CANARA BANK vs S. SURESH on 19 February 2018

FINAL ORDER

This Original Application has been filed under Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 for recovery of a sum of Rs.14,55,58,492.18 with further interest @13.65% per annum with monthly rests from the defendants jointly and severally and by sale of ‘A’ to ‘C’ schedule properties. BRIEF FACTS OF THE CASE

1. Pursuant to the application made by the 1st defendant, the applicant sanctioned an open cash credit (OCC) limit of Rs.15 lakhs to him on 28.03.2013 and subsequently it was enhanced to Rs.2.30 crores on 24.04.2013. Towards securing the OCC limit, the 1st defendant executed security documents on 30.03.2013 and 24.04.2013 and defendants 2 and 3 executed guarantee agreement on 24.04.2013 in favour of the applicant bank. Thereafter, the OCC limit was enhanced to Rs.10 crores on 22.07.2013 and the 1st defendant executed security documents on 23.07.2013 for securing the enhanced cash credit limit. Towards securing repayment of the enhanced cash credit limit of Rs.10 crores, defendants 2 to 5 executed guarantee agreement in favour of the applicant bank on 23.07.2013. On 09.10.2014, the 1st defendant was granted an ad-hoc OCC limit of Rs.2.50 crores in addition to the regular OCC limit. As security for the ad-hoc OCC limit, the 1st defendant executed security documents on 09.10.2014 and guarantee agreement was executed by defendants 2 to 5 on 09.10.2014.

2. In addition to the execution of loan documents, the 1st defendant had on 29.03.2013 created mortgage by deposit of title deeds of his property described in ‘A’ schedule to the OA to secure due repayment of the amount due under the OCC limit. The 1st defendant also executed letter dated 30.03.2013 evidencing the deposit of title deeds to the applicant on 29.03.2013. The 1st defendant executed letters dated 24.04.2013, 23.07.2013 and 09.10.2014 stating that the mortgage created by him over ‘A’ schedule property would be available to secure all the amounts availed by him from the applicant bank. The defendants 2 and 3 had on 23.04.2013 created mortgage by deposit of title deeds of their property described in ‘B’ schedule to the OA to collaterally secure due repayment of the amount availed by the 1st defendant and they executed a letter dated 24.04.2013 confirming the creation of mortgage over the aforesaid property on 23.04.2013. Subsequently, defendants 2 and 3 issued letter to the applicant on 23.07.2013 and 09.10.2014 stating that the mortgage created by them in respect of ‘B’ schedule property would be available to secure all the amounts availed by the 1st defendant. The defendants 2 to 5 had on 22.07.2013 created mortgage by deposit of title deeds of their property described in ‘C’ schedule to the OA to collaterally secure due repayment of the amount availed by the 1st defendant and they executed a letter dated 23.07.2013 confirming the creation of mortgage on 22.07.2013. Thereafter, defendants 2 to 5 executed letter dated 09.10.2014 stating that the mortgage created by them in respect of ‘C’ schedule property would be available to secure all the amounts availed by the 1st defendant from the applicant bank.

3. It is the case of the applicant that operation of the OCC account became irregular and the account was classified as NPA on 01.03.2015. The applicant bank initiated proceedings under the SARFAESI Act and issued notice to the defendants on 16.03.2015 and that despite receiving the notice, they have not repaid the dues. As per the statement of account maintained by the applicant, an amount of Rs.14,57,66,855.18 is due to the applicant from the defendants. The total penal interest charged in the OCC account is Rs.30,90,193/- and the quantum of penal interest that had been capitalized in the account is Rs.2,08,363/-. After deducting the capitalized portion of penal interest i.e., Rs.2,08,363/- from the outstanding liability, the amount due to the applicant from the defendants as on 02.02.2016 is Rs.14,55,58,492.18.

4. The defendants were duly served with summons. Though the defendants had entered appearance through Advocate P.V.George and sought adjournment for filing vakalat and written statement, they did not file vakalat or written statement and as such, defendants 1 to 5 were set exparte on 08.09.2016.

5. The evidence on the side of the applicant bank consists of the proof affidavit of its Senior Manager, AW1 and Exts.A1 to A40.

6. During the pendency of the OA, the applicant bank conducted sale of the property set out in ‘C’ schedule to the OA under SARFAESI Act on 06.01.2017 and recovered a sum of Rs.8,50,10,000/-. Consequently, title deed pertaining to the ‘C’

schedule property viz., sale deed No.3853/2006 of Sasthamangalam SRO (Ext.A33) was returned to the applicant bank on 22.03.2017 as per order dated 08.03.2017 in IA No.302/2017. The applicant bank filed a memo on 14.06.2017 stating that the amount recovered by sale of the ‘C’ schedule property was appropriated towards the loan account on 25.01.2017.

7. 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 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:

8. The case of the applicant bank regarding recovery of the sum of Rs.14,55,58,492.18 claimed as due under Ext.A40 statement of account relating to the OCC limit as on 02.02.2016 with further interest on the sum of Rs.14,24,68,299.18 (after deducting the penal interest portion – Rs.30,90,193/-) at the contractual rate @13.65% per annum with monthly rests from 03.02.2016 to 22.03.2016 together with pendente lite and post decree interest, less the sum of Rs.8,50,10,000/- recovered by the applicant bank by sale of ‘C’ schedule property under the SARFAESI Act (which was appropriated towards the OCC account on 25.01.2017), from the defendants jointly and severally and by sale of ‘A’ and ‘B’ schedule properties, is proved by the proof affidavit of its Senior Manager, AW1 and Exts.A1 to A40.

9. Having regard to the amount advanced, the interest and penal interest applied and the chronic default committed, I am of the view that the applicant bank is entitled to get pendente-lite and post- decree interest @13.65% per annum with monthly rests, as prayed for.

