FEDERAL BANK vs Thomas P Mathew on 8 September 2026

1. Thomas P.Mathew,

Sole Proprietor of

M/s.Panamthottathil Distributors, Pazhavangadi, Ranni, Pathanamthitta. S/o.P.V.Mathew, Panamthottathil House, Naranammoozhy P.O., Athikkayam, Ranni Taluk, Pathanamthitta District.

2. Annamma Varghese, W/o.Varghese Philip, Vembalil House, Naranammoozhy P.O., Athikkayam, Ranni Taluk, Pathanamthitta District.

3. Shaji P.John, S/o.P.E.Yohannan, Panamthottathil House, Naranammoozhy P.O., Athikkayam, Ranni Taluk, Pathanamthitta District.

…Defendants

This Original Application having been heard on 15.07.2026 in the presence of Advocate Shri.Akshay Gopal, representing counsel for Advocate Shri.K.N.Sivasankaran for the applicant bank and Advocate Shri.M.S.Kalesh, representing counsel for Advocate Shri.M.Ramaswamy Pillai for the 2nd defendant 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.32,77,302.92 due under OD/CC account together with future interest thereon @19% per annum with monthly rests from defendants 1 and 2 jointly and severally and by sale of the schedule properties. 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 Pazhavangadi in Pathanamthitta District. 3.1 At the request of the 1st defendant, applicant bank granted a cash credit limit of Rs.10 lakhs to him on 01.12.2005

for augmenting his business after executing necessary security documents. Towards collateral security for the cash credit facility, the 1st defendant created equitable mortgage over ‘A’ schedule property and executed letter dated 02.12.2005 confirming the deposit of title deed with the applicant bank. Subsequently, at the request of the 1st defendant, cash credit limit was enhanced to Rs.20 lakhs on 29.06.2006 and the 2nd defendant is the co- borrower for such enhanced limit, and both the defendants executed the loan documents on the aforesaid date. For further securing the enhanced cash credit limit, the 2nd defendant created equitable mortgage over ‘B’ schedule property and executed letter dated 30.06.2006 confirming the deposit of title deed and creation of mortgage with the applicant bank. Besides the same, the 1st defendant extended the benefit of mortgage already created over ‘A’ schedule property and executed letter dated 30.06.2006 confirming the extension of mortgage. The cash credit limit was renewed on 18.10.2007. 3.2 After availing the loan, defendants 1 and 2 defaulted in repayment and the account was classified as NPA on 30.09.2008. Consequently, applicant bank issued a lawyer notice dated 22.10.2008 calling upon defendants 1 and 2 to repay the outstanding dues. As they did not settle the dues, securitization proceeding was initiated and took possession of ‘B’ schedule property on 30.04.2010. Later enquiries revealed that a portion of the property mortgaged by the 1st defendant was purchased by the 3rd defendant and hence he is impleaded in this case. Being unable to recover the outstanding dues, the applicant was constrained to file the OA claiming the following reliefs:

(i) To recover a sum of Rs.32,77,302.92 together with pendente lite and post-decree interest thereon from defendants 1 and 2 jointly and severally and by sale of the 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 1st defendant was served with summons by effecting publication of summons in Malayala Manorama daily dated 14.06.2014. But he neither appeared nor was he represented and hence the 1st defendant was set exparte on 05.08.2014.

5. The 2nd defendant filed written statement denying the averments and contending inter alia that the claim of the applicant is illegal and unwarranted and hence the OA is to be dismissed in limine. It was informed that the applicant bank had advanced an amount of Rs.10 lakhs to the 1st defendant on 01.12.2005 who executed a deed of hypothecation of goods and first charge was created over electrical items, mineral water, spices etc. It is averred in paragraph 10 of the written statement that the 2nd defendant had deposited title deeds of 37.85 Ares of land with an intention to create mortgage which was confirmed on 02.12.2005. This defendant is not the co-borrower of the enhanced credit limit of Rs.20 lakhs. As insisted by the applicant, this defendant had executed certain documents on the promise of the bank authorities that the limit will be utilized only for the business, and the 1st defendant will submit the stock statement. Based on such promise, the 2nd defendant deposited title deed of her residential building having an extent of 4.15 Ares as security for the loan availed by the 1st defendant. As per the terms of loan, if any default committed by the 1st defendant, the applicant bank can recover the outstanding by sale of the stocks. The action of the applicant in proceeding against ‘B’ schedule property of this defendant by leaving ‘A’ schedule property is illegal. Hence the OA may be dismissed.

