CITY UNION BANK LIMITED vs M/s C V PHILIPOSE SONS on 11 January 2019

**FINAL ORDER**

The applicant bank has filed Original Application [OA] on 28.05.2012 under Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 for recovery of a sum of Rs.34,34,177.02 (Rupees Thirty four lakhs thirty four thousand one hundred seventy seven and paisa two only) due under the cash credit limit account No.OLCC-16838 and interest thereon @ 20.25% compounded monthly from 21.05.2012, costs of this proceedings till realization, by sale of the OA schedule properties and against the defendants jointly, severally and personally, and against their assets.

**BRIEF FACTS OF THE CASE**

1. The applicant is a Banking Company registered under the Indian Companies Act and carrying the banking business having registered and head office at No.146, TSR (Big) Street, Kumbakonam, PIN-689 101 and branches throughout India and one amongst them at Illampallil Towers, Ramanchira, M.C.Road, Thiruvalla-689 101, represented by its present Branch Manager Sri.Arunraj.L.

2. The defendants availed the loan from the applicant bank on 19.08.1997 and mortgaged the immovable property 20.08.1997. The mortgage was extended when the credit facility was enhanced from Rs.15 lakhs to Rs.20 lakhs letter dated 25.06.2009 and the 2^nd defendant executed mortgage letter dated 09.05.2008, and Rs20lakhs was enhanced to Rs.25 lakhs and extended the mortgage created on 19.08.1997 to 25.06.2009. The present OA is filed on 28.05.2012 within the period of limitation prescribed under Section 24 of the RDBFI Act 1993.

3. The 1^st defendant is a firm and defendants 2 and 3 are its partners. In the year 1997, the defendants approached the applicant for a cash credit limit of Rs.15 lakhs for their working capital requirement. Accordingly, the applicant bank sanctioned said amount to the defendants after executing necessary loan documents. As a collateral security, 2^nd defendant deposited the original title deed pertaining to 10 Ares and 40 Square meters of immovable property comprised in Sy.No.198/30 of Thiruvalla Taluk of Pathanamthitta District on

19.08.1997 more fully described under 'A' schedule to the OA and executed a letter of mortgage by the 2^nd defendant on 20.08.1997.

4. It is the further case of the applicant that in the year of 2008 defendants again approached the applicant for enhancement of existing cash credit facility. Accordingly, the applicant had enhanced the cash credit facility from Rs.15 lakhs to Rs.20 lakhs and the 2^nd defendant executed mortgage letter dated 09.05.2008 continuing the mortgage created on 19.08.1997 as collateral security.

5. Again in the year 2009, at the request of the defendants the credit facility was enhanced from Rs.20 lakhs to Rs.25 lakhs vide loan sanction order No.ADV/C/F114640 dated 25.05.2009 issued from the head office. As a security for the said enhanced cash credit facility of Rs.25 lakhs, defendants on 25.06.2009 executed Form No.248 acknowledging the receipt of sanction communication dated 25.05.2009, partnership letter in Form No.95 stating that defendants 2 and 3 are the partners of the 1^st defendant firm, letter requesting the applicant to grant loan facility of Rs.25 lakhs, demand promissory note for an amount of Rs.25 lakhs and undertook to repay the same together with interest @ 1.50% per annum above the applicant's prime lending rate subject to 16.25% per annum with monthly rests and at such rate to be fixed by the bank time to time and agreed to abide by all the rules and regulations of the applicant bank.

6. Apart from the above, the defendants on 25.06.2009 executed a consent letter in favour of the applicant consenting to disclose the information relating to them to CIBIL etc. in case of their default in repayment loan, executed Overdraft Rules in favour of the applicant undertaking to abide the term and conditions of sanction.

7. The defendants executed take delivery letter in Form No.69 promissory note for an amount of Rs.25lakhs, Agreement for hypothecation where the goods like paints and other hardware items stored in the godown situated at cross road junction were hypothecated favoring the bank, Agreement for hypothecation of book debts. Additionally, the 2^nd defendant vide letter dated 25.06.2009 agreed to extent the mortgage already created on 19.08.1997 towards the enhanced credit facilities.

8. It is the contention of the applicant that defendants failed to repay as per the term of loan sanction and the account become irregular despite of repeated requests and demand to regularize the same resulting in classification of the account as NPA on 31.03.2011 and issued Section 13(2) demand notice dated 14.06.2011 under of the SARFAESI Act demanding to pay an amount of Rs.28,21,925.02 due under the loan account as on 30.04.2011.

