TAMILNAD MERCANTILE BANK LIMITED vs M/s PEGEES GLOBALS on 28 September 2026

1. M/s.Pegees Globals,

represented by its Managing Partner,

P.G.Kesava Pillai,

IV/57, Pullampillapichanatu,

Muthanvazhey, Pandanad P.O.,

Chengannur.

2. P.G.Kesava Pillai (Dead),

Managing Partner,

M/s.Pegees Globals,

IV/57, Pullampillapitchanatu,

Muthanvazhey, Pandanad.P.O.,

Chengannur.

3. R.Rajeev,

Partner, M/s.Pegees Globals,

IV/57, Pullampillapitchanatu,

Muthanvazhey, Pandanad.P.O.,

Chengannur.

4. Shobhana Chandran,

Partner, M/s.Pegees Globals,

IV/57, Pullampillapitchanatu,

Muthanvazhey, Pandanad.P.O.,

Chengannur.

5. P.Radhamma (Dead),

Partner, M/s.Pegees Globals,

IV/57, Pullampillapitchanatu,

Muthanvazhey, Pandanad.P.O.,

Chengannur.

6. Arun Chandran,

Partner, M/s.Pegees Globals,

IV/57, Pullampillapitchanatu,

Muthanvazhey, Pandanad.P.O.,

Chengannur.

7. A.Ramachandran Nair,

S/o.Ramanarayanan,

Swathi, Vazhakkala,

Kakkanad P.O., Ernakulam.

8. Chandrasekharan Nair,

S/o.Kunjunni Nair,

Viruntheathe House,

Pandanad.P.O., Chengannur.

…Defendants

9. Devi Prasad,

S/o.late Kesava Pillai,

IV/57, Pullampillapitchanatu,

Muthanvazhey, Pandanad.P.O.,

Chengannur.

…Additional 9th defendant [Additional 9th defendant was impleaded as legal heir of deceased 2nd defendant as per order dated 25.07.2017 in IA No.1234/2017]

This Original Application having been heard on 08.06.2026 in the presence of Advocate Sri.V.V.Surendran for the applicant bank and Advocate Sri.C.S.Ullas for defendants 4, 6, 8 and additional 9th 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.68,23,660/- due under packing credit account together with future interest thereon @14% per annum with monthly rests from the defendants jointly and severally and by sale of ‘A’ and ‘B’ schedule properties. Facts of the case:

2. The applicant is a company registered under the Companies Act, having its head office at Thoothukudi, Tamilnadu and one of its branches at Changanasserry, Kottayam.

3. The 1st defendant is a partnership firm, 2nd defendant is its managing partner and defendants 2 to 6 are the partners. At the request of the 1st defendant, applicant bank sanctioned a packing credit loan of Rs.30 lakhs on 15.03.2001 and the 2nd defendant on behalf of the 1st defendant firm and all its partners executed necessary security documents in favour of the bank. Defendants 2 to 8 executed a joint and several guarantee in respect of the facility availed by the 1st defendant. Towards collateral security for the loan, the 2nd defendant created mortgage over the schedule properties by deposit of title deeds with the bank. According to the applicant bank, the defendants availed packing credit limits of Rs.27,99,360/- on 26.03.2001 as PCL 1/2000-01 and Rs.6.50 lakhs on 04.07.2001 as PCL 2/2000-

01. The defendants are bound to close the said loans within 180 days from the date of availing the same. Several notices were sent to the defendants demanding repayment of the outstanding dues but they did not care to repay the same. In such premises, the applicant was constrained to file the OA seeking relief to recover the sum of Rs.68,23,660/- together with future interest and costs from the defendants jointly and severally and by sale of the schedule properties.

4. Defendant 1 to 6 and 8 jointly filed written statement denying the averments in the OA besides admitting the availing of the subject loans from the applicant as PCL Nos.1/2000 and 2/2000 respectively on 26.03.2001 and 04.07.2001. It is contended that the OA is barred by limitation and hence the same is to be dismissed in limine. It is claimed that after issuance of notice under S.13(2) of the SARFAESI Act, the defendants discussed with the bank officials and submitted proposals for settlement of the outstanding dues but the applicant failed to respond to the same. The interest charged in the account is exorbitant and unconscionable. The 2nd defendant had not handed over any documents to the bank for creation of mortgage and the applicant has failed to produce a memorandum of deposit of title deeds evidencing creation of mortgage. Hence the OA may be dismissed.

5. The 7th defendant neither appeared nor was he represented and hence he was set exparte on 21.09.2006.

6. The additional 9th defendant filed written statement claiming that he, being the legal heir of deceased mortgagor/2nd defendant, is not involved in any of the transactions entered into between the applicant and the 2nd defendant. He came to know that his father had availed loans from the applicant bank in 2001 for the partnership firm and his mother, brother and sister stood as guarantors for the loan. There is no valid mortgage of the properties as alleged in the OA and hence the applicant has no right to proceed against the same.

