CANARA BANK vs Esakt Wire Products on 4 August 2025

1. Exakt Wire Products,

FIC Industrial Area,

Plot No.14, Perindandoor P.O.,

Athani, Thrissur,

Represented by its managing partner.

2. V.A.Muhammed,

Valiyakath House,

Thaikadu P.O., Chavakkad, Thrissur. Also at: Hedge Rading & Cont. W.L.L., Salva Road, Doha, Islamic Bank Building, Doha, Qatar.

3. K.S.Shine,

Kannamkotty House,

Peruvallore.

Now at:

Neha Apartments, Ayyanthole,

Behind Collectorate, Thrissur.

4. Kajabi,

Kooliyattil House,

Chervathani,

Vaduthala, Kunnamkulam.

Now at: Alingal House,

Thiruvathara P.O.,

Chavakkad, Thrissur.

…Defendants

This Original Application having been heard on 14.07.2025 in the presence of Advocates M/s.Saju N.A., Lekha G., Rini T., Flony P.J. and Antony Shyju for the applicant bank, defendants 1 to 3 being exparte and the 4th defendant being absent 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 an aggregate sum of Rs.46,01,980/- together with future interest and costs from the defendants and their assets. Facts of the case:

2. The applicant is a body corporate incorporated under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 having its head office at Bangalore and branches at various places including one at Athani MSME, Thrissur.

3. At the request of the 1st defendant, applicant bank sanctioned a term loan of Rs.10 lakhs and cash credit limit of Rs.30 lakhs on 16.03.2006 and the defendants availed the facilities after executing necessary loan documents. As security for repayment of the balance in the cash credit facility, the 4th defendant executed guarantee agreement dated 16.03.2006 guaranteeing due observance of the terms and conditions with regard to the sanction of the facility. The defendants did not adhere to the repayment schedule and the accounts became highly irregular. However, they executed letters of acknowledgement of debt and security dated 10.01.2009 and 12.03.2009 confirming the balance outstanding under the loan accounts. As the defendants did not repay the dues, applicant bank issued demand notice under the provision of SARFAESI Act recalling the entire credit facilities, on which the secured asset was sought to be released for Rs.40 lakhs. Accordingly, the property was released and a sum of Rs.40 lakhs was credited into the loan accounts. Since the balance amount due under the facilities was not repaid, the applicant was constrained to file the OA claiming the following reliefs:

(i) To recover an aggregate sum of Rs.46,01,980/- together with pendente lite and post-decree interest thereon from the defendants and their assets;

(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. All the defendants were duly served with summons. Defendants 1 to 3 neither appeared nor were they represented and hence they were declared exparte on 02.11.2012.

5. The 4th defendant filed written statement contending inter alia that the 1st defendant is a company run by three partners viz., defendants 2 to 4. The 4th defendant has already remitted the amount due towards the bank and the bank has issued compromise settlement letter to the Deputy Tahsildar, Taluk Office, Thrissur requesting them to withdraw RR proceedings against the 4th defendant, besides stating that they have agreed to release the subject property by accepting the compromise amount of Rs.40 lakhs. Further, it is claimed that she, being one of the partners of the firm, had already cleared her dues and if any amount is due towards the loan accounts, rest of the defendants/partners of the firm have the sole liability to repay the debt and hence the proceeding against the 4th defendant is not sustainable. Proof Affidavit:

6. In order to establish the claim on behalf of the applicant bank, one Mr.Paulose P.I. and Muralidharan T., Managers of the applicant have filed proof affidavit and additional proof affidavit and produced the loan documents marked as Exhibits A1 to A12. The proof affidavit and additional proof affidavit filed by AW1 and AW2 and the documents produced in this case are not challenged by the defendants. The availing of loans is well established from the documents placed by the applicant bank. An aggregate sum of Rs.46,01,980/- is outstanding in the loan accounts as on 08.01.2012, which is clearly established from the accounts statements marked as Exts.A11 and A12.

7. The counter proof affidavit presented by the 4th defendant was rejected for not rectifying the defects noted by the Registry. The 4th defendant remained absent from the proceeding from 08.07.2019 and none appeared and represented to address arguments in this case.