6. The 3rd defendant filed written statement claiming that he is not aware of the availing of credit facility by the 1st defendant nor mortgaged the property purchased by him. At the time of sale of the property alleged to have been mortgaged with the bank, the same was free from encumbrance to the knowledge of this defendant. This defendant purchased the property in 2007 and the mortgage or extension of mortgage is not within his knowledge. Hence it is prayed to dismiss the OA as against the 3rd defendant. Proof Affidavit:

7. To establish the claim on behalf of the applicant bank, one Mr.Premachandran S. and Mr.Issac Kurian, Senior Managers of the bank have filed proof affidavit and additional proof affidavit respectively and produced the loan documents marked as Exhibits A1 to A22. The availing of the loan is well established from the documents placed by the applicant bank.

8. The 2nd defendant filed counter proof affidavit reiterating the same averments in her written statement. It is claimed that aggrieved by the securitization proceeding initiated by the applicant bank as against her property described in ‘B’ schedule, she filed SA No.628/2011 along with a petition seeking direction to sell ‘A’ schedule property belonging to the 1st defendant. If the bank is ready to execute sale deed in respect of ‘A’ schedule property, she is ready to find out prospective buyers for the said property; and the OA may be dismissed.

9. Heard arguments advanced by the learned counsel appearing for the applicant bank and the 2nd defendant.

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

11. On careful consideration of the submissions and the available materials, it appears that there is no dispute about availing of the subject loan of Rs.20 lakhs by the 1st defendant from the applicant bank and creation of mortgage over ‘A’ and ‘B’ schedule properties respectively by defendants 1 and 2. It is claimed by the 2nd defendant that she is not the co-borrower of the enhanced cash credit limit of Rs.20 lakhs availed by the 1st defendant. The records reveal that defendants 1 and 2 submitted Ext.A6 application for enhancement of the cash credit facility to the applicant bank on 29.06.2006. While availing the enhanced limit of Rs.20 lakhs, defendants 1 and 2 executed Ext.A8 demand promissory note for Rs.20 lakhs, Ext.A9 security delivery letter and Ext.A10 agreement of cash credit agreeing to repay the loan amount together with interest @15% per annum with monthly rests and the borrowers also undertook to pay additional interest as may be prescribed by the bank/RBI from time to time over and above the rate mentioned above in the event of violation of any of the terms of sanction.

12. Further, it could be seen that at the time of renewal of the cash credit facility on 18.10.2007, defendants 1 and 2 executed letter of continuation, revival letter, demand promissory note, security delivery letter and agreement of cash credit marked as Exts.A14 to A18 respectively agreeing to repay the loan amount of Rs.20 lakhs along with interest @16.25% per annum with monthly rests. In view of material evidence placed by the applicant bank, denial of liability by the 2nd defendant is not sustainable.

13. According to the applicant bank, after availing the subject loan, defendants 1 and 2 failed and neglected to regularize the loan account, which resulted in classification of the account as NPA on 30.09.2008. It is the specific case of the applicant that the primary security i.e., movable assets hypothecated by the 1st defendant are not available to be proceeded against to recover the outstanding dues. In such circumstance, the applicant has initiated securitization proceeding against ‘B’ schedule property mortgaged by the 2nd defendant. It is submitted that the bank can proceed against any of the secured assets for realization of its dues and the defendants cannot dictate the applicant to proceed against a particular item of collateral security.

14. Per contra, it is the claim of the 2nd defendant that the applicant bank must exhaust their remedy against the 1st defendant/principal borrower first before proceeding against her property. If the sale proceeds of ‘A’ schedule property is insufficient to wipe off the entire liability, the applicant can enforce their right against the property mortgaged by her.

15. It is well settled that a creditor is free to take recourse to any remedy available to it against either the borrower/co-borrower or the guarantor or against both as the liability of the guarantor is co-extensive with that of the principal debtor as provided under S.128 of the Indian Contract Act, 1872. It is claimed by the 2nd defendant that she filed SA No.628/2011 (TSA No.250/2016) before the Tribunal challenging the recovery steps taken by the applicant bank as against her property and raised the similar issue therein. But the SA was dismissed on merit on 02.05.2018. The 2nd defendant has no case that she challenged the said order in any forum and as such, the same has attained finality. The 2nd defendant, being the co-borrower as well

as mortgagor, cannot dictate the manner or sequence in which the applicant should enforce its remedies and the contention is not acceptable.

