FEDERAL BANK vs S. SREEVALLABHAN on 9 July 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 short ‘the Act’) for recovery of a sum of Rs.19,48,751.58 due under FML-1 account with interest on the sum of Rs.19,02,511/- @21% per annum with monthly rests from defendants 1 to 5 jointly and severally and by sale of ‘A’ and ‘B’ schedule properties; a sum of Rs.20,24,262.11 due under FML-2 account with interest on the sum of Rs.19,75,843.60 @21% per annum with monthly rests from defendants 1 to 5 jointly and severally and by sale of ‘A’ and ‘B’ schedule properties; and a sum of Rs.10,75,432.68 due under FHS loan account with interest on the sum of Rs.10,65,929.60 @15.75% per annum with monthly rests from defendants 1 and 2 jointly and severally and by sale of ‘C’ schedule property. BRIEF FACTS OF THE CASE

1. The 1st defendant is the husband of the 2nd defendant. The defendants 3 to 5 are the co-obligants/co-borrowers for the credit facilities availed by defendants 1 and 2. The 5th defendant has executed a Power of Attorney dated 27.12.2007 in favour of the 4th defendant authorizing her to do all or any of the acts specified therein including execution of the loan documents and the 5th defendant has executed the loan documents through his Power of Attorney holder, the 4th defendant.

2. During July, 2008, the defendants approached the Nanthencode Branch of the applicant bank seeking financial assistance. Considering the request of the defendants, the Nanthencode Branch of the applicant bank had sanctioned two Federal Mortgage Loans (FML-1 & FML-2) of Rs.22 lakhs each to be repaid as per the terms and conditions specified in the loan agreements executed by the defendants. The 1st defendant as principal borrower and defendants 2 to 5 as co-obligants/co-borrowers availed FML-1 of Rs.22 lakhs on 31.07.2008 after executing demand promissory notice, security delivery letter and agreement for federal mortgage loan in favour of the bank. The 2nd defendant as principal borrower and

Rs.22 lakhs on 31.07.2008 after executing demand promissory notice, security delivery letter and agreement for federal mortgage loan in favour of the bank.

3. As security for the FML-1 and FML-2 facilities, defendants 2, 4 and 5 on 31.07.2008 deposited the original partition deed No.4303/1962 of SRO, Cherthala and exchange deed No.1960/1994 of SRO, Pattanakkad relating to a total extent of 12.35 Ares of land in Sy.Nos.53/2 and 53/3-1 (correct survey number as per revenue records is 53/3-2) in Vayalar Mekku (Kadakkarappally) Village, Cherthala Taluk, Alappuzha District owned by them and more particularly described in schedule ‘A’ to the OA with the applicant bank’s Nanthencode Branch to create mortgage by deposit of title deed as envisaged under S.58(f) of the Transfer of Property Act. The defendants 2, 4 and 5 executed joint letter dated 01.08.2008 confirming the deposit of title deeds and creation of mortgage in favour of the bank. As security for FML-1 and FML-2 facilities, the 3rd defendant on 18.09.2008 deposited certified copy of partition deed

No.1224/1971 of SRO, Meenachal relating to 79.13 Ares of land in Sy.Nos.293/3 and 293/4 in Thalayazham Village, Vaikom Taluk, Kottayam District, owned by him and more particularly described in schedule ‘B’ to the OA with the Nanthencode Branch of the applicant bank with intention to create mortgage by deposit of title deed as envisaged under S.58(f) of the Transfer of Property Act. The 3rd defendant also confirmed the deposit of title deed on 18.09.2008 and creation of mortgage vide his letter dated 19.09.2008.

