CANARA BANK vs M/s KAIKKARA FISHERMEN DEVELOPMENT WELFARE CO-OPERATIVE SOCIETY LTD. (KFDWCS) on 29 August 2018

FINAL ORDER

The applicant bank has filed Original Application [for brevity herein after referred as “OA”] on 12.11.2014 under Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 [ for brevity herein after referred as RDDBFI Act] for recovery of a sum of Rs.23,21,415/- with interest @12.95% per annum including 2% penal interest with monthly rests from 01.10.2014 till realization from the defendants jointly and severally and by sale of their assets. BRIEF FACTS OF THE CASE

1. The applicant is M/s.Canara Bank a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 with head office at 112, JC Road, Bangalor-2 and having among other places a branch at Manacaud, Trivandrum District, Kerala and is represented in this proceedings by its Manager, who is duly authorized and empowered to represent the applicant bank.

2. The defendants executed loan documents on 29.01.2009 acknowledgement of debt on 28.11.2011 and lawyer notice was issued on 12.08.2014. Hence the applicant declares that the application is instituted within the period of limitation prescribed under Section 24 of the RDDBFI Act 1993.

3. The 1st defendant is a co-operative society registered under Kerala Co-operative Societies Act 1969 (Reg.No.DF(T) 29/92 dated 01.10.1992 under name and style “M/s.Kaikkara Fisherman Development and Welfare Co-operative Society Ltd. (hereinafter referred to as KFDWCS). The defendants 1, 2 and 3 approached the applicant at Manacaud Branch, Trivandrum and submitted a loan application to avail loan for an amount of Rs.1,50,00,000/- (Rupees One Crore fifty lakhs). Along with the said loan application, the defendants submitted certified copy of resolution passed by the 1st defendant society taking decision to apply loan for an amount of Rs.100 lakhs. As per the said resolution the Board of Directors of the 1st defendant society have resolved to apply a loan for an amount of Rs.100lakhs (Rupees One Crore) from the applicant bank for the purpose of purchasing machineries for the Self Help Groups working under the 1st defendant society and further resolved and authorized the 2nd and 3rd defendants to execute and sign necessary documents to the said purpose.

4. It is submitted that on accepting the loan application, the applicant bank sanctioned a loan amount of Rs.1 Crore as Term Loan (SHG) on 21.01.2009. On 19.01.2009 the applicant bank forwarded a sanctioning order of the applicant bank to the 1st defendant society stating the terms and condition of loan. As per the term of sanction the term loan is to be repaid in 60 equated monthly installments of Rs.2,18,670/- with initial repayment of holiday of one month in 5 years. The interest agreed was 11.25% per annum compounded and subject to the change from time to time as advised by the head office of the applicant bank.

5. It is further submitted that the undertaking in wiring for obtaining the loan stating that the term and conditions of the distribution of the loan by the 1st defendant society and the capacity to obtain the loan from the applicant has been submitted by the 2nd and 3rd defendants dated 24.01.2009 to the applicant bank. The defendants 1 to 3 submitted a request dated 28.01.2009 to transfer the loan availed by the 1st defendant society to the account of 1st defendant society with SBT, Kadekkavoor Branch.

6. It is stated that as a security for the credit facility, the defendants executed various loan documents. The defendants agreed to the term and conditions stated in the sanction memorandum by executing ‘Letter of Undertaking re: Loan/Advances’ dated 29.01.2009. The defendants also executed Articles of agreement for financing Self Help Group through voluntarily Agency/SHPI (Self-Promoting Institution) (Society/Charitable Trust) registered under respective Act on 29.01.2009 and repayment schedule executed by the defendants in favour of the applicant bank. The defendants further executed agreement Re: Advance against books debts as primary security in favour of the applicant bank dated 29.01.2009. Further the defendants executed a guarantee agreement along with covering letter dated 29.01.2009. The details of term and conditions of term loan availed by the defendants are fully stated in the said agreement. According to that, the defendants agreed to repay the loan availed as per the repayment schedule. Therefore, the defendants are jointly and severally liable to repay the loan availed from the applicant bank. Apart from the liability of the 1st defendant, the defendants 2 to 10 are personally also liable to repay the amount availed from the applicant bank.

7. It is submitted by the applicant bank that the defendants on 29.01.2009 executed another agreement agreeing that they are the members of the Managing Committee of Kaikkara Fisherman Development and Welfare Co-operative Society and are aware of the loan amount as sanctioned by the applicant bank. It was also agreed that they are fully aware of the term and conditions of the applicant bank and the defendants 2 to 10 shall be treated as the principal borrower of the KFDWCS. They further agreed that if any default in repayment of loan amount by the 1st defendant society, in terms of the stipulations of the applicant bank shall be construed as a default on the part of the Managing Committee Members and they are severally and individually be liable to repay the loan amount. The defendants have executed a letter of acknowledgment of debt and security with the applicant bank dated 28.11.2011.

8. It is the contention of the applicant that the defendants did not adhere the term and conditions of the loan and defaulted the payment of equated monthly installments in the term of loan account. Consequently, the account in the name of the 1st defendant becomes an NPA on 24.09.2013. Since the defendants committed default in the repayment of loan amount, the applicant bank demanded the dues with the defendants by issuing demand notice. In response to the demand notice the defendants though admitted the liability in writing but come with a proposal for one time settlement. The applicant considers the said proposal of one time settlement and though the proposal was acceptable to the applicant, the defendants never complied to pay the dues as agreed by them. Accordingly, as on 11.08.2014 the balance amount of Rs.22,63,322/- is due to the applicant from the defendants. Therefore, the applicant demanded the said amount by sending lawyer notice dated 12.08.2014 to all the defendants. The 1st, 2nd and 9th defendants received the lawyer notice and 3rd, 4th, 5th, 6th, 7th, 8th and 10 defendants refused to receive the lawyer notice. Inspite of receipt of lawyer notice defendants did not remit any amount to the applicant bank till date. As on 30.09.2014 an amount of Rs.23,21,415/- is due under the term loan account of the defendants. Hence, the applicant is constrained to file this Original Application for recovery of the said amounts.

