BANK OF BARODA vs RAMESH KUMAR P on 4 January 2019

FINAL ORDER

The applicant bank has filed Original Application [for brevity herein after referred as “OA”] on 23.06.2008 under Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 [ for short referred as RDDBFI Act] for recovery of a sum of Rs.10,61,507/- with interest @10.75% per annum with monthly rests from 23.06.2008 till realization from the defendants and by sale of their assets. BRIEF FACTS OF THE CASE

1. The applicant is a body corporate, constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970

having its head office 41/2, Mahatma Gandhi Road, Bangalore-1 and Branch office at Vellayambalam, Thiruvananthapuram District, and is represented by the Branch Manager of the Vellayambalam Branch, D.S.Shibu who has verified and signed this application on behalf of the applicant, as principal officer of the applicant.

2. The 1st defendant availed a mortgage loan (Housing Loan) amounting to Rs.9,90,000/- on 24.06.2005 by executing a demand promissory note and created equitable mortgage over the property described in schedule to the application on 24.06.2005. The application is filed within three years from the date of demand promissory note and is thus within the period of limitation.

3. The 1st defendant is the borrower and the 2nd defendant is the guarantor to the credit facility availed by the 1st defendant. It is case of the applicant that the 1st defendant on 16.06.2005 approached the applicant for a housing loan of Rs.9,90,000/-. At the request of the 1st defendant, applicant bank sanctioned a Housing loan of Rs.9,90,000/-. on 24.06.2005. As security for the credit facility, 1st defendant executed a demand promissory note for Rs.9,90,000/- on 24.06.2005 promising to pay the said amount with interest thereon at the rate of 8.75% per annum with monthly rests. Apart from the above 1st defendant on 24.06.2005 executed an undertaking and a deed of agreement in favour of the applicant, whereby the 1st defendant expressly undertook to repay the principal in 180 equal monthly installments and repay the interest as well as the over due interest at the rate of 8.75% and 2% additional interest from time to time until such arrears to be paid in full. It is further agreed that the said interest of 10.75% p.a is inclusive of additional interest 2% p.a/compound interest agreed to be paid by the 1st defendant in case of default in repaying the amount as agreed.

4. In addition to the above, the 1st defendant also created a security interest in favour of the applicant bank by way of mortgage of immovable property of 7.095 cents of land and building in Sy.No.611/7-1 of Parasala Village, Neyyattinkara Taluk, Thiruvananthapuram District by deposited the title deed and confirmation of creation of mortgage.

5. It is stated that the 2nd defendant on 24.06.2005 executed a guarantee agreement in favour of the applicant expressing to undertaking the guarantee repayment of the amount failing due to the applicant under the aforesaid transaction and be personally, jointly and severally liable for the same.

6. It is the contention of the applicant that the defendants did not adhere to the term and conditions of the loan and committed breach thereof and the loan amount had been remaining highly irregular. Accordingly, the applicant classified the said loan account as NPA and had issued notice dated 07.07.2007 under Section 13(2) of the Act calling upon the defendants to pay the entire amount to which the defendants did not care to heed. Thus, the applicant filed a application before the Hon’ble CJM Court, Thiruvananthapuram under Section 14 of the SARFAESI ACT, in which Hon’ble CJM Court ordered to delivery of the secured assets and handed over the same to the applicant. The said property has sold by the applicant after complying all the formalities prescribed under the SARFAESI ACT for a total consideration of Rs.3,40,000/-.

7. It is stated by the applicant that even though part amount was realized through SARFAESI proceedings as on 18.06.2008 till there is a balance of Rs.10,61,507/- is due from the defendant. Hence, the applicant is constrained to file this Original Application for recovery of the said amounts.

8. After filing of the OA, the applicant bank has taken out the summons on the defendants as directed by the Tribunal and has filed the proof of service. The summons issued to the 1st defendant was returned with an endorsement “addressee left”. Therefore, the Tribunal vide order dated 12.02.2009 had directed the applicant to take substitute service on the 1st defendant through paper publication. Accordingly, applicant has taken out substituted service through paper publication in Mathrubhumi daily dated 07.10.2009 and had filed a memo on 05.11.2009 evidencing the same. Inspite of issuance of summons through paper publication, the 1st defendant neither appeared nor was he represented and he chose to remain absent and hence he was declared ex-parte on 08.07.2010. The summons issued to the 2nd defendant was received and had filed Vakalath on 28.07.2008.