4. Subsequently, in the month of March, 2009, defendants 1 and 2 approached the bank for financial assistance by way of housing loan facility. Considering the request of defendants 1 and 2, Nanthencode Branch of the applicant bank sanctioned a federal housing scheme loan (FHS) of Rs.9 lakhs and they availed the said facility on 31.03.2009 after executing demand promissory notice, security delivery letter and agreement for federal housing loan in favour of the bank. As security for the FHS loan availed by defendants 1 and 2, on 31.03.2009 they deposited original sale deed No.3491/2009 of Kottappadi SRO relating to 1/19th undivided share in the land having an extent of 18.297 cents comprised in Re- Sy.No.118/2 of Guruvayur Village, Chavakkad Taluk and residential flat thereon i.e., Type 3, G 1, measuring area of 589 sq.ft. on the ground floor of Sreepathi Arcade together with car parking space marked as G1 in Guruvayoor Village, Chavakkad Taluk owned by them and more particularly described in schedule ‘C’ to the OA with the Nanthencode Branch of the applicant bank with intention to create mortgage by deposit of title deed as envisaged under S.58(f) of the

Transfer of Property Act. The defendants 1 and 2 also confirmed the deposit of title deed vide letter dated 01.04.2009.

5. The defendants 1 to 5 executed balance confirmation letters on 13.07.2011 and 16.07.2011 thereby confirming the balance outstanding under the FML-1 and FML-2 accounts. The defendants 1 and 2 executed balance confirmation letter on 10.01.2012 confirming the balance outstanding under the FHS loan as on 09.01.2012. The defendants failed and neglected to respond to the letters and personal contacts made by the applicant bank on many occasions and hence a demand notice under S.13(2) of the SARFAESI Act was caused to be issued to the defendants on 06.06.2012 calling upon them to pay the entire amount due under the respective accounts, but the defendants failed to settle the liabilities.

6. As per the statement of account maintained by the bank, an amount of Rs.19,63,729/-, Rs.20,40,493.60 and Rs.10,77,440.60 is due under FML-1, FML-2 and FHS loan accounts respectively. The applicant has charged penal interest of Rs.61,218/-, Rs.64,650/- and Rs.11,511/- in FML-1, FML-2 and FHS loan accounts respectively and its capitalization effect would come to Rs.14,977.42, Rs.16,231.49 and Rs.2,007.92. The amount claimed in the OA is Rs.50,48,446.37 which is the amount outstanding after deducting the capitalized penal interest of Rs.33,216.83.

7. The defendants filed written statement contending inter alia that the OA as framed is not maintainable either in law or on facts and that none of the documents relied by the applicant can be accepted in evidence as all of them have been manipulated with fraudulent intention of making alleged gains. The statements of accounts viz., Exts.A17 and A18 appended along with the OA cannot be acted upon as it does not reflect the true transactions between the defendants and the applicant bank. The applicant bank has deliberately suppressed various transactions as per which considerable amount of the defendants had been adjusted without their consent. In fact, if a true and correct accounts are taken of all the transactions the defendants have with the applicant bank, then in that event no amount whatsoever is due from the defendants to the applicant bank; on the other hand, substantial amounts will have to be refunded to the defendants.

8. It is submitted by the defendants that the 1st defendant is a private limited company engaged in business as insurance brokers. The 2nd defendant is the chairman and managing director of the 1st defendant company and the 3rd defendant is the additional chairman and managing director of the 1st defendant company. The defendants 2 and 3 for the purpose of augmentation and promotion of the 1st defendant’s business had approached the applicant bank for various credit facilities and pursuant thereto, the following facilities were granted by the applicant bank:

(a) Federal mortgage loan of Rs.22 lakhs availed by the 2nd defendant on 31.07.2008 for his personal purpose.

(b) Federal mortgage loan of Rs.22 lakhs availed by the 3rd defendant on 31.07.2008 for her personal purpose.

(c) Housing loan of Rs.9 lakhs availed by defendants 2 and 3 on 13.03.2009.

(d) Car loan of Rs.16 lakhs was availed on 20.11.2009 for and on behalf of the 1st defendant in which defendants 2 and 3 stood as guarantors.

(e) Car loan of Rs.4 lakhs was availed on 12.05.2010 for and on behalf of the 1st defendant in which defendants 2 and 3 stood as guarantors.

(f) The 1st defendant availed a bank guarantee limit of Rs.55 lakhs on 09.06.2010 for which fixed deposits standing in the name of defendants 2 and 3 were offered as security.

