DHANALAKSHMI BANK vs Kudumbasree Community Development Society on 31 October 2025

1. Kudumbasree Community Development Society, Vakathanam Grama Panchayath, Vakathanam P.O., Kottayam District, Rep. by Charge Officer, Mr.Kunjumon V.

2. S.Venugopal, ‘Anjali’, Vakathanam P.O., Kottayam District.

3. Valsamma Rajappan, Raj Bhavan, Vakathanam P.O., Kottayam District.

4. District Mission Co-ordinator, Kudumbasree, Dist. Panchayth Building, Pattom, Thiruvananthapuram.

5. Chief Executive, Kudumbasree, TRIDA Rehabilitation Building, 2nd Floor, Medical College P.O., Thiruvananthapuram. …Defendants

This Original Application having been heard on 04.08.2025 and 30.10.2025 in the presence of Advocate Sri.Sijo George for the applicant bank and Advocates M/s.Varughese Cherian and Jayakala S.S. for the 3rd defendant, defendants 1 and 2 being absent and defendants 4 and 5 being exparte 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.13,09,120.19 due under micro credit/term loan account together with future interest thereon @19% per annum with monthly rests and penal interest @2% per annum from defendants 1 to 3 jointly and severally and their assets. Facts of the case:

2. The applicant is a scheduled commercial bank incorporated under the Indian Companies Act, 1956 having its registered office at Trichur and one of its branches at Kottayam.

3. The 1st defendant is a community development society under defendants 4 and 5. The 2nd defendant was the former president and the 3rd defendant is the secretary of the society. The affairs of the 1st defendant are supervised by defendants 4 and 5 and hence included in this case and no specific relief is claimed against them. The 1st defendant as principal borrower and defendants 2 and 3 as co-obligants had applied for a loan of Rs.50 lakhs. Considering their request, applicant bank sanctioned the loan on 16.03.2007. The loan was applied for onward lending to the Self-Help Groups (SHG)/Neighborhood Groups (NHG) for various activities for development and improvement of socio-economic conditions of the members of SHG/NHG. The defendants availed the facility after executing necessary security documents. They were properly repaying the loan but subsequently committed default in repayment. In such premises, applicant bank was constrained to file the OA claiming the following reliefs:

(i) To recover a sum of Rs.13,09,120.19 together with pendente lite and post-decree interest thereon from defendants 1 to 3 jointly and severally and their assets;

(ii) To recover the costs, charges and expenses from defendants 1 to 3;

(iii) To issue Recovery Certificate to the Recovery Officer with a direction to recover the amount and pay it to the applicant bank.

written statement

4. The 1st defendant filed written statement denying the claim made by the applicant bank. But he has not filed any counter proof affidavit nor adduced any documentary evidence to substantiate his case despite sufficient opportunity granted.

5. The 2nd defendant filed written statement contending that this defendant was the former president of the 1st defendant and he is not a beneficiary of the loan transaction. The loan amount was repaid by the 1st defendant directly to the applicant bank. It is seen from the bank statement that for the loan of Rs.50 lakhs, the defendants have paid a sum of Rs.59,04,425.43 and hence the applicant is not entitled to get any relief in this case.

6. The 3rd defendant filed written statement contending inter alia that the OA is barred by limitation and hence the same is liable to be dismissed. She has not executed any of the loan documents and has not availed any loan from the applicant bank. The acknowledgement of liability is invalid as no stamp is affixed therein. This defendant is in no way responsible for the activities of the 1st defendant and hence no liability could be attributed to her. The 2nd defendant, the then member secretary, had misappropriated an amount of Rs.8.75 lakhs and he alone was responsible for the transaction of funds. As the demand promissory note and acknowledgement of debt are invalid, there is no cause of action for the applicant to file this case. The interest charged is exorbitant and unconscionable. In view of the above, the applicant is not entitled to get any relief in this case. Proof Affidavit:

7. In order to establish the claim on behalf of the applicant bank, one Mr.Santhosh K.R., Branch Manager has filed proof affidavit and produced the loan documents marked as Exhibits A1 to A9. The availing of the credit facility by defendants 1 to 3 is well established from the documents placed by the applicant bank.

8. The 2nd defendant filed counter proof affidavit reiterating the averments made in the written statement and claimed that the 1st defendant alone is liable for the claim amount and hence the OA may be dismissed as against him.

9. The 3rd defendant filed counter proof affidavit claiming that as per the statement produced by the bank, an amount of Rs.59,04,425.43 is paid by the defendants out of the loan amount of Rs.50 lakhs and hence no liability arises to pay any more. Due to misappropriation of funds of the society by the 2nd defendant, this defendant filed W.P.(C) No.8046/2014 before the Hon'ble

High Court of Kerala praying for a direction to the Government of Kerala and defendants 1, 4 and 5 to recover the amount misappropriated by the 2nd defendant and remit the same in the account maintained by the community development society with the applicant bank. In the aforesaid writ petition, the Under Secretary to Government has filed counter affidavit stating that action has been initiated against the 2nd defendant for recovery of Rs.8.75 lakhs that has been misappropriated by him. The amount claimed in the OA is incorrect. In the above circumstance, the OA may be dismissed.