16. The documents marked as Exts.A1 to A18 and A20 to A22 would substantiate the claim made by the applicant bank in this case. A sum of Rs.32,77,302.92 (i.e., after excluding the capitalization effect of penal interest of Rs.56,891.88 from the total dues of Rs.33,34,194.80) is outstanding under the cash credit account as on 13.10.2010, which is clearly established from the account statement marked as Ext.A20. In the above circumstances, applicant bank is entitled to recover the said amount from defendants 1 and 2. The issue is answered in favour of the applicant.

17. The account statement marked as Ext.A21 would show that the applicant has charged a sum of Rs.2,52,818/- by way of penal interest in the cash credit 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.

18. According to the applicant bank, during the subsistence of mortgage, a portion of the property mortgaged by the 1st defendant was purchased by the 3rd defendant and hence he was impleaded as a party in this case. He, being the subsequent purchaser of a portion of ‘A’ schedule mortgaged property, this final order would be binding on him as well.

19. Considering the amount advanced, interest and penal interest applied, repayments effected and default committed, I am of the view that applicant bank is entitled to get pendente lite and post decree interest @12% per annum on the sum of Rs.30,24,484.92 (i.e., after excluding the penal interest of Rs.2,52,818/- from the OA claim amount of Rs.32,77,302.92), which is reasonable in the facts and circumstances of the case.

20. 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.32,77,302.92 (Rupees thirty two lakhs seventy seven thousand three hundred and two and Paise ninety two only) due under the cash credit account from defendants 1 and 2 jointly and severally and by sale of ‘A’ and ‘B’ schedule properties;

(ii) pendente lite and post-decree interest @12% per annum on the sum of Rs.30,24,484.92 (Rupees thirty lakhs twenty four thousand four hundred and eighty four and Paise ninety two only) from 14.10.2010 till realization from defendants 1 and 2 jointly and severally and by sale of ‘A’ and ‘B’ schedule properties; and

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

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

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

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

24. 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 8th day of September, 2026)

[SOVAN KUMAR DASH] PRESIDING OFFICER

A P P E N D I X Witness for Applicant: AW1: Sri.Premachandran S., Senior Manager of the applicant bank. AW2: Sri.Issac Kurian, Senior Manager of the applicant bank. Witness for Defendant(s):

DW1:

Smt.Annamma Varghese, 2nd defendant.

Applicant’s Exhibits

Ext.No Date Particulars of documents

A1 01.12.2005 Demand promissory note for Rs.10 lakhs executed by the 1st defendant. A2 01.12.2005 Security delivery letter executed by the 1st defendant. A3 01.12.2005 Agreement for cash credit executed by the 1st defendant. A4 29.06.2005 Partition deed No.1137/2005 of Perunad SRO. A5 02.12.2005 Letter executed by the 1st defendant confirming the deposit of title deed with the applicant bank. A6 29.06.2006 Application for enhancement of cash credit facility submitted by defendants 1 and 2. A7 29.06.2006 Revival letter executed by defendants 1 and 2. A8 29.06.2006 Demand promissory note for Rs.20 lakhs executed by defendants 1 and 2. A9 29.06.2006 Security delivery letter executed by defendants 1 and 2. A10 29.06.2006 Agreement of cash credit executed by defendants 1 and 2. A11 05.02.1987 Sale deed No.593/1987 of Ranny SRO. A12 30.06.2006 Letter executed by the 2nd defendant confirming the deposit of title deed with the applicant bank. A13 30.06.2006 Letter confirming the extension of mortgage by the 1st defendant. A14 18.10.2007 Letter of continuation executed by defendants 1 and 2.

A15 18.10.2007 Revival letter executed by defendants 1 and 2. A16 18.10.2007 Demand promissory note for Rs.20 lakhs executed by defendants 1 and 2. A17 18.10.2007 Security delivery letter executed by defendants 1 and 2. A18 18.10.2007 Agreement of cash credit executed by defendants 1 and 2. A19 22.10.2008 Copy of lawyer notice issued to defendants 1 and 2 calling upon them to close the loan account. A20 04.08.2007 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 … Certificate 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 8th September, 2026

TA No.1305/2016 (OA NO.446/2010)

Between

The Federal Bank Ltd., Panavelil Buildings, Pazhavangadi – 689 673, Ranni, Pathanamthitta District. …Applicant

And

Thomas P.Mathew, Sole Proprietor of M/s.Panamthottathil Distributors, Pazhavangadi, Ranni, Pathanamthitta. S/o.P.V.Mathew, Panamthottathil House, Naranammoozhy P.O., Athikkayam, Ranni Taluk, Pathanamthitta District & 2 others.

…Defendants

F I N A L O R D E R