(g) The 1st defendant availed a temporary overdraft facility in current account for an amount of Rs.24 lakhs on 30.03.2011.

9. It is urged by the defendants that as security for the amounts falling due under the said transactions, they hypothecated the movables belonging to them specifically mentioned in the agreement of loan and also offered various items of immovable properties belonging to them in favour of the bank. The defendants were regularly making payments to each and every loan account at regular intervals and at no point of time was there any default upto 01.03.2012. While so, to the great surprise and shock of the defendants, they came to understand that the bank has clandestinely availed multiple loans without the knowledge and consent of the defendants and accounts were manipulated to such an extent as though the defendants were availing loan from the said amounts. Thereupon, the defendants vide letter dated 02.03.2012 requested the applicant bank to give copies of all the documents pertaining to loans

availed by them in respect of the fixed deposits standing in their name from the applicant bank, but the applicant did not respond to the same.

10. It is urged by the defendants that they were issued with notice dated 06.06.2012 as contemplated under S.13(2) of the SARFAESI Act and the defendants raised their objection vide letter dated 09.06.2012 showing the details of loan repayment and requested the bank to handover copies of documents and to ascertain the actual amount due. On 09.10.2012 the defendants received a reply detailing the transactions and showing that an amount of Rs.1,80,23,715/- has been transferred from the 1st defendant’s account to loan accounts, besides informing that an amount of Rs.96,78,071/- was outstanding under various loans. The defendants vide letter dated 09.10.2012 submitted their objections in the manner in which the loan accounts were being manipulated by the applicant without their knowledge and consent and also made it clear that the interest rate was being manipulated to put the defendants in dire straits on account of increased rate of interest being charged on them. The defendants were served with a letter dated 06.11.2012 confirming the total amount in the fixed deposit at Rs.3,45,46,172/-, interest accruing on the same at Rs.62,88,612/- and loan against fixed deposit at Rs.2,35,46,560/- and interest paid at Rs.52,77,192/-.

11. It is urged by the defendants that on receipt of the letter dated 06.11.2012, the defendants vide letter dated 23.11.2012 once again requested the applicant to give full details of the accounts. This was followed by letter dated 07.12.2012 informing the irregularities noted and requesting for information as required above. However, ignoring the request of the defendants, the applicant through its counsel issued notice of demand on 15.02.2013 stating that an amount of Rs.52,77,547.40 was alleged to be due to the applicant. The defendants sent letters dated 23.12.2013 and 08.01.2014 requesting for further details along with copies of documents such as loan applications signed by the defendants, fixed deposit opening forms signed by the defendants, fixed deposit discharge forms signed by the defendants etc.

12. It is submitted by the defendants that on 05.02.2014, a letter was issued by the applicant stating that out of Rs.50 lakhs claimed to be deposited by the defendants, only an amount of Rs.44,29,910/- was remitted by the defendants and that the details regarding deposits and other transactions were under preparation and the same would be intimated to the defendants. Thereupon on 22.04.2014 and 30.04.2014 the defendants again requested the applicant and its Zonal Manager requesting for details of various accounts such as copies of FD opening application, FD discharge, FD receipt and discharge copy, FD closure details etc. However, on 29.05.2014 the defendants were served with a summary and statements of accounts of fixed deposits standing in their name and the loans availed by them except the documents signed by the defendants for opening of FD/loans. However, from the statement of accounts it was clear that the defendants had never signed documents for opening so many loans from deposits mentioned in the statement. The statements show that total fixed deposit was Rs.3,75,15,471/- and a total loan of Rs.4,65,82,575/- was also availed as per the statement supplied by the applicant. As the defendants had never permitted availment of huge loans from the fixed deposits, they have been completely duped due to the unauthorized debits and transactions carried out by the applicant which caused heavy loss to the defendants, by creating multiple loans on FDs without the consent of the defendants.

