SOUTH INDIAN BANK vs M/s. IMAGE BUILDERS AND DEVELOPERS on 27 July 2018

FINAL ORDER

The applicant bank has filed Original Application [for brevity referred as “OA”] on 06.04.2010 under Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 for recovery of a sum of Rs.58,75,060/- with future interest on the sum of Rs.58,34,613/- @ 19.5% per annum compounded with monthly rests and penal interest @ of 2% p.a. from the defendants 1 to 5 jointly and severally and by sale of OA ‘A’ schedule property. BRIEF FACTS OF THE CASE

1. The applicant is a banking company registered under the Companies Act 1956 and governed by the provisions of the Banking Regulations Act (Central Act X of 1949) and carrying out business of banking, having its Registered Office at Mission Quarters, T.B. Road, Thrissur and having one of its branches at Round South, Thrissur. The applicant is represented by its Chief Manager, who is the Principal Officer authorized and competent to represent the applicant in these proceedings.

2. The 1st defendant is a partnership firm and defendants 2 to 5 are its partners. For the business purpose of the 1st defendant, defendants 2 to 5 approached applicant and submitted a loan application. Having considering the loan application of the defendants, the applicant had sanctioned a Full Secured Loan [for brevity FSL] of Rs.30,00,000/- vide sanction letter dated 03.07.2007. As per the terms of sanction, defendants has to repay the said amount in 84 equated monthly installments of Rs.61,050/-.

3. As a security for FSL, defendants 1 to 5 had executed a demand promissory note on 04.07.2007 promising that defendants 1 to 5 jointly and severally to pay the applicant the sum of Rs.30lakhs with interest thereon. The defendants 1 to 5 also executed a letter of continuity, declaring that the above pronote shall operate as continuing security for the ultimate balance with interest thereon to become payable upon the said FSL account. They also agreed to charging varying interest rates as fixed by the bank notwithstanding the rate specified in the pronote. The defendants further agreed to the bank charging penal interest at the rate fixed by the bank, in case of any default in repayment as per the terms and conditions of the sanction. The credit facility was further secured by equitable mortgage of 79.81 cents of land in Re.Sy.No.10/7 part of Velappaya Village, Thrissur Taluk, Thrissur District covered by Sale Deed No.4552/2006 of SRO, Mundur, more fully described in ‘A’ schedule to the OA. The defendants 2 to 5 had also executed a letter of confirmation dated 05.07.2007 confirming the deposit of title deed and intention to create security thereon in favour of the applicant bank.

4. It is submitted that at the request of defendants 2 to 5 the applicant bank sanctioned another FSL of Rs.10,00,000/- vide sanctioned letter dated 19.01.2008. As per the terms of sanction defendants has to repay the said amount in 60 equated monthly installments of Rs.24,050/-.

5. As a security for FSL, defendants 1 to 5 had executed a demand promissory note on 19.01.2008 promising that defendants 1 to 5 jointly and severally to pay the applicant the sum of Rs.10lakhs with interest thereon. The defendants 1 to 5 also executed a letter of continuity, declaring that the above pronote shall operate as continuing security for the ultimate balance with interest thereon payable in the said FSL account. The defendants had also agreed to charging varying interest rates as fixed by the bank notwithstanding the rate specified in the pronote and further had agreed to the bank charging penal interest at the rate fixed by the bank, in case of any default in terms and conditions of the advance granted. That apart defendants 1 to 5 vide letter of authority dated 19.01.2008 agreed to bank charging interest on the facilities availed by them as per directives of the RBI from time to time irrespective of the rate of interest mentioned in the documents. The credit facility was further secured by extension of equitable mortgage of 79.81 cents of land in Re.Sy.No.10/7 part of Vellappaya Village, Thrissur Taluk, Thrissur District covered by Sale Deed No.4552/2006 of SRO, Mundur together with all buildings, existing or to be constructed thereon in future, already created on 04.07.2007.

6. It is further submitted that defendants 1 to 5 on 19.01.2008 executed an acknowledgment of debt, acknowledging the liability under the FSL Account No.652.1703 in the name of

M/s.Image Builders and Developers as Rs.31,09,757/- plus interest from 05.01.2008.

7. It is submitted by the applicant that Sale Deed No.4552/2006 was executed by the defendants 6 and 7 on 22.11.2006 in favour of defendants 2 to 5. In the said sale deed the age of 7th defendant was given as 19 years. As the parents of the 7th defendant was parties of the said sale deed, there was no reason to disbelieve the statement contained in the document with regarding the age of the 7th defendant. But the 7th defendant in collusion with defendants 5 and 6 filed a suit as an indigent person in P.O.P.No.65/2008 before the Sub Court, Thrissur alleging that he was a minor at the time of execution of the sale deed and that his interest was not protected and sought for setting sale deed as the same is a sham document and the same is pending. The applicant has initiated criminal proceedings against the defendants 5 and 6 before the Hon’ble CJM Court, Thrissur in M.P.No.5447/2009 for cheating which is pending consideration.