9. The 2^nd defendant issued a reply letter dated 07.07.2011 to the Branch Manager of the applicant bank requesting one year time or installment to clear the debt. Upon receipt of the said reply letter, the Branch Manager of the applicant issued a reply letter dated 14.07.2011 stating that the bank is unable to consider the request made in the letter dated 07.07.2011 and demanded the defendants to pay at least 50% of the dues immediately within a week to consider granting three month time to pay the balance 50%. Since, the defendants failed to clear the said liability, the authorized officer of the applicant issued possession notice dated 04.01.2012 under Section 13(4) of the SARFAESI Act to the defendants and published the same in compliance of the Security Interest (Enforcement) Rules.

10. The 1^st and 3^rd defendant vide letter dated 01.02.2012 requested the applicant bank to grant them time to pay the debt due in the monthly installments of Rs.2,00,000/- and paid an amount of Rs.50,000/- towards the cash credit loan. The applicant on the same day i.e., 01.02.2012 replied rejecting the offer of the defendants. Since, the defendants failed to clear the dues, the applicant through its Advocate issued a demand notice dated 03.02.2012 demanding an amount of Rs.27,42,501.02, excluding the interest for the period from 01.03.2007 to 31.01.2012. Since there occurred a mistake in typing the date as 01.03.2007 appearing in para 2 of that notice instead of 01.03.2011, the same was corrected by a correction notice dated 15.02.2012. As on 21.05.2012 an amount of Rs.34,34,177.02 is due to the applicant from the defendants under the cash credit limit of Rs.25,00,000/-. Hence, the present OA.

11. After filing of the OA, the applicant bank has taken out summon as directed by the Tribunal and has filed the proof of service on 02.07.2012. Accordingly, the service of summons was completed as per the regulations. Inspite of service of summons, defendants neither appeared nor represented and hence they were declared ex-parte on 02.11.2012.

12. The evidence on the side of the applicant bank consists of the proof affidavit of its Branch Manager (AW1) and Exhibits.A1 to A26 is marked on the side of applicant and closed their side of evidence.

13. Heard arguments of the applicant bank and perused the records of the case. The following points arise for my consideration:

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

**(ii) What order?**

My findings on the above points are as follows:- **Point No.(i) : In affirmative**

**Point No.(ii) : As per final order.**

**Reasons:-**

14. The evidence of the applicant bank by way of proof affidavit of Branch Manager AW1 reiterates the facts pleaded in the OA and the affidavit is corroborated by the above referred Exhibits A1 to A26 which clearly establishes the case of the applicant bank to allow the present OA. Even otherwise the whole case of the applicant bank is based on the documentary evidence and the witness has duly proved all the documents exhibited by him.

15. It is quite evident from the documents placed on record by the applicant bank that defendants have availed the financial assistance from the applicant bank and have failed to repay the dues of the applicant bank. Added to this, the absence of defendants inspite of service of summons, appears to be intentional without any bonafide reasons and it appears that they remained absent as they 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 by the applicant bank.

16. 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**

- (a) The OA is allowed with costs.

- (b) Defendants are jointly and severally directed to pay the applicant bank a sum of Rs.34,34,177.02 (Rupees Thirty four lakhs thirty four thousand one hundred seventy seven and paisa two only) due under the cash credit limit account No.OLCC-16838 together with future interest on the sum of Rs.32,55,841.02 (Rupees Thirty two lakhs fifty five thousand eight hundred forty one and paisa two only) [Rs.34,34,177.02 - (penal interest of Rs.1,46,428+31,908)] at the rate of 16.25% per annum from 22.05.2012 till realization.

- (c) In the event of failure of the defendants to pay the OA claim amount, the bank is at liberty to sell the OA 'A' schedule property and the sale proceeds be appropriated towards the OA claim amount as required under law.

- (d) In the event of non-realization of the OA claim amount despite the sale of the mortgaged property referred above, the bank is at liberty to proceed against the other properties of the defendants both movable and immovable, as required under law.

- (e) Schedule 'A' property shown in the OA shall become part and parcel of the final order of the OA and Recovery Certificate of present OA.

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

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

17. 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 11^th day of January, 2019]*


9TA.No.243/2016 (O.A.No.245/2012)**APPENDIX****Witness for Applicant:**

AW1: Arunraj.L, Branch Manager of the applicant bank.