13. It is the case of the defendants that without their knowledge, consent and authorization, the loan applications have been corrected in different ways and that the corrections are made in the loan application submitted by the depositor for single loan. The defendants never authorized or discharged and availed further loans and the unlawful act of the applicant resulted heavy financial loss to the defendants. The defendants thereupon on 17.06.2014 and 20.06.2014 addressed a letter to the Zonal Manager highlighting various discrepancies and falsification of the accounts leading to considerable loss and damage to the defendants amounting to over Rs.70 lakhs. The defendants also requested the applicant for the signed documents for all the transactions and to inform the defendants the actual amount due from them if any after adjusting the loan, to which there was no response. The defendants received a reply dated 27.06.2014 issued by the applicant refusing to issue copies of documents and making wild allegations against the defendants.

14. It is submitted by the defendants that they were constrained to file W.P.(C) No.19621/2014 and the Hon’ble High Court vide judgment dated 05.08.2014 was pleased to direct the applicant to handover all documents requested by the petitioner within a period of six weeks from the date of judgment and until then the applicant bank was restrained from proceeding under the SARFAESI Act. The defendants thereupon vide letter dated 21.08.2014 sought for all the documents executed by them in respect of all the transactions which they had with the bank. Pursuant thereto, the applicant bank vide letter dated 11.09.2014 enclosed the documents purporting that those were the only documents available with them executed by the defendants. The copies of FD receipts and copy of the loan documents against FD supplied by the applicant bank in their possession executed by the defendants in respect of the transactions they had with the applicant is produced along with the written statement.

15. It is contended by the defendants that on perusal of the aforementioned documents, it is revealed that there is complete manipulation in the account, that the documents executed by the defendants for certain loans have been materially altered, amounts struck off, new entries made and several manipulations carried out in the loan documents purporting to create new liabilities on the defendants, that the loan applications have been completely manipulated in a different handwriting and several material dates struck off, fresh amounts inducted and the said applications have absolutely no bearing to any of the transactions which the defendants have carried out and that the manipulations have been carried out to support new transactions for which there has been neither oral nor written instructions issued by the defendants. By the aforesaid manipulations in the account, the defendants suffered considerable loss. The manipulations effected in the accounts of the defendants were without their knowledge and consent and were illegal and unauthorized. The 19 loan applications for the initial loan availed by the defendants were totally manipulated by striking of figures, adding new figures, manipulation of dates without authentication adding new amounts etc. The 19 fixed deposits and the loans availed from the same are not binding on the defendants and no liability whatsoever can be cast on the defendants based on the aforesaid illegal and unauthorized transactions.

16. It is urged by the defendants that they availed bank guarantee facility from the applicant bank and the guarantee was for an amount of Rs.55 lakhs and has paid off the entire amount due as liability thereunder. The bank guarantee was invoked for Rs.43 lakhs and the bank adjusted an amount of Rs.24.78 lakhs from the fixed deposit amount given by way of security for the bank guarantee and the balance amount of Rs.18.7 lakhs was paid towards the said facility. That apart, the defendants have also effected payments to the bank for adjustments against bank guarantee liability and other liabilities. The payment effected towards bank guarantee and other dues is Rs.18.48 lakhs as mentioned in their letter dated 27.02.2013 and that the bank in their letter dated 09.10.2012 informed that an amount of Rs.1.80 crores has been adjusted against various loan accounts. Therefore, the total remittance against various loans since 02.03.2012 is Rs.2.30 crores and hence on the basis of the available records, it is clear that no amount is due towards bank guarantee and other dues.

17. It is the case of the defendants that the bank guarantee issued on 09.06.2010 was for a period of 2 years 4 months, terminating on 09.10.2012. The bank guarantee was invoked by the beneficiary on 23.02.2012 and therefore, the bank guarantee was live only for a period of one year eight months. The bank guarantee having been invoked earlier than expected and the bank having received the bank guarantee commission for the entire period of 3 years are precluded from charging interest for the period for which the bank guarantee was taken. No amount whatsoever is due to the applicant bank on account of the bank guarantee transaction and on the other hand, the applicant bank is bound to refund the excess amount collected by the bank under the guise of guarantee commission and interest.