8. It is contended by the applicant that the 1st defendant availed the credit facility for his business purpose but did not honour the commitment as per the terms of sanction of the loan. The applicant bank made repeated demands to regularize the accounts were of no effect, and as on 05.04.2010 an amount of Rs.44,35,057/- is due in the FSL account No.652.1703 and Rs.14,40,003/- is due in the FSL account No.652.1797 of the defendants 1 to 5. Hence, the applicant was 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 as directed by the Tribunal and has filed the proof of service on 15.01.2010. The summons issued to the defendants were duly served on them and service of summons was completed as per the regulations. The defendants entered appearance through their counsel. But subsequently they were absent to the proceedings. Hence, the defendants 1 to 4 were placed exparte on 06.08.2015 and defendants 5 to 7 were place exparte on 29.10.2015.

10. The evidence on the side of the applicant bank consists of the proof affidavit of its Assistant General Manager, AW1 and Exhibits A1 to A13 were 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 its Assistant General Manager AW1, reiterates the facts pleaded in the OA and the affidavit is corroborated by the above referred Exhibits A1 to A13 which clearly establishes the case of the applicant bank to allow the present OA. Added to this, the absence of defendants inspite of appearance through their counsel and subsequent absence to the proceedings appears to be intentional without any bonafide reasons and it appears that they admitted the entire case of the applicant as sought for in 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. 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. In view of the above the present OA is to be allowed with costs as sought by the applicant bank.

13. Having regard to the amount advanced, the interest applied, the conduct and operations in the account and the default committed, the Tribunal is of the view that the applicant bank is entitled to get a final order on the following lines:-

O R D E R

(a) The OA is allowed with costs. The applicant bank is allowed to recover:

(b) the sum of Rs.44,35,057/- (Rupees Forty four lakhs thirty five thousand fifty seven only) due under the FSL Account No.652.1703 with further interest on the sum of

Rs.44,06,044/- (Rupees Forty four lakhs six thousand forty four only (i.e. Rs.44,35,057–penal interest of Rs.29,013)]@15.50% per annum with monthly rests from 06.04.2010 till realization from the defendants 2 to 5 jointly and severally and also its costs.

(c) the sum of Rs.14,40,003/- (Rupees Fourteen lakhs forty thousand and three only) due under the FSL Account No.652.1797 with further interest on the sum of Rs.14,28,569/- (Rupees Fourteen lakhs twenty eight thousand five hundred and sixty-nine only (i.e. Rs.14,40,003–penal interest of Rs.11,434)] @15.50% per annum with monthly rests from 06.04.2010 till realization from defendants 2 to 5 jointly and severally and also its costs (d) 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; (e) 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 2 to 5, as required under law;

(f) 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; (g) The applicant bank shall file memo of costs within ten days from the date of this final order; (h) 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 steno, transcribed by him, corrected by me and then pronounced in the open court on this the 27th day of July, 2018]

(S.V.GOWRAMMA) Presiding Officer

A P P E N D I X Witness for Applicant: AW1: M.J.Davies, Assistant General Manager of the applicant bank.

Witness for Defendants: Nil

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1. 03.07.2007 Loan Sanction letter issued by the applicant duly acknowledged by the defendants 2 to 5 A2. 04.07.2007 Demand Promissory Note for Rs.30,00,000/- executed by the defendants 1 to 5. A3. 04.07.2007 Letter of continuity executed by the defendants 1 to 5. A4. 19.01.2008 Acknowledgment of debt executed by the defendants 1 to 5. A5. 19.01.2008 Loan sanction letter issued by the applicant and duly acknowledged by defendants 2 to 5. A6. 19.01.2008 Demand Promissory Note for Rs.10,00,000/- executed by the defendants 1 to 5. A7. 19.01.2008 Letter of continuity executed by the defendants 1 to 5. A8. 19.01.2008 Letter issued by the defendants 1 to 5 to the applicant bank. A9. 22.11.2006 Sale Deed No.4552/2006 of Mundur SRO. A10. 05.07.2007 Letter confirming the deposit of title deeds executed by the defendants 2 to 5. A11. 21.01.2008 Letter issued to the applicant by the defendants 2 to 5. A12.

Certified copy of the statement of account pertaining to the FSL Account No.652.1703. A13.

Certified copy of the statement of account pertaining to the FSL Account No.652.1797.

Defendants Exhibits – Nil

[PRESIDING OFFICER]

[PRESIDING OFFICER]

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 27th day of July, 2018

Present: S.V.Gowramma, B.A., LL.B Presiding Officer T.A.No.1445/2016 (O.A.No.188/2010) Between The South India Bank Ltd., Trissur Main Branch. …Applicant And M/s.Image Builders and Developers & others …Defendants

FINAL ORDER