**Witness for Defendant(s):** Nil

**Exhibits on the part of the applicant**

<table><thead><tr><th><b><u>Ext.No.</u></b></th><th><b><u>Particulars of documents</u></b></th></tr></thead><tbody><tr><td>A1</td><td>Letter of mortgage executed by the 2^nd defendant on 20.08.1997.</td></tr><tr><td>A2</td><td>Letter of mortgage executed by the 2^nd defendant on 09.05.2008.</td></tr><tr><td>A3</td><td>Loan sanction order No.ADV/C/F/114640 dated 25.05.2009 issued by the Head office of the applicant bank.</td></tr><tr><td>A4</td><td>Letter executed by the defendants dated 25.06.2009 in Form 248 acknowledging the receipt of the sanction communication dated 25.05.2009.</td></tr><tr><td>A5</td><td>Partnership letter dated 25.06.2009 in Form No.95 executed by the defendants 2 and 3.</td></tr><tr><td>A6</td><td>Request letter dated 25.06.2009 in Form No.73 for sanctioning loan amount of Rs.25lakhs executed by the defendants.</td></tr><tr><td>A7</td><td>Demand promissory note dated 25.06.2009 for Rs.25lakhs executed by the defendants.</td></tr><tr><td>A8</td><td>Consent letter dated 25.06.2009 executed by the defendants.</td></tr><tr><td>A9</td><td>Overdraft Rule dated 25.06.2009 signed by the defendants.</td></tr><tr><td>A10</td><td>Take delivery letter dated 25.06.2009 in Form No.69 executed by the defendants in respect to the demand note for Rs.25lakhs.</td></tr><tr><td>A11</td><td>Hypothecation agreement dated 25.06.2009 in Form No.144 executed by defendants in respect to loan facility of Rs.25lakhs.</td></tr><tr><td>A12</td><td>Agreement of hypothecation of book debts dated 25.06.2009 in Form No.228 executed by defendants in respect to loan facility of Rs.25lakhs</td></tr><tr><td>A13</td><td>Letter dated 25.06.2009 extending the mortgage created 20.08.1997 to the cash credit facility of Rs.25lakhs executed by the 2^nd defendant.</td></tr><tr><td>A14</td><td>Original partition deed No.2001/1990 dated 31.08.1990 of Thiruvalla SRO.</td></tr></tbody></table>

A15 Demand notice dated 14.06.2011 under Section 13(2) of the SARFAESI Act issued by the authorized officer of applicant to the defendants.

A16 Reply letter dated 07.07.2011 received from the 2^nd defendant.

A17 Reply letter dated 14.07.2011 issued by the applicant bank.

A18 Possession notice dated 04.01.2012 issued under Section 13(4) of the SARFAESI Act to the defendants.

A19 Letter dated 01.02.2012 issued by the 1^st and 3^rd defendant to the applicant bank.

A20 Credit slip dated 01.02.2012 for Rs.50,000/- issued to the 1^st defendant.

A21 Reply letter dated 01.02.2012 issued by the applicant to the 3^rd defendant.

A22 Demand notice dated 03.02.2012 issued by the Advocate Sri.O.N.Ninan to the defendants.

A23 Correction notice dated 15.02.2012 issued by the Advocate Sri.O.N.Ninan to the defendants.

A24 Certified copy of statement of account pertaining to cash credit limit loan account No.OLCC-16838 for the period from 25.06.2009 to 21.05.2012.

A25 Statement of account showing the unapplied interest in respect to cash credit limit account No.OLCC-16838 for the period from 01.03.2011 (date of NPA) to 21.05.2012.

A26 Statement showing penal interest calculated and rate of interest applied for the period upto 21.05.2012 pertaining to the cash credit limit account.

Defendants Exhibits - Nil

TA.No.243/2016 (O.A.No.245/2012)11**'A' SCHEDULE**

District : Pathanamthitta Sub District : Thiruvalla Taluk : Thiruvalla Farka : Thiruvalla Village : Thiruvalla Local Authority : Thiruvalla Municipality Right : Pandarapattom Old.Sy.Nos. : 121/17D, 121/17B and 123/8B Re.Sy.No. : 198/30 Extent in Ares : 10.40 Ares

**DESCRIPTION OF PROPERTY**

An extent of 10.40 Ares comprised in Re.Sy.No.198/30 (Old.Sy.No.121/17D, 121/17B and 123/8B) more particularly described in the Partition Deed No.2001/1990 of Thiruvalla Sub Registry Office.

**BOUNDARIES**

East : Thiruvalla -Mavelikkara Road. South : Properties of Koshy Issac of Kurisimmottil and building of Irampally. West : Property in the possession of Ezhava. North : Properties of Kalloor alias Chacko, Road East to West of property of Kulanji Purackan.

**IN THE DEBTS RECOVERY TRIBUNAL-II KERALA AT ERNAKULAM**


Dated this the 11^th day of January, 2019

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

TA.No.243/2016 (O.A.No.245/2012)

**Between**

City Union Bank Ltd. Thiruvalla Branch.

...Applicant

**And**

M/s.C.V.Philipose Sons Represented by its Partners.

...Defendants

**FINAL ORDER**