18. It is submitted by the defendants that by manipulation of accounts, an amount of Rs.23,75,385/- is seen debited into the accounts of the defendants which are to be reversed and the said amount to be refunded to the defendants. The defendants had availed four overdraft facilities from the applicant bank in a period of four years. On perusing the statement of accounts pertaining to the overdraft facilities, it was noticed that the applicant has charged interest over 32% per annum which is grossly illegal and in gross violation of the circulars issued by RBI. Total remittance of Rs.40,37,525/- was made into the overdraft account when the accounts were sought to be closed. The amounts have been adjusted from the accounts of the defendants without their knowledge and consent and adjusted to the overdraft account and thus causing considerable loss to the tune of Rs.10 lakhs. From the statement submitted by the applicant itself it is evident that the defendants have not taken any loan in respect of the fixed deposit amounting to Rs.1,46,68,296/-. The applicant had informed the 1st defendant that

an amount of Rs.1,80,23,730/- was transferred by them from the 1st defendant’s account to the loan account. Had such a huge amount been transferred from the 1st defendant’s account, then there would have been no liability whatsoever and that the said transfer is not supported by any documents.

19. It is contended by the defendants that the averments in para 5.1 to 5.17 are incorrect and are denied for the reasons already stated supra. The averments in para 5.18 to 5.20 are wrong and are denied. No such amount whatsoever is due to the bank and in fact amounts are due to the defendants and even after adjustment of the amount due on a proper taking of the accounts if any to the loan accounts, substantial amount has to be reimbursed and refunded to the defendants if a proper accounting of the entire transactions with the applicant bank is taken based on correct and legal accounting. The averments in para 5.21 to 5.23 are incorrect for the reasons stated supra. The statement of account produced by the applicant bank cannot be relied upon for any purpose as the same does not reflect the true transactions. Ext.A15 is a fabricated document created by the applicant in which signatures were obtained at the time of availment of loans. The averments in para 5.24 to 5.27 are incorrect and are denied for the reasons already stated. The rates of interest charged are not in accordance with the bank’s circular or the RBI guidelines issued from time to time. The applicant has no cause of action for the OA and no cause of action has arisen against the defendants on the dates mentioned in the OA. The defendants prayed to dismiss the OA and direct the applicant to reimburse and refund the excess amount collected from the defendants.

20. The evidence on the side of the applicant bank consists of the proof affidavit of its Chief Manager (AW1) and Exts.A1 to A37. Though the 1st defendant as DW1 filed counter proof affidavit for himself and on behalf of the 2nd defendant, no documents were got marked on their side as the documents produced by them are only photocopies.

21. Heard arguments 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:

22. Admittedly, the 1st defendant as principal borrower and defendants 2 to 5 as co-obligants/co-borrowers availed FML-1 of Rs.22 lakhs on 31.07.2008; the 2nd defendant as principal borrower and

Rs.22 lakhs on 31.07.2008 and defendants 1 and 2 availed FHS loan of Rs.9 lakhs on 31.03.2009 from Nanthencode Branch of the applicant bank and created mortgage over the immovable properties belonging to the defendants.

23. The applicant bank has filed the above OA for recovery of amounts due under the aforementioned three loan accounts viz., FML-

1 of Rs.22 lakhs availed by the defendants on 31.07.2008, FML-2 of Rs.22 lakhs availed by the defendants on 31.07.2008 and FHS loan of Rs.9 lakhs availed by defendants 1 and 2 on 31.03.2009. The defendants in there written statement have admitted the availment of the aforesaid loans and creation of mortgage over the immovable properties owned by them as security for the subject loans at para Nos.7 and 8 of the written statement, however they having been raising contentions against some other credit facilities purportedly sanctioned/availed against fixed deposits kept with the applicant bank and its alleged repayments and also the overdraft facilities availed by them during their course of business activities as a reason for challenging the claim of the applicant. As the said facilities are not the subject matter of the instant OA, the Tribunal finds it apt not to consider such contentions raised by the defendants in their written statement and is confining to the contentions with regard to the three credit facilities viz., FML-1 of Rs.22 lakhs availed by the defendants on 31.07.2008, FML-2 of Rs.22 lakhs availed by the defendants on 31.07.2008 and FHS loan of Rs.9 lakhs availed by defendants 1 and 2 on 31.03.2009 from the Nanthencode Branch of the applicant bank and proceeds to pass the order. The defendants do not dispute the availing of credit facilities, creation of mortgage, execution of documents pertaining to the subject matter in the OA, however cast allegations on the applicant bank of playing fraud by manuplating documents pertaining to other facilities. Further it is not their case that they have filed a counter claim against the present OA claim or have initiated appropriate proceedings before competent court alleging fraud.

