INDIAN OVERSEAS BANK vs M/s UTHAMAN PETROLEUM on 9 May 2018

FINAL ORDER

This Original Application is filed on 01.09.2014 under Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 for recovery of a sum of Rs.82,04,119.70 together with future interest thereon on Rs.54,82,930.70 @13.25% per annum with monthly rests and on Rs.20,39,048/- @13.75% per annum with monthly rests and on Rs.6,82,141/- @ 14.25% per annum with half yearly rests from 15.07.2014 till realization and by sale of OA ‘A’ and ‘B’ schedule properties. BRIEF FACTS OF THE CASE

1. The applicant is a Nationalized Bank constituted under the Banking companies (Acquisition of Transfer of Undertaking Act-Act 5 of 1970) having its Central office at 763, Anna Salai, Chennai-600 002 with Regional Offices and branches at various places in India including a branch at Alappuzha. The Chief Manager and Principal Officer is competent to verify and authorized to sign the pleadings and take all legal actions representing the applicant bank.

2. The applicant declares that the application is presented within the limitation prescribed under Section 24 of the RDBFI Act 1993, as applicant had granted credit facilities to the defendants on 07.09.2009, 19.12.2009 and 23.07.2010 after the executing security documents. The defendants had confirmed the liability under the credit facilities vide revival letter dated 07.05.2012. Hence the application is within the period of limitation.

3. The 1st defendant is a partnership firm engaged in the business of running petrol and diesel pump retail outlet of Indian Oil Corporation. The 2nd defendant is the Managing Partner and 3rd defendant is the partner of the 1st defendant.

4. It is submitted by the applicant the business was originally carried on by the 3rd defendant as a proprietor concern in the name and style ‘M/s.Uthaman Petroleum’. The said proprietory concern had availed a credit facility of Rs.10 lakhs and term loan facility of Rs.4,45,000/- from the applicant. Subsequently, the said proprietary concern was converted into a partnership firm with the name ‘M/s.Uthaman Petroleum’ with the 2nd defendant and 3rd defendant as partners. The said partnership firm is the 1st defendant herein.

5. It is the case of the applicant that defendants approached the applicant in the year 2009 with a request to avail Cash Credit Facility (for brevity OCC facility) to meet the requirements of their business. Considering the request, the applicant had sanctioned an OCC facility for an amount of Rs.25,00,000/- vide credit sanction advice dated 07.09.2009.

6. As a security for the OCC facility, defendants had executed a demand promissory note along with a letter dated 11.09.2009 agreeing to pay the applicant, on demand the sum of Rs.25,00,000/- along with interest thereon. The credit facility was secured by hypothecation of articles more fully described under ‘A’ schedule to the OA vide hypothecation agreement dated 11.09.2009. The 2nd and 3rd defendants stood has guarantors to the credit facility and have executed guarantee agreement dated 11.09.2009.

7. It is stated that the defendants had approached the applicant in October 2009 requesting to avail term loan facility for improvement of the petrol pump. Considering the request, the applicant had sanctioned a term loan facility for an amount of Rs.14,00,000/- vide credit sanction advice dated 19.12.2009.

8. As a security for the term loan facility defendants had executed a demand promissory note dated 19.12.2009 agreed to pay the applicant, on demand the sum of Rs.14,00,000/- along with interest thereon. The defendants vide letter dated 19.12.2009 agreed that the said loan shall be repaid together with interest in 60 monthly equal installments of Rs.31,675/- and in case of any default applicant will have option to recall the entire loan amount or any part thereof. The defendants had executed a letter of hypothecation dated 19.12.2009 hypothecating the stock of petroleum products. The term loan facility was also secured by personal continuing guarantees of 2nd and 3rd defendant and they had executed a guarantee agreement dated 19.12.2009 in favour of the applicant.

9. It is submitted by the applicant that in June 2010, at the request of defendants the existing cash credit facility of Rs.25,00,000/- was enhanced to Rs.37,00,000/- under Easy Trade Finance (ETF) vide credit sanction advice dated 23.07.2010. As a security for the enhanced limit defendants had executed demand promissory note dated 23.07.2010, hypothecation agreement dated 23.07.2010 and personal continuing guarantee of 2nd and 3rd defendant along with a separate letter of guarantee dated 23.07.2010. In additional to the above, the 1st and 2nd defendant also executed letter of authorisation by partners on 23.07.2010 that each partner is entitled to make payment on behalf of the firm and executed confirmation of balance/revival letters, binding on the firm and the partner.

10. It is stated by the applicant that the 2nd defendant in November, 2009 had approached the applicant seeking to avail agricultural term loan facility under IOB Green Credit Yojana. Considering the request, the applicant had sanctioned an agricultural term loan facility for an amount of Rs. 4,00,000/- vide credit sanction advice dated 17.11.2009.