9. After filing of the OA, the applicant bank has taken out the summons twice on the defendants as directed by the Tribunal and has filed the proof of services on 06.02.2015 and 08.12.2015. The summons issued to the defendants were duly served on them and service of summons was completed as per the regulations. Inspite of service of summons, defendants neither appeared nor were they represented and thus they were declared exparte on 14.03.2017.

10. The evidence on the side of the applicant bank consists of the proof affidavit of its Senior Manager, AW1 and Exhibits A1 to A42 is marked on the side of applicant and closed their side of evidence.

11. 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:-

12. The evidence of the applicant bank by way of proof affidavit of Senior Manager AW1 reiterates the facts pleaded in the OA and the affidavit is corroborated by the above referred Exhibits A1 to A42 which clearly establishes the case of the applicant bank to allow the present OA. 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 present OA. In view of the above the present OA is to be allowed with costs as sought by the applicant bank. 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. 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.

13. 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 jointly and severally directed to pay the applicant bank a sum of Rs.23,21,415/- [Rupees Twenty three lakhs twenty one thousand four hundred and fifteen only] with further interest thereon @ 12.95% per annum with monthly rests from 01.10.2014 till realization and also its costs from the defendants;

(c) In the event of failure of the defendants to pay the OA claim amount, the bank is at liberty to sell the OA schedule property of the defendants and the sale proceeds be appropriated towards the OA claim amount as required under law; (d) The applicant bank shall file the latest memo of calculation of OA amount together with interest costs etc., to be paid by the defendants duly considering the amounts if any paid by the defendants and or amount realised by sale of assets etc., during the intervening period after filing the OA enabling the office to prepare recovery certificate for the amount to be paid by defendants to the applicant bank; (e) Office is directed to issue recovery certificate as sought by the applicant bank in the OA and do the needful as required under law forthwith.

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 steno, transcribed by him, corrected by me and then pronounced in the open court on this the 29th day of August, 2018]

(S.V.GOWRAMMA) Presiding Officer

A P P E N D I X Witness for Applicant: AW1: K.P.Anil, Senior Manager of the applicant bank.

Witness for Defendants: Nil

Exhibits on the part of the applicant

Ext.No. Particulars of documents A1. Loan application dated 17.11.2008 submitted by the defendants to the applicant. A2. List of Members dated 03.11.2008. A3. Certified copy of Resolution dated 03.11.2008. A4. Statement dated 03.11.2008 A5. Statement regarding track record of 1st defendant dated 03.11.2008. A6. Letter dated 05.11.2008. A7. Letter forwarded by Matsyafed 17.11.2008. A8. Performance statement 03.12.2008. A9. Certified copy of Resolution No.6. dated 11.12.2008. A10. Loan sanctioning order dated 19.01.2009. A11. Loan sanction memorandum dated 21.01.2009. A12. Letter of undertaking dated 24.01.2009. A13. Certified copy of minutes of meeting dated 15.10.2008. A14. Request letter regarding the transfer of loan availed to SBT dated 28.01.2009. A15. Letter of undertaking Re.loans/advances dated 29.01.2009. A16. Articles of Agreement dated 29.01.2009. A17. Agreement Re. Advances against books debts and prime security dated 29.01.2009. A18. Guarantee Covering Letter along with Guarantee agreement dated 29.01.12009. A19. Guarantee Covering Letter along with Guarantee agreement dated 29.01.2009. A20. Guarantee Covering Letter along with Guarantee agreement dated 29.01.12009. A21. Guarantee Covering Letter along with Guarantee agreement dated 29.01.2009. A22. Guarantee Covering Letter along with Guarantee agreement dated 29.01.12009.

A23. Guarantee Covering Letter along with Guarantee agreement dated 29.01.2009. A24. Guarantee Covering Letter along with Guarantee agreement dated 29.01.12009. A25. Guarantee Covering Letter Guarantee agreement dated 29.01.2009. A26. Guarantee Covering Letter along with Guarantee agreement dated 29.01.12009. A27. Agreement dated 29.01.2009. A28. Acknowledgement of debt and secuirty dated 28.11.2011. A29. Lawyer notice dated 12.08.2014. A30. Acknowledgment card. A31. Acknowledgment card. A32. Acknowledgment card. A33. Unserved covers showing ‘refused’ A34. Unserved covers showing ‘refused’ A35. Unserved covers showing ‘refused’ A36. Unserved covers showing ‘refused’ A37. Unserved covers showing ‘refused’ A38. Unserved covers showing ‘refused’ A39. Unserved covers showing ‘refused’ A40. Certified copy of the statement of term loan account dated 09.10.2014. A41. Certified copy of the statement of unapplied interest dated 09.10.2014. A42. Certified copy of the statement of period and rate of interest dated 09.10.2014. A43. Certified copy of General Power of Attorney dated 29.01.1999.

Defendants Exhibits – Nil

[PRESIDING OFFICER]

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 29th day of August, 2018

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

Between Canara Bank, Manacaud Branch, Thiruvananthapuram. …Applicant And M/s.Kaikkara Fishermen Development Welfare, Co-operative Society Ltd. & others.

...Respondents

FINAL ORDER