9. The 2nd defendant had filed reply statement on 14.07.2009 contending that the 1st defendant has availed a mortgage housing loan after executing the sale deed on 24.06.2005. It is further contended that the OA is not maintainable either in law or on facts. It seems that D.S.Shibu has signed the application by representing the bank. But there was no mention that in what capacity he has signed the application. It is not clear whether has been authorized by the board of the bank to sign the application. In that case the board might have given the power of attorney authorizing the manager to sign the application on behalf of the bank. But no such power of attorney is produced along with the OA.

10. It is stated that 1st defendant has not created any equitable mortgage on 24.06.2005 by depositing title deed of the property schedule in the OA as the sale deed is executed on 24.06.2005. Hence practically it is not possible to deposit the same on 24.06.2005 and no mortgage is created on 24.06.205. Further the bank has no right to charge penal interest 2% and they cannot capitalize the same also. It is the contention of the 2nd defendant that the 2nd defendant signed on the blank form and gave to the bank. When 2nd executed the deed, he was not aware of contents of the documents it was signed on the blank form. It further contended that 2nd defendant is not liable to pay the total amount of Rs.10,61,507/- and interest as claimed by the applicant. On these contentions 2nd defendant prayed for dismissal of the OA.

11. The evidence on the side of the applicant bank consists of the proof affidavit of its Branch Manager, AW1 and Exhibits A1 to A15 were marked on the side of applicant and closed their side of evidence. Defendants have neither adduced any evidence nor produced any documents.

12. Heard arguments that came to be advanced by either side and perused the records of the case. The following points arise for my consideration:

(i) Whether the applicant is entitled to get the reliefs prayed for in the OA?

(ii) What order?

Findings:

Point No.1: In affirmative Point No.2: As per order

Reasons:

13. It is admitted by the 2nd defendant that 1st defendant had availed a mortgaged housing loan after executing the sale deed on 24.06.2005.

14. The primary contention raised by 2nd defendant is that he has only signed the blank guarantee form without affixing any date. The entire form was filed by the branch manager. It is pertinent to mention here that no prudent man will sign and issue blank papers to anyone. On perusal of Exhibit A6 certified copy of the letter of guarantee dated 24.06.2005, the said document is executed by the 2nd defendant by putting his signatures on the documents and echoes the hollowness of the 2nd defendant’s case from the materials available on record.

15. Second contention raised by the 2nd defendant is that D.S.Shibu who had signed the application had not produced any power of attorney authorizing the manager to sign the application on behalf of the bank. It seen from the record that the applicant bank is represented by the branch manager who is one of the principal officers who is authorized to right to the sign and verify the OA and represent the bank in this proceeding. Hence the contention of the 2nd defendant is not sustainable.

16. The further contention regarding 1st defendant has not mortgaged any property with the bank is refuted by the applicant bank by producing the certified coy of the Exhibit A5 memorandum of title for creation of mortgages, obtained from CBI Court, Ernakulam, dated 24.06.2005 executed by the 1st defendant in favour of the applicant bank and Exhibit A7 certified copy of the Sale Deed No.1408/2005 dated 24.06.2005. Hence, the contention of 2nd respondent that the 1st defendant has not created any equitable mortgage is devoid of any merits.

17. The other contentions with regard to the interest charged and amount claimed in the OA is countered by the applicant bank by producing Exhibit A3 letter of undertaking executed by the 1st defendant in favour of the applicant bank agreeing to pay additional interest at 2% in case of default in repayment. Further the applicant has produced Exhibit A13 certified copy of statement of account, Exhibit A14 certified copy of memorandum of interest charged in the loan account. On verification of Exhibit A13 and A14 statements accounts as on the date of filing the OA an amount of Rs.10,61,507/- is due from the 1st defendant to the applicant bank. Hence, the aforesaid contention of the 2nd defendant is answered against him.

18. The evidence adduced by the applicant bank would divulge the fact that the defendants had applied for Exhibit A1 housing loan dated 16.06.2005 and 2nd defendant being the guarantor to the credit facility availed by the 1st defendant. In pursuance of the request applicant bank had sanctioned housing loan of Rs.9,90,000/- to the 1st defendant. As a security towards loan 1st defendant had executed Exhibit A1 demand promissory note dated 24.06.2005, Exhibit A3 undertaking letter dated 24.06.2005, Exhibit A4 articles of agreement dated 24.06.2005. As a further security 1st defendant vide Exhibit A5

memorandum deposited the Exhibit A7 Sale Deed No.1405/2005 dated 24.06.2005. The 2nd defendant had executed Exhibit A6 letter of guarantee dated 24.06.2005 guaranteeing the regular repayment towards the loan account.