24. The materials on record would divulge the fact that the 5th defendant had executed Ext.A1 Power of Attorney dated 27.12.2007 in favour of the 4th defendant authorizing her to do all or any of the acts specified therein including execution of the loan documents and as such, the 5th defendant had executed the loan documents through the 4th defendant. Records indicate that the 1st defendant as principal borrower and defendants 2 to 5 as co-obligants/co-borrowers availed FML-1 of Rs.22 lakhs on 31.07.2008 after executing Ext.A2 demand promissory notice, Ext.A3 security delivery letter and Ext.A4 agreement for federal mortgage loan in favour of the bank. On 31.07.2008 itself, the 2nd defendant as principal borrower and

Rs.22 lakhs after executing Ext.A5 demand promissory notice, Ext.A6 security delivery letter and Ext.A7 agreement for federal mortgage loan in favour of the bank.

25. It is apparent from the materials on record that as security for the FML-1 and FML-2 facilities, defendants 2, 4 and 5 on 31.07.2008 deposited title deeds pertaining to ‘A’ schedule property to the OA viz., Ext.A8 original partition deed No.4303/1962 of SRO, Cherthala and Ext.A9 exchange deed No.1960/1994 of SRO, Pattanakkad relating to a total extent of 12.35 Ares of land in Sy.Nos.53/2 and 53/3-1 in Vayalar Mekku (Kadakkarappally) Village, Cherthala Taluk, Alappuzha District owned by them with the applicant bank’s Nanthencode Branch to create mortgage by deposit of title deeds and defendants 2, 4 and 5 jointly executed Ext.A11 letter dated 01.08.2008 confirming the deposit of title deeds and creation of mortgage in favour of the bank. As security for FML-1 and FML-2

facilities, the 3rd defendant on 18.09.2008 had deposited title deed pertaining to ‘B’ schedule property to the OA i.e., Ext.A12 certified copy of partition deed No.1224/1971 of SRO, Meenachal relating to 79.13 Ares of land in Sy.Nos.293/3 and 293/4 in Thalayazham Village, Vaikom Taluk, Kottayam District owned by him with the Nanthencode Branch of the applicant bank with intention to create mortgage by deposit of title deed. The 3rd defendant also confirmed the deposit of title deed made by him on 18.09.2008 and creation of mortgage vide Ext.A13 letter dated 19.09.2008.

26. Records would further indicate that defendants 1 and 2 had availed a federal housing scheme loan (FHS) of Rs.9 lakhs from the Nanthencode Branch of the applicant bank on 31.03.2009 and as security for the loan, they executed Ext.A14 demand promissory notice, Ext.A15 security delivery letter and Ext.A16 agreement for federal housing loan in favour of the bank. As collateral security for the FHS loan availed by defendants 1 and 2, they deposited the title deed pertaining to ‘C’ schedule to the OA i.e., Ext.A17 original sale deed No.3491/2009 of Kottappadi SRO relating to 1/19th undivided share in the land having an extent of 18.297 cents comprised in Re- Sy.No.118/2 of Guruvayur Village, Chavakkad Taluk and residential flat thereon i.e., Type 3, G 1, measuring area of 589 sq.ft. on the ground floor of Sreepathi Arcade together with car parking space marked as G1 in Guruvayoor Village, Chavakkad Taluk owned by them with the Nanthencode Branch of the applicant bank with intention to create mortgage by deposit of title deed. The defendants 1 and 2 confirmed the deposit of title deed with the bank vide Ext.A17 letter dated 01.04.2009.