7. Pending the OA, the 5th defendant also died. Memo dated 13.09.2023 filed by the applicant to record defendants 3 and 4 and additional 9th defendant as legal heirs of the deceased 5th defendant is taken on record vide proceeding dated 15.09.2023.

Proof Affidavit:

8. In order to establish the claim on behalf of the applicant bank, one Mr.E.J.Baby, Manager of the bank has filed proof affidavit and produced the loan documents marked as Exhibits A1 to A30.

9. The 6th defendant filed counter proof affidavit for himself and on behalf of defendants 1 to 5 and 8 denying the claim of the applicant and sought to dismiss the OA on the ground of limitation.

10. Heard the rival submissions made by the learned counsel appearing on either side and perused the materials on record. The sole issue arises for consideration is whether the applicant is entitled to recover the amount as claimed in this case?

11. Admittedly, the defendants availed the packing credit loans from the applicant bank and there occurred some default in repayment. The core issue raised by the defendants is that the OA is barred by limitation and hence the same is liable to be dismissed. It is claimed by the learned counsel appearing for the defendants that applicant had issued a lawyer notice to the defendants on 02.07.2002 recalling the outstanding dues and hence the limitation is to be reckoned from 02.07.2002 and as such, the OA filed on 10.04.2006 is barred by limitation. The learned counsel for the defendants relied upon a judgment of the Hon'ble Apex Court reported in AIR 2006 SC 1874 in the case of Syndicate Bank vs. Channaveerappa Beleri & others.

12. On perusal of records, it appears that the 2nd defendant had created mortgage over the schedule properties by deposit of title deeds marked as Exts.A18 and A19 with the bank on 26.03.2001 towards collateral security for the loan. The 2nd defendant had also executed Ext.A17 memorandum confirming the deposit of title deeds with the bank with the intent to create equitable mortgage for the purpose of securing repayment of the loan. As such, valid mortgage was created over the subject matter properties and mere denial of the defendants regarding the creation of mortgage over the subject matter properties without any corroborative evidence is not acceptable. As per Article 62 of the Limitation Act, 1963, to enforce payment of money secured by a mortgage or otherwise charged upon immovable property is 12 years from the date when the money sued for becomes due. As such, the OA filed on 10.04.2006 is well within the statutory period of limitation.

13. The ratio cited by the learned counsel for the defendants is on a different context. It is a case of guarantee bond executed by the guarantors. The Hon'ble Apex Court considered the applicability of Article 55 and Article 113 of the Limitation Act, 1963 and held that limitation of three years is applicable from the date of refusal by the guarantors and the suit having been filed within three years from the date of refusal. Ultimately, it was held that the suit is within time. But here in this case, the guarantor created equitable mortgage as held earlier and hence Article 62 of the Limitation Act is applicable and the OA having been filed within a period of 12 years from the money sued for becomes due which is within time. The ratio cited by the learned counsel for the defendants, with due respect, is not appliable to the present case. There is no merit in the contention raised by the defendants and hence the same is not acceptable.

14. Further, the records would show that the 3rd defendant submitted an affidavit dated 04.08.2016 before the Tribunal on behalf of all the defendants wherein it is averred that the 3rd defendant has approached the bank for one time settlement and has issued a registered letter to the bank (copy of the letter dated 03.08.2016 is enclosed with the affidavit) and offered to pay Rs.85 lakhs towards full and final settlement of the outstanding dues and sought to refer the matter to Lok Adalat held on 13.08.2016. As such, the defendants have acknowledged their liability under the subject loan account without raising any dispute. Though this case was referred to Lok Adalat, no settlement was arrived at between the parties. The recovery measures initiated by the applicant under the provisions of SARFAESI Act, 2002 did not materialize due to filing of Securitisation Applications by the defendants.

15. The evidence adduced by the applicant marked as Exts.A1 to 30 would establish the claim made in this case. As on 10.04.2006, an amount of Rs.68,23,660/- is outstanding under the loan account, which is clearly established from the account statements marked as Exts.A28 and A29. Hence the applicant is entitled to recover the said amount from the defendants and by sale of the mortgaged properties. Previously, both the items were sold in auction under the securitisation proceeding. In the written notes filed by the applicant in paragraph (l), it is stated as follows:

(l) It is to be noted that the applicant has initiated securitization proceedings and sold the secured assets in auction and realized amounts but the defendants have challenged the sale and are yet to be concluded or finalized. Hence that amount realized is not now adjusted towards the debt. Hence the entire amount as per the account with accrued interest is

recoverable and is entitled to be allowed, charged on the properties scheduled and recoverable by its sale if the sale already effected could not be completed.

It is not disputed by either side. Since the sale is not complete and the amount realized is not adjusted in the loan account, applicant bank has right to realize the outstanding dues from the properties, which are still available. The issue is answered accordingly.

16. It could be seen from the statements filed by the applicant along with a memo dated 06.12.2010 that the applicant has charged a sum of Rs.2,93,942/- by way of penal interest in the 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.

17. Considering the amount advanced, interest and penal interest applied 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 on the sum of Rs.65,29,718/- (i.e., after excluding the penal interest of Rs.2,93,942/- from the OA claim amount of Rs.68,23,660/-), which is reasonable in the facts and circumstances of the case.