19. But the defendants were not adhering the term and conditions of sanction had committed default in repayment of loan. Hence the applicant had issued Exhibit A8 lawyer notice dated 28.05.2008 demanding the repayment of liability due under the loan account. As per Exhibit A13 and A14 statements of account produced by the applicant bank are admissible documents under Bankers’ Books Evidence Act and as on 23.06.2008 an amount of Rs.10,61,507/- is due from the defendants.

20. In the light of the above, the Tribunal come to a conclusion that all the loan documents are valid and duly executed by the defendants. The factum of availing the loan coupled with the execution of documents would go to show that the applicant bank has a valid cause of action against the defendants to institute this OA. Added to this, the absence of 1st defendant/borrower inspite of service of summons appears to be intentional without any bonafide reasons and it appears that he remained absent as he admitted the entire case of the applicant as sought for in the OA. In view of the above, the present OA is to be allowed with costs as sought for by the applicant bank.

21. In the above circumstance, the applicant bank is entitled for recovery of a sum of Rs.10,61,507/- claimed as due under Exhibit A13 and A14 statement of accounts relating to the Housing Loan as on 18.06.2008 with further interest on the sum of Rs. 10,52,548/- (i.e.,

Rs.10,61,507– penal interest of Rs.8,959/-) from the defendants jointly and severally. Having regard to the amount advanced, the interest applied, the conduct and operations in the account and the default committed, I am of the view that the applicant bank is entitled to get a final order on the following lines:-

ORDER

22. The OA is allowed with costs. The applicant bank is allowed to recover:

(i) the sum of Rs.10,61,507/- (Rupees Ten lakhs sixty one thousand five hundred and seven only) with further interest on the sum of Rs.10,52,548/- (Rupees Ten lakhs fifty two thousand five hundred and forty eight only) @ 8.75% per annum with monthly rests from 23.06.2008 till realization from the defendants jointly and severally.

(ii) In the event of non-realization of the OA claim amount, the bank is at liberty to proceed against the personal properties of the defendants both movable and immovable, as required under law.

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

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

23. The Registry is directed to communicate copy of the order to the parties concerned by speed post or registered post with AD. [Dictated to the steno, transcribed by him, corrected by me and then pronounced in the open court on this the 4th day of January, 2019]

(S.V.GOWRAMMA) Presiding Officer

A P P E N D I X Witness for Applicant: AW1: Santhoshkumar, Branch Manager of the applicant bank.

Witness for Defendants: Nil

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 16.06.2005 Certified copy housing loan application submitted by the defendants to the applicant bank, obtained from CBI Court Ernakulam. A2 24.06.2005 Certified copy of demand promissory note executed by the 1st defendant in favour of the applicant bank obtained from the CBI Court, Ernakulam. A3 24.06.2005 Certified copy of undertaking letter executed by the 1st defendant in favour of the applicant bank, obtained from CBI Court, Ernakulam. A4 24.06.2005 Certified copy of Articles of agreement executed by the 1st defendant in favour of the applicant bank, obtained from the CBI Court, Ernakulam. A5 24.06.2005 Certified copy of Memorandum of deposit of title deed executed by the 1st defendant in favour of the applicant bank, obtained from the CBI Court, Ernakulam. A6 24.06.2005 Certified copy of guarantee letter executed by the 2nd defendant in favour of the applicant bank, obtained from the CBI Court, Ernakulam. A7 24.06.2005 Certified copy of the Sale Deed No.1408/2005, obtained from the CBI Court, Ernakulam. A8 28.05.2008 Office copy of the suit notice issued to the defendants. A9 28.05.2008 Original postal receipt (2 in numbers) A10 04.09.2007 Order in CMP No.1074/2007 passed by the CJM Court, Thiruvananthapuram. A11 17.09.2007 Order in CMP.No.1074/2007 passed by the CJM Court, Thiruvananthapuram. A12 27.01.2009 Office copy of sale certificate issued by the applicant bank. A13

Certified copy of the statement of account pertaining to the loan account No.207108361000008 for the period from

23.06.2005 to 13.01.2012. A14

Office copy of memorandum of interest charged for the period from 24.06.2005 to 17.06.2008. A15 25.05.2004 Attested copy of power of attorney executed by the applicant bank in favour of the Santhosh Kumar B.S. Branch Manager.

Defendants Exhibits – Nil

[PRESIDING OFFICER]

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 4th day of January, 2019

Present: S.V.Gowramma, B.A., LL.B Presiding Officer

Between Vijaya Bank, Vellayambalam Branch. …Applicant And Ramesh Kumar.P & another

...Respondents

FINAL ORDER