27. The evidence adduced by the applicant bank would go to show that defendants 1 to 5 acknowledged their liability under FML-1 and FML-2 accounts by executing Ext.A19 and A20 balance confirmation letters respectively on 13.07.2011 and 16.07.2011. The defendants 1 and 2 had also executed Ext.A21 balance confirmation letter on 10.01.2012 confirming the balance outstanding under the FHS loan as on 09.01.2012. According to the applicant bank, as the defendants failed to respond to the letters and personal contacts made by them on many occasions, recovery proceedings were initiated by issuing Ext.A22 demand notice under S.13(2) of the SARFAESI Act to the defendants on 06.06.2012 calling upon them to pay the entire amount due under the respective accounts, but the defendants failed to settle the liabilities.

28. The Tribunal could infer from Exts.A23, A24 and A25 statements of accounts that an amount of Rs.19,63,729/-, Rs.20,40,493.60 and Rs.10,77,440.60 is due under FML-1, FML-2 and FHS loan accounts respectively. It could be seen that the applicant has charged penal interest of Rs.61,218/-, Rs.64,650/- and Rs.11,511/- in FML-1, FML-2 and FHS loan accounts respectively and its capitalization effect would come to Rs.14,977.42, Rs.16,231.49 and Rs.2,007.92. The amount claimed in the OA is Rs.50,48,446.37, which is the amount outstanding after deducting the capitalized penal interest of Rs.33,216.83.

29. Records would indicate that all the security documents were duly executed by the defendants and valid equitable mortgage has been created over ‘A’ to ‘C’ schedule properties to the OA as security for the subject loans availed by the defendants. Further, defendants 1 to 5 had acknowledged their liability under FML-1 and FML-2 accounts by executing Ext.A19 and A20 balance confirmation letters dated 13.07.2011 and 16.07.2011 wherein they confirmed the balance under FML-1 account as Rs.12,47,098/- as on 13.07.2011 and Rs.12,98,865/- being the balance under FML-2 account as on 15.07.2011. By executing Ext.A21 balance confirmation letter dated 10.01.2012, defendants 1 and 2 has confirmed the balance outstanding under FHS account as on 09.01.2012 and also the correctness of the amount with interest and other changes due to the applicant. In such backdrop, the defendants cannot plead ignorance of the claim made by the applicant in the OA. Moreover, the applicant has produced all the relevant documents to substantiate their case put forth by them before the Tribunal. The applicant has charged interest in the loan accounts as per Exts.A32 to A34 circulars issued by RBI.

30. Having regard to the amounts advanced, the interest and the penal interest applied and the chronic default committed, the Tribunal is of view that the applicant bank is entitled to get pendente- lite and post-decree interest @19% per annum with monthly rests, @19% per annum with monthly rests and @13.75% per annum with monthly rests on FML-1, FML-2 and FHS accounts respectively.

FINAL ORDER

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

(i) the sum of Rs.19,48,751.58 (Rupees nineteen lakhs forty eight thousand seven hundred fifty one and Paise fifty

eight only) due under FML-1 account with further interest on the sum of Rs.18,87,533.58 [Rupees eighteen lakhs eighty seven thousand five hundred thirty three and Paise fifty eight only (i.e. Rs.19,48,751.58 – Rs.61,218/-)] @19% per annum with monthly rests from 30.06.2014 till realization from defendants 1 to 5 jointly and severally and by sale of ‘A’ and ‘B’ schedule properties;

(ii) the sum of Rs.20,24,262.11 (Rupees twenty lakhs twenty four thousand two hundred sixty two and Paise eleven only) due under FML-2 account with further interest on the sum of Rs.19,59,612.11 [Rupees nineteen lakhs fifty nine thousand six hundred twelve and Paise eleven only (i.e., Rs.20,24,262.11 – Rs.64,650/-)] @19% per annum with monthly rests from 30.06.2014 till realization from defendants 1 to 5 jointly and severally and by sale of ‘A’ and ‘B’ schedule properties;