11. As a security for the term loan facility, the 2nd defendant had executed a demand promissory note dated 23.11.2009 agreeing to pay the amount thereon on demand along with interest. The 2nd defendant vide letters dated 23.11.2009 agreed that the said loan shall be repaid together with interest in 84 monthly equal installments of Rs.6,800/-. It is also agreed that in the event of default of payment, they shall be liable to pay overdue interest at the rate of Rs.2 per Rs.100 per month and the applicant will have the option in its discretion to recall the entire loan amount or any part thereof. That apart the 2nd defendant executed letter of hypothecation dated 23.11.2009 hypothecating all of present and future crops etc to secure the term loan facility.

12. It is stated by the applicant that as a security to the aforesaid credit facilities availed by the defendants they have created an equitable mortgaged of property owned by them more fully described under ‘B’ schedule to the OA and deposited title deed in respect of the property. The defendants also executed confirmation of letters dated 15.03.2007, 11.09.2009 and 06.01.2011. Subsequently the 2nd defendant had extended the mortgage and executed a confirmation letters for supplemental mortgage dated 24.11.2009, 20.12.2009 and 23.07.2010.

13. It is the contention of the applicant that despite the undertaking made by the defendants, they failed to make payment of any installment and committed default. On account of nonpayment the loan accounts, the accounts were classified as NPA on 31.03.2011 and the applicant bank initiated proceedings under SARFAESI Act (for brevity the ACT) thereby issued demand notice dated 28.08.2011. As the defendants did not clear the debts, applicant proceeds further and issued notice dated 28.12.2011 under 13(4) of the Act. Thereafter applicant proceeded against the property and brought it to sale. In e- auction, the highest bid Rs.56,00,000/- was received from Mr.Fabin Simon. The said sale challenged by the 2nd defendant in SA.No.110/2014.

14. It is stated that the defendants vide letter dated 03.04.2012 confirmed the balance outstanding in cash credit and term loan facilities as on 31.02.2012. The 2nd defendant had also acknowledged his liability under the agricultural loan facility as on 16.04.2012. As per the statement of account maintained by the applicant bank an amount Rs.82,04,119.70/- together with future interest thereon on Rs.54,82,930.70 @13.25% per annum with monthly rests and on Rs.20,39,048/- @13.75% per annum with monthly rests and on Rs.6,82,141/- @ 14.25% per annum with half yearly rests is due under the loan accounts of the defendants. Hence, the applicant was constrained to file this original application for recovery of the said amount.

15. After filing of the OA, the applicant bank has taken out the summons as directed by the Tribunal and has filed the proof of service on 07.01.2015. The defendants were duly served with summons and service of summons was completed as per the regulations. The defendants have filed Vakalath on 19.11.2014 but they failed to file written statement in time and hence the chance of filing written statement was closed on 17.03.2017.

16. The evidence on the side of the applicant bank consists of the proof affidavit of its Chief Manager and Principal Officer, AW1 and Exhibits A1 to A44 is marked on the side of applicant and closed their side of evidence.

17. 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 the affirmative

Point No.(ii):

As per final order.

Reasons:-

18. The evidence of the applicant bank by way of proof affidavit of Chief Manager and Principal Officer AW1 reiterates the facts pleaded in the OA and the affidavit is corroborated by the above referred Exhibits A1 to A44 which clearly establishes the case of the applicant bank to allow the present OA. Added to this, the non-filing of written statement by the defendants inspite of filing Vakalath appears to be intentional without any bonafide reasons and it appears that they did not contest the matter 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.

19. 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) The defendants are directed to pay the applicant a sum of Rs.82,04,119.70 (Rupees Eighty Two lakhs four thousand one hundred nineteen and paise seventy only) together with future interest on the sum of Rs.54,82,930.70 (Rupees Fifty four lakhs eight two thousand nine hundred thirty and paise seventy only) @ 13.25% per annum with monthly rests and on Rs.20,39,048/- (Rupees Twenty lakhs thirty nine thousand and forty eight only) together with future interest @ 13.75% per annum with monthly rests and on Rs.6,82,141/- (Rupees Six lakhs eight two thousand one hundred and forty one only) together with future interest @ 14.25% per annum with half yearly rests with effect from 15.07.2014 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’ and ‘B’ schedule properties of the defendants 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 properties referred above, the bank is at liberty to proceed against the other properties of the defendants, as required under law; (e) Schedule ‘A’ and ‘B’ properties 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.

20. 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 9th day of May, 2018]

(S.V.GOWRAMMA) Presiding Officer

A P P E N D I X Witness for Applicant: AW1: T.A. Abraham, Chief Manager and Principal Officer of the applicant bank.