ORDER

10. The OA is allowed with costs. The applicant bank is allowed to recover the sum of Rs.14,55,58,492.18 (Rupees fourteen crores fifty five lakhs fifty eight thousand four hundred ninety two and Paise eighteen only) with further interest on the sum of Rs.14,24,68,299.18 (Rupees fourteen crores twenty four lakhs sixty eight thousand two hundred ninety nine and Paise eighteen only) @13.65% per annum with monthly rests from 03.02.2016 till realization and also its costs, less the sum of Rs.8,50,10,000/- (Rupees eight crores fifty lakhs ten thousand only) recovered by the applicant bank by sale of ‘C’ schedule property on 25.01.2017, from the defendants jointly and severally and by sale of ‘A’ and ‘B’ schedule properties.

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

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. 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 PS, transcribed by her, corrected by me and then pronounced in the open court on this the 19th day of February, 2018]

(S.V.GOWRAMMA)

Presiding Officer

A P P E N D I X

Witness for Applicant: AW1: N.Raveendran, Senior Manager of the applicant bank.

Witness for Defendant(s): Nil

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 30.03.2013 Demand promissory notice for Rs.15 lakhs executed by the 1st defendant in favour of the applicant bank. A2 30.03.2013 Request for overdraft facility executed by the 1st defendant in favour of the applicant bank. A3 30.03.2013 Cash credit agreement executed by the 1st defendant in favour of the applicant bank. A4 24.04.2013 Demand promissory notice for Rs.2.15 crores executed by the 1st defendant in favour of the applicant bank. A5 24.04.2013 Request for overdraft facility executed by the 1st defendant in favour of the applicant bank. A6

24.04.2013 Hypothecation agreement executed by the 1st defendant in favour of the applicant bank. A7

24.04.2013 Guarantee agreement executed by the 2nd defendant in favour of the applicant bank. A8

24.04.2013 Guarantee agreement executed by the 3rd defendant in favour of the applicant bank. A9

23.07.2013 Demand promissory notice for Rs.7.70 crores executed by the 1st defendant in favour of the applicant bank. A10 23.07.2013 Request for overdraft facility submitted by the 1st defendant to the applicant bank. A11 23.07.2013 Supplemental common hypothecation agreement executed by the 1st defendant in favour of the applicant bank. A12 23.07.2013 Guarantee agreement executed by the 2nd defendant in favour of the applicant bank. A13 23.07.2013 Guarantee agreement executed by the 3rd defendant in favour of the applicant bank. A14 23.07.2013 Guarantee agreement executed by the 4th defendant in favour of the applicant bank. A15 23.07.2013 Guarantee agreement executed by the 5th defendant in favour of the applicant bank.

A16 09.10.2014 Demand promissory notice for Rs.2.50 crores executed by the 1st defendant in favour of the applicant bank. A17 09.10.2014 Request for overdraft facility submitted to the applicant by the 1st defendant. A18 09.10.2014 Supplemental agreement executed by the 1st defendant in favour of the applicant bank. A19 09.10.2014 Guarantee agreement executed by the 2nd defendant in favour of the applicant bank. A20 09.10.2014 Guarantee agreement executed by the 3rd defendant in favour of the applicant bank. A21 09.10.2014 Guarantee agreement executed by the 4th defendant in favour of the applicant bank. A22 09.10.2014 Guarantee agreement executed by the 5th defendant in favour of the applicant bank. A23 30.03.2013 Letter executed by the 1st defendant evidencing the deposit of title deed with the applicant bank. A24 19.01.2000 Will No.III/6/2000 of Sasthamangalam SRO. A25 24.04.2013 Letter executed by the 1st defendant in favour of the applicant bank. A26 23.07.2013 Letter executed by the 1st defendant in favour of the applicant bank. A27 09.10.2014 Letter executed by the 1st defendant in favour of the applicant bank. A28 24.04.2013 Letter executed by defendants 2 and 3 evidencing deposit of title deeds with the applicant bank. A29 25.02.2010 Settlement deed No.829/2010. A30 23.07.2013 Letter executed by defendants 2 and 3 in favour of the applicant bank. A31 09.10.2014 Letter executed by defendants 2 and 3 in favour of the applicant bank. A32 23.07.2013 Letter executed by defendants 2 to 5 evidencing deposit of title deeds with the applicant bank. A33 30.10.2006 Sale deed No.3853/2006 of Sasthamangalam SRO. [Ext.A33 was returned to the applicant bank as per order dated 08.03.2017 in IA No.302/2017] A34 09.10.2014 Letter executed by defendants 2 to 5 in favour of the applicant bank. A35 16.03.2015 Notice under S.13(2) of the SARFAESI Act issued to the 1st defendant by the Authorised Officer of the applicant bank. A36 16.03.2015 Notice under S.13(2) of the SARFAESI Act issued to the 2nd defendant by the Authorised Officer of the applicant bank. A37 16.03.2015 Notice under S.13(2) of the SARFAESI Act issued to the 3rd defendant by the Authorised Officer of the applicant bank. A38 16.03.2015 Notice under S.13(2) of the SARFAESI Act issued to the 4th defendant by the Authorised Officer of the applicant bank. A39 16.03.2015 Notice under S.13(2) of the SARFAESI Act issued to the 5th defendant by the Authorised Officer of the applicant bank. A40 … Certified copy of the statement of account relating to the OCC limit.

Defendants’ Exhibits – Nil

(PRESIDING OFFICER)

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 19th day of February, 2018

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

T.A No.426/2016 (O.A No.308/2016) Between Canara Bank

…Applicant And Suresh.S & 4 others. …Defendants

FINAL ORDER