(iii) the sum of Rs.10,75,432.68 (Rupees ten lakhs seventy five thousand four hundred thirty two and Paise sixty eight only) due under FHS loan account with further interest on the sum of Rs.10,63,921.68 [Rupees ten lakhs sixty three thousand nine hundred twenty one and Paise sixty eight only (i.e., Rs.10,75,432.68 – Rs.11,511/-)] @13.75% per annum with monthly rests from 30.06.2014 till realization from defendants 1 and 2 jointly and severally and by sale of ‘C’ schedule property; and

(iv) also its costs from the defendants jointly and severally and by sale of ‘A’ to ‘C’ schedule properties, in proportion to the amounts ordered to be recovered from them.

32. ‘A’ to ‘C’ schedules to the OA shall be appended to this order.

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

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

35. The Registry is directed to communicate copy of this 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 9th day of July, 2018]

(S.V.GOWRAMMA)

A P P E N D I X Witness for Applicant: AW1: Subramanian.K.S, 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 27.12.2007 Power of Attorney executed by the 5th defendant in favour of the 4th defendant. A2 31.07.2008 Demand promissory notice executed by the defendants. A3 31.07.2008 Security Delivery letter executed by the defendants. A4 31.07.2008 Agreement for Federal Mortgage Loan executed by the defendants. A5 31.07.2008 Demand promissory notice executed by the defendants. A6 31.07.2008 Security Delivery letter executed by the defendants. A7 31.07.2008 Agreement for Federal Mortgage Loan executed by the defendants. A8 17.09.1962 Partition Deed No.4303/62. A9 11.08.1994 Exchange Deed No. 1960/1994 A10 - Location Sketch A11 01.08.2008 Letter executed by defendants 2, 4 and 5 confirming the deposit of title deed with the applicant bank. A12 24.05.1971 Copy of Partition Deed No.1224/71 A13 19.09.2008 Letter executed by the 3rd defendant confirming the deposit of title deed with the applicant bank. A14 31.03.2009 Demand promissory notice for Rs.9 lakhs executed by defendants 1 and 2 in favour of

A15 31.03.2009 Security Delivery Letter executed by defendants 1 and 2. A16 31.03.2009 Agreement for Federal Housing Loan executed by defendants 1 and 2. A17 20.02.2009 Sale Deed No.3491/2009.

(PRESIDING OFFICER)

A18 01.04.2009 Letter confirming the deposit of title deed executed by defendants 1 and 2 in favour of the applicant bank. A19 13.07.2011 Balance Confirmation Letter executed by the defendants. A20 16.07.2011 Balance Confirmation Letter executed by the defendants. A21 10.01.2012 Balance Confirmation Letter executed by defendants 1 and 2. A22 06.06.2012 Copy of notice u/s 13(2) of SARFAESI Act issued to the defendants. A23 16.06.2014 Statement of Account pertaining to FML-1. A24 16.06.2014 Statement of Account pertaining to FML-2 A25 16.06.2014 Statement of Account pertaining to FHS facility. A26 - Statement of penal interest and capitalization effect in FML 1 account. A27 - Statement of penal interest and capitalization effect in FML 2 account. A28 - Statement of penal interest and capitalization effect in FHS account. A29 - Statement showing the rate of interest charged in FML-1 account. A30 - Statement showing the rate of interest charged in FML-2 account. A31 - Statement showing the rate of interest charged in FHS account. A32 17.10.1994 Copy of RBI circular A33 26.06.1976 Copy of RBI Circular A34 26.07.2002 Copy of RBI Circular A35 … Copy of statement showing the AADs and its utilization. A36 17.02.2016 Copy of current account statement. A37 02.04.2014 Copy of letter issued to the 1st defendant by

[PRESIDING OFFICER]

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 9th day of July, 2018

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

TA No.49/2016 (OA No.359/2014) Between The Federal Bank Ltd.

…Applicant And S.Sreevallabhan & 4 others.

…Defendants

FINAL ORDER