH] PRESIDING OFFICER

A P P E N D I X Witness for Applicant: AW1: Sri.Haridas T.T., Chief Manager of the applicant bank. AW2: Sri.Akhil Babu, Associate Vice President of the applicant bank. Witness for Defendant(s): Nil

Applicant’s Exhibits

Ext.No Date Particulars of documents

A1 20.12.2002 Demand promissory note for Rs.75 lakhs executed by the defendants. A2 20.12.2002 Security delivery letter executed by the defendants. A3 20.12.2002 Agreement of cash credit executed by the defendants. A4 27.10.1998 Sale deed No.3336/1998 of Kodungallur SRO. A5 19.01.2000 Sale deed No.187/2000 of Kodungallur SRO. A6 21.12.2002 Letter executed by defendants 4 and 6 confirming the deposit of title deeds with the applicant bank. A7 05.11.1993 Sale deed No.218/1993 of Kodungallur SRO. [Returned to the applicant bank] A8 21.12.2002 Letter executed by defendants 5 and 7 confirming the deposit of title deeds with the applicant bank. A9 31.12.2003 Balance confirmation letter executed by the defendants acknowledging the liability under the cash credit account. A10 30.04.2005 Balance confirmation letter executed by the defendants acknowledging the liability under the cash credit account. A11 19.03.2005 Copy of lawyer notice issued to the defendants. A12 25.07.2005 Copy of lawyer notice issued to the defendants. A13 … Certified copy of the statement of account relating to the cash credit facility. A14 24.04.2008 Statement showing the penal interest charged in Ext.A13 account and capitalization value thereof.

A15

24.04.2008

Statement showing the rate of interest applied in Ext.A13 account from time to time. A16 … Statement showing the deposit of Rs.81 lakhs by the 4th defendant.

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 11th August, 2026

TA No.1420/2016 (OA NO.136/2008)

Between

The Federal Bank Ltd., Kodungallur, Thrissur District.

…Applicant

And

M/s.Maharaja Timbers, XX/1, Pulloot, Kodungallur & 7 others.

…Defendants

F I N A L O R D E R