18. 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.68,23,660/- (Rupees sixty eight lakhs twenty three thousand six hundred and sixty only) due under the packing credit loan accounts from defendants 1, 3, 4 and 6 to 8 jointly and severally and by sale of ‘A’ and ‘B’ schedule properties; in case of non-recovery of the amount, the same shall be recovered from the assets, if any, inherited by additional 9th defendant from the deceased 2nd defendant and also from the assets inherited by defendants 3 and 4 and additional 9th defendant from the deceased 5th defendant;

(ii) pendente lite and post-decree interest @12% per annum on the sum of Rs.65,29,718/- (Rupees sixty five lakhs twenty nine thousand seven hundred and eighteen only) from 11.04.2006 till realization from defendants 1, 3, 4 and 6 to 8 jointly and severally and by sale of ‘A’ and ‘B’ schedule properties; in case of non-recovery of the amount, the same shall be recovered from the assets, if any, inherited by additional 9th defendant from the deceased 2nd defendant and also from the assets inherited by defendants 3 and 4 and additional 9th defendant from the deceased 5th defendant; and

(iii) costs and expenses borne by it for realization of the loan from defendants 1, 3, 4 and 6 to 8.

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

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

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

22. 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 28th day of September, 2026)

[SOVAN KUMAR DASH] PRESIDING OFFICER

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

DW1:

Sri.Arun Chandran, 6th defendant.

Applicant’s Exhibits

Ext.No. Date Particulars of documents

A1 14.10.1996 Photocopy of the Power of Attorney executed by the applicant bank in favour of AW1. A2 26.03.2001 Demand promissory note for Rs.30 lakhs executed by the 2nd defendant in favour of the applicant bank. A3 26.03.2001 Letter to waive presentment executed by the 2nd defendant in favour of the applicant bank. A4 26.03.2001 Letter of undertaking executed by the 2nd defendant in favour of the applicant bank. A5 26.03.2001 Letter of continuity executed by the 2nd defendant in favour of the applicant bank. A6

26.03.2001 Letter executed by the defendants in favour of the applicant bank. A7

26.03.2001 Declaration of partnership executed by the defendants in favour of the applicant bank. A8

26.03.2001 Letter of hypothecation executed by the 2nd defendant in favour of the applicant bank. A9

26.03.2001 Letter of indemnity executed by the 2nd defendant in favour of the applicant bank. A10 ….. Packing credit agreement executed by the 2nd defendant in favour of the applicant bank. A11 26.03.2001 Shipping lien executed by the 2nd defendant in favour of the applicant bank. A12 26.03.2001 General letter of undertaking executed by the 2nd defendant in favour of the applicant bank. A13 26.03.2001 Security letter executed by the 2nd defendant in favour of the applicant bank. A14 26.03.2001 Joint and several guarantee executed by defendants 2 to 8 in favour of the applicant bank.

A15 26.03.2001 Guarantee covering letter executed by the 2nd defendant in favour of the applicant bank. A16 26.03.2001 Consent letter executed by the 2nd defendant in favour of the applicant bank. A17 26.03.2001 Memorandum executed by the 2nd defendant confirming the deposit of title deed with the applicant bank. A18 13.03.2001 Settlement deed No.618 of Chengannur SRO. A19 02.05.1958 Certified copy of document No.1999 of Changannur SRO. A20 03.03.2001 Encumbrance certificate No.359 issued by SRO, Chengannur. A21 15.03.2001 Encumbrance certificate No.423 issued by SRO, Chengannur. A22 14.03.2001 Possession certificate No.221 along with location sketch, issued by the Village Officer, Pandanad. A23 14.03.2001 Tax receipt No.60 issued by the Village Officer, Pandanad. A24 14.08.1979 Purchase certificate issued by Special Tahsildar, Land Tribunal, Chengannur. A25 06.02.2001 Encumbrance certificate No.191 issued by SRO, Chengannur. A26 06.02.2001 Tax receipt No.27 issued by the Village Officer, Pandanad. A27 03.02.2001 Possession certificate No.97/01 along with location map issued by the Village Officer, Pandanad. A28 ….. Certified copy of the statement of account relating to the PCL-1/2000-01. A29 ….. Certified copy of the statement of account relating to the PCL-2/2000-01. A30 ….. Copy of lawyer notice issued to the defendants by the applicant bank calling upon them to pay the amount due.

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 28th September, 2026

TA No.1351/2016 (OA NO.126/2006)

Between

Tamilnad Mercantile Bank Ltd., Changanassery Branch, Post Box No.41, Door No.8/1131, Vazheparambil Buildings, Dr.Alphonsa Road, Changanasserry, Kottayam – 686 101. …Applicant

And

M/s.Pegees Globals, represented by its Managing Partner, P.G.Kesava Pillai, IV/57, Pullampillapichanatu, Muthanvazhey, Pandanad P.O., Chengannur & 8 others. …Defendants &

additional defendant

F I N A L O R D E R