Witness for Defendant(s): Nil

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 07.09.2009 Credit Sanction Advice relating to open cash credit (OCC) A2 11.09.2009 Demand Promissory Note A3 11.09.2009 Letter executed by the defendants in favour of the applicant. A4 11.09.2009 Hypothecation agreement executed by the defendants. A5 11.09.2009 Letter of hypothecation (for securing machineries/vehicles/goods/book debts) A6

11.09.2009 Letter of guarantee executed by 2nd defendant. A7

11.09.2009 Letter of guarantee executed by 3rd defendant. A8

19.12.2009 Credit Sanction Advice relating to term loan account. A9

19.12.2009 Demand promissory Note A10 19.12.2009 Letter executed by the defendants in favour of the applicant. A11 19.12.2009 Letter executed by the defendants in favour of the applicant. A12 19.12.2009 Letter of hypothecation executed by the defendants in favour of the applicant. A13 19.12.2009 Letter of guarantee executed by the defendants. A14 23.07.2010 Credit Sanction Advice relating to enhancement of existing cash credit facility from Rs.25,00,000/- to 37,00,000/-. A15 23.07.2010 Demand Promissory Note A16 23.07.2010 Letter executed by the defendants in favour of the applicant. A17 23.07.2010 Hypothecation agreement executed by the defendants.

A18 08.07.2010 Letter issued by the 2nd defendant to the applicant. A19 23.07.2010 Letter executed by the defendants in favour of the applicant. A20 23.07.2010 Letter of guarantee executed by the 2nd defendant. A21 23.07.2010 Letter of guarantee executed by the 3rd defendant. A22 17.11.2009 Credit Sanction Advice issued by the applicant to the 2nd defendant. A23 23.11.2009 Demand Promissory Note. A24 23.11.2009 Letter issued by the 2nd defendant to the applicant. A25 23.11.2009 Letter executed by the 2nd defendant in favour of the applicant A26 23.11.2009 Letter of hypothecation (agricultural advances) executed by the 2nd defendant. A27 15.03.2007 Confirmation letter. A28 29.05.2010 Sale Deed No.2112/2010 of Mararikulam SRO. A29 06.01.2011 Confirmation letter. A30 15.10.2007 Sale Deed No.3136/2007 of Mararikulam SRO. A31 11.09.2009 Confirmation letter. A32 24.11.2009 Confirmation letter for supplemental mortgage. A33 20.12.2009 Confirmation letter for supplemental mortgage. A34 23.07.2010 Confirmation letter for supplemental mortgage. A35 23.08.2011 Demand notice issued to the defendants under Section 13(2) of the Act. A36 28.12.2011 Possession Notice issued to the defendant under Section 13(4) of the Act. A37 06.05.2013 Letter issued by the 1st defendant to the applicant. A38 12.08.2013 Letter issued by the applicant to the 1st defendant A39 07.05.2012 Revival letter executed by the defendants. A40 03.04.2012 Balance confirmation letter executed by the defendants. A41

Computerized statement of account in the cash credit facility for the period from 15.07.2009 to 14.07.2014 A42

Computerized statement of account in the term loan facility for the period from

19.12.2009 to 14.07.2014. A43

Computerized statement of account in the green credit facility for the period from 01.01.2009 to 14.07.2014. A44

Statement showing the rate of interest.

Defendants Exhibits – Nil

[PRESIDING OFFICER]

‘A’ SCHEDULE

The stock of petrol, diesel, oil etc stored in the premises at ‘M/s.Uthaman Petroleum’, Beach Road, Kattoor.

Improvements/constructions etc in the premises of the petrol pump comprised in Sy.No.204/6/13/2, 204/6-14 and 204/5, Kalavoor Village, Ambalapuzha Taluk.

‘B’ SCHEDULE Item No.1

District

: Alappuzha

Sub District : Mararikulam

Taluk

: Ambalapuzha Taluk

Village

: Kalavoor Resurvey No. : 204/6/13-2, 204/6/14 and

Extent

: 8.09 Ares DESCRIPTION OF PROPERTY All that part and parcel of land having an extent of 8.09 Ares of land and building therein comprising 4.86 ares situated in Ry.Sy.No.204/6/13/2, 2.43 ares situated in Re.Sy.No.204/6/14 and 0.83 Ares situated in Re.Sy.No.204/5, Kalavoor Village, Ambalapuzha Taluk belonging to the 2nd defendant under Sale Deed No.2112/2010, Mararikulam SRO and more particularly described in the schedule to therein. BOUNDARIES

North : Chandralekha’s property

East : Alappuzha-Cherthala Road

South : Dr.Antony’s property West : Chandramathi, Shanmughan property Item No.2

District

: Alappuzha

Sub District : Mararikulam

Taluk

: Cherthala

Village

: Mararikulam North Resurvey No. :

Extent

: 20.24 Ares DESCRIPTION OF PROPERTY All that part and parcel of land having an extent of 20.24 Ares of land situated in Ry.Sy.No.650/8, Block No.31, Mararikulam North Village, Cherthala Taluk belonging to the 2nd defendant under sale deed No.3136/2007 of Mararikulam SRO and more particularly described in the schedule to therein. BOUNDARIES

North : Remaining property of vendors

East : property of Bhaskaran

South : Mararikulam Road West : 4 feet pathway.

[PRESIDING OFFICER]

IN DEBTS RECOVERY TRIBUNAL-II, KERALA AT ERNAKULAM

Dated this the 9th day of May, 2018

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

Between Indian Overseas Bank, Alappuzha Branch

…Applicant And M/s.Uthaman Petroleum & others

…Defendants

FINAL ORDER