10. Heard arguments advanced by the learned counsel for the applicant bank and the 3rd defendant. The 1st and 2nd defendants remained absent from the proceeding from 25.05.2022 and 04.11.2022 respectively and none came forward on their behalf to address arguments in this case.

11. On careful evaluation of the submissions and the available materials, it appears that the 1st defendant society as principal borrower and defendants 2 and 3 as co-obligants had applied for a loan of Rs.50 lakhs and the same was sanctioned by the applicant bank vide Ext.A6 sanction letter dated 16.03.2007, which was countersigned by defendants 1 to 3 in token of having accepted the terms and conditions thereof. At the time of availing the loan, the 1st defendant society as well as defendants 2 and 3 being its authorized representatives executed Ext.A1 demand promissory note promising jointly and severally to pay to the applicant bank the sum of Rs.50 lakhs together with interest @12.50% per annum with monthly rests. The defendants 1 to 3 had also executed Ext.A2 D.P.Note delivery letter with a request that in the event of payment not being made on demand, the applicant bank is at liberty to give time for payment to either of them without discharging either of them from liability.

12. The defendants 1 to 3 had also undertaken to repay the loan amount in equated monthly installment of Rs.1.80 lakhs for a period of 36 months inclusive of initial holiday period of two months vide Exts.A3 and A4 agreements dated 16.03.2007. They had also executed Ext.A5 letter declaring that any payment or acknowledgement made by any one of them shall have limitation against all of them jointly and severally for the purpose of the law of limitation. The records would show that defendants 1 to 3 executed Ext.A8 acknowledgement of liability dated 15.12.2008 for extending the period of limitation under S.18 of the Limitation Act. The applicant bank presented the OA before the Tribunal on 13.12.2011 i.e., within three years from the date of execution of the acknowledgement of liability by defendants 1 to 3. By virtue of the execution of the aforementioned loan documents by defendants 1 to 3, they cannot deny the claim of the applicant bank and they are jointly and severally liable to repay the outstanding loan amount. It appears that substantial amount has been repaid by defendants 1 to 3 towards the loan account. As on 12.12.2011, a sum of Rs.13,09,120.19 is outstanding under the subject loan account which is clearly established from the account statement marked as Ext.A9. Further, the dispute regarding misappropriation of funds cannot be adjudicated by the Tribunal while trying an application under S.19(1) of the Recovery of Debts and Bankruptcy Act, 1993.

13. As per the statement of account produced by the applicant bank, an amount of Rs.78,951.52 was debited 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 penal interest of Rs.78,951.52 charged in the loan account.

14. Considering the amount advanced, interest and penal interest applied, substantial 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.12,30,168.67 (i.e., after excluding the penal interest of Rs.78,951.52 from the OA claim amount of Rs.13,09,120.19), which is reasonable in the facts and circumstances of the present 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.13,09,120.19 (Rupees thirteen lakhs nine thousand one hundred and twenty and Paise nineteen only) due under micro credit/term loan account from defendants 1 to 3 jointly and severally and their assets;

(ii) pendente lite and post-decree interest @12% per annum on the sum of Rs.12,30,168.67 (Rupees twelve lakhs thirty thousand one hundred and sixty eight and Paise sixty seven only) from 13.12.2011 till realization from defendants 1 to 3 jointly and severally and their assets; and

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

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

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

18. 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 31st day of October, 2025)

[SOVAN KUMAR DASH] PRESIDING OFFICER

A P P E N D I X Witness for Applicant: AW1: Sri.Santhosh K.R., Branch Manager of the applicant bank. DW1: Sri.S.Venugopal, 2nd defendant DW2: Smt.Valsamma Rajappan, 3rd defendant

Witness for Defendant(s): Nil

Applicant’s Exhibits

Ext.No Date Particulars of documents

A1 16.03.2007 Demand Promissory Note for Rs.50,00,000/- executed by the 1st defendant through 2nd and 3rd defendants in favour of the applicant bank. A2 16.03.2007 D.P. Note delivery letter issued by the 1st defendant through 2nd and 3rd defendants to the applicant bank. A3 16.03.2007 Articles of agreement executed by the 1st defendant through 2nd and 3rd defendants. A4 16.03.2007 Agreement for term loan executed by the 1st defendant through 2nd and 3rd defendants in favour of the applicant bank. A5 16.03.2007 Letter regarding limitation issued by the 1st defendant through 2nd and 3rd defendants to the applicant bank. A6

16.03.2007 Sanction letter issued by the applicant bank and counter signed by the 1st defendant through 2nd and 3rd defendants. A7

16.03.2007 Letter of undertaking issued by the 1st defendant through 2nd and 3rd defendants to the applicant bank. A8

15.12.2008 Acknowledgement of liability executed by the 1st defendant through 2nd and 3rd defendants. A9

12.12.2011 Certified copy of the statement of account relating to the term loan.

Defendants’ Exhibits – Nil

PRESIDING OFFICER

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

Dated the 31st October, 2025

TA No.1105/2016 (OA NO.10/2012)

Between

The Dhanlaxmi Bank Ltd., Kottayam Branch.

…Applicant

And

Kudumbasree Community- Development Society, Vakathanam Grama Panchayath, Vakathanam P.O., Kottayam District, Rep. by Charge Officer, Mr.Kunjumon V. & 4 others.

…Defendants

F I N A L O R D E R