8. On perusal of records, it appears that the 1st defendant is a partnership firm, 2nd defendant is the managing partner and defendants 3 and 4 are its partners. Defendants 2 to 4 executed the loan documents marked as Exts.A1 to A4 in their capacity as managing partner and partners of the 1st defendant firm to secure the term loan of Rs.10 lakhs and cash credit limit of Rs.30 lakhs. The 4th defendant executed Ext.A5 guarantee agreement and Ext.A6 guarantee covering letter agreeing to repay the sum of Rs.30 lakhs together with future interest, expenses, charges etc. debited in the account from time to time. It could be seen from the statement produced by the applicant along with the OA that Rs.40 lakhs received by the applicant bank by releasing the secured asset was credited in the term loan and cash credit accounts and the OA was filed for recovery of the balance amount due from the defendants. In such premises, the 4th defendant cannot be absolved from the liability and her liability is co-extensive with that of the principal borrower to clear the entire dues of the applicant.

9. Further, it could be seen from the account statement that the applicant bank has charged a sum of Rs.44,682/- and Rs.4,05,116/- by way of penal interest in the term loan account and cash credit account respectively and Rs.4,245/- and

Rs.39,568/- as further interest thereon in view of capitalization in the said accounts. 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.4,245/- and Rs.39,568/- debited as interest on capitalization of penal interest in the term loan and cash credit accounts and cannot claim any pendente lite and post-decree interest on the aforesaid penal interest of Rs.44,682/- and Rs.4,05,116/- charged in the said accounts.

10. Considering the amount advanced, interest and penal interest applied and substantial recovery effected, I am of the view that the applicant bank is entitled to get a sum of Rs.8,09,720/- (i.e., after excluding the capitalized penal interest of Rs.4,245/- from the OA claim amount of Rs.8,13,965/-) in the term loan account together with pendente lite and post decree interest @12% per annum on the sum of Rs.7,65,038/- (i.e., after excluding the penal interest of Rs.44,682/- from Rs.8,09,720/-) and a sum of Rs.37,48,447/- (i.e., after excluding the capitalized penal interest of Rs.39,568/- from the OA claim amount of Rs.37,88,015/-) in the cash credit account together with pendente lite and post decree interest @12% per annum on the sum of Rs.33,43,331/- (i.e., after excluding the penal interest of Rs.4,05,116/- from Rs.37,48,447/-), which is reasonable in the facts and circumstances of the case.

11. 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 the amounts as given below: Term loan account Rs.8,09,720/- (Rupees eight lakhs nine thousand seven hundred and twenty only) together with future interest @12% per annum on the sum of Rs.7,65,038/- (Rupees seven lakhs sixty five thousand thirty eight only) from 09.01.2012 till realisation from the defendants and their assets; Cash credit account Rs.37,48,447/- (Rupees thirty seven lakhs forty eight thousand four hundred and forty seven only) together with future interest @12% per annum on the sum of Rs.33,43,331/- (Rupees thirty three lakhs forty three thousand three hundred and thirty one only) from 09.01.2012 till realisation from the defendants and their assets; and costs and expenses borne by it for realization of the loans from the defendants.

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

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

14. 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 4th day of August, 2025)

[SOVAN KUMAR DASH] PRESIDING OFFICER

A P P E N D I X Witness for Applicant: AW1: Sri.Paulose P.I., Manager of the applicant bank. AW2: Sri.Muralidharan T., Manager of the applicant bank.

Witness for Defendant(s): Nil

Applicant’s Exhibits

Ext.No Date Particulars of documents

A1 16.03.2006 Deed of hypothecation of machinery executed by the defendants in favour of the applicant bank. A2 16.03.2006 Cash credit agreement executed by the defendants. A3 16.03.2006 Agreement regarding collateral security executed by the defendants. A4 16.03.2006 Demand promissory note for Rs.30 lakhs executed by the defendants. A5 16.03.2006 Guarantee agreement executed by the 4th defendant. A6 16.03.2006 Guarantee covering letter executed by the 4th defendant. A7 10.01.2009 Acknowledgement of debt and security executed by the defendants acknowledging the liability under the term loan account. A8 12.03.2009 Acknowledgement of debt and security executed by the defendants acknowledging the liability under the term loan account. A9 10.01.2009 Acknowledgement of debt and security executed by the defendants acknowledging the liability under the cash credit account. A10 12.03.2009 Acknowledgement of debt and security executed by the defendants acknowledging the liability under the cash credit account. A11 ... Certified copy of the statement of account relating to the term loan.

A12 ... Certified copy of the statement of account relating to the cash credit facility.

Defendants’ Exhibits – Nil

PRESIDING OFFICER

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

Dated the 4th August, 2025

TA No.1125/2016 (OA NO.26/2012)

Between

Canara Bank, MSME Branch, Athani, Thrissur.

…Applicant

And

Exakt Wire Products, FIC Industrial Area, Plot No.14, Perindandoor P.O., Athani, Thrissur, Represented by its managing partner & 3 others.

...Defendants

F I N A L O R D E R