INDIAN OVERSEAS BANK vs M/s. ANJANEYA POWER LAUNDRY on 22 September 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 RDDBFI Act’) for recovery of a sum of

Rs.11,31,280/- due under the term loan account with further interest thereon @13.15% per annum with monthly rests from the defendants; the sum of Rs.17,15,253/- due under the term loan account with further interest thereon @13.40% per annum with monthly rests from defendants 1 and 2; and the sum of Rs.7,97,120.50 due under the cash credit account with further interest thereon @13.40% per annum with monthly rests from defendants 1 and 2. BRIEF FACTS OF THE CASE

1. The 1st defendant is a proprietary concern of the 2nd defendant engaged in providing laundry services. The 3rd defendant is the guarantor to one of the loans availed by the applicant to the 2nd defendant. During 2010, the 2nd defendant approached the Aralummoodu Branch of the applicant bank for a term loan to purchase machines and other accessories in connection with his business and on the basis of the request made by him, the applicant bank sanctioned to the 2nd defendant a term loan of Rs.10 lakhs as per credit sanction advice dated 12.04.2010. The defendants 1 and 2 availed the said loan on execution of demand promissory notice for Rs.10 lakhs, term loan agreement dated 12.04.2010, letter requesting the applicant to permit repayment of the loan in equated monthly installments and letter of undertaking dated 12.04.2010 in favour of the applicant bank. The 3rd defendant executed agreement of guarantee dated 12.04.2010 agreeing to guarantee the repayment of the aforesaid loan provided to the 2nd defendant.

2. It is the case of the applicant that during October, 2010, the 2nd defendant approached the applicant bank for another term loan for purchasing a generator and a few other machines in connection with his business and on the basis of the request made by him, the applicant sanctioned a term loan of Rs.15 lakhs to the defendants and defendants 1 and 2 availed the said loan and executed demand promissory notice for Rs.15 lakhs on 01.10.2010, term loan agreement, letter requesting the applicant to permit repayment of the loan in equated monthly installments and a letter of undertaking in favour of the applicant bank.

3. During August, 2011, the 2nd defendant approached the applicant bank for a cash credit facility in connection with his business and on the basis of the said request, the applicant bank sanctioned a cash credit facility of Rs.5 lakhs as per credit sanction advice dated 12.08.2011 and the said facility was availed by the 2nd defendant after executing demand promissory notice for Rs.5 lakhs, letter enclosing demand promissory notice for Rs.5 lakhs, letter of hypothecation and a letter of hypothecation of machineries in favour of the applicant bank.

4. It is urged by the applicant that the defendants did not adhere to the terms and conditions of the loans and defaulted in repayment of installment and interest due to the applicant bank under the term loan accounts and cash credit account as agreed. On 07.02.2013, the 2nd defendant executed revival letter in respect of term loans and cash credit facility referred to above and acknowledged the liability due to the bank in connection with the said loan accounts.

5. According to the applicant bank, as per the statement of account maintained by them, an amount of Rs.11,31,280/- (which includes overdue interest of Rs.33,185/-) is due under the term loan of Rs.10 lakhs availed on 12.04.2010; an amount of Rs.17,15,253/- (which includes overdue interest of Rs.5,324/-) is due under the term loan of Rs.15 lakhs availed on 01.10.2010 and an amount of Rs.7,97,120.50 (which includes overdue interest of Rs.31,494/-) is due under the cash credit account. The applicant bank is claiming future interest @13.15% per annum with monthly rests, @13.40% per annum with monthly rests and @13.40% per annum with monthly rests respectively in the aforementioned accounts from the date of this application i.e., 25.09.2015 till the date of recovery.

6. The applicants have taken out the summons as directed by the tribunal and the defendants were duly served with summons. Though the defendants 1 and 2 had entered appearance and sought adjournment for filing written statement, they did not file any written statement despite sufficient opportunity granted and subsequently they chose to remain absent and hence the chance of filing written statement stood closed on 17.03.2017. The 3rd defendant neither appeared nor was she represented and as such she was set exparte on 17.03.2017.

7. The evidence on the side of the applicant bank consists of the proof affidavit of its Manager (AW1) and Exts.A1 to A20.

8. 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:

9. On a conspectus of the pleadings and evidence available on record, the Tribunal could find that the applicant bank had sanctioned to the 2nd defendant a term loan of Rs.10 lakhs for his proprietary concern - the 1st defendant as per Ext.A1 credit sanction advice dated 12.04.2010 and the 2nd defendant executed Ext.A2 demand promissory notice for Rs.10 lakhs, Ext.A3 term loan agreement dated 12.04.2010 and Ext.A4 letter requesting the applicant to permit repayment of the loan in equated monthly installments and Ext.A5 letter of undertaking dated 12.04.2010 in favour of the applicant bank. The 3rd defendant executed Ext.A6 agreement of guarantee dated 12.04.2010 agreeing to guarantee the repayment of the aforesaid term loan of Rs.10 lakhs granted to the 2nd defendant.

10. Records indicate that at the request of the 2nd defendant, the applicant sanctioned to the 2nd defendant a term loan of Rs.15 lakhs for his proprietary concern on 01.10.2010 and as security for the said loan, the 2nd defendant executed Ext.A7 demand promissory notice, Ext.A8 term loan agreement, Ext.A9 letter requesting the applicant to permit repayment of the loan in equated monthly installments and Ext.A10 letter of undertaking in favour of the applicant bank.

11. A perusal of records would reveal that the 2nd defendant again approached the applicant bank for a cash credit facility in connection with his business and on the basis of the said request, the applicant bank sanctioned a cash credit facility of Rs.5 lakhs on 12.08.2011 as per Ext.A11 credit sanction advice dated 12.08.2011 and the said facility was availed by the 2nd defendant after executing Ext.A12 demand promissory notice, Ext.A13 letter enclosing demand promissory notice for Rs.5 lakhs, Ext.A14 letter of hypothecation and Ext.A15 letter of hypothecation of machineries in favour of the applicant bank. Thereafter on 17.02.2013, the 2nd defendant executed Ext.A16 revival letter acknowledging the liability under the term loans of Rs.10 lakhs and Rs.15 lakhs availed respectively on 12.04.2010 and 01.10.2010 and the cash credit limit of Rs.5 lakhs availed on 12.08.2011.

12. Exts.A17 to A19 certified copies of the statements of accounts produced by the applicant would show that the defendants committed default in repayment of the loans and the term loan of Rs.10 lakhs, term loan of Rs.15 lakhs and the cash credit limit of Rs.5 lakhs availed by the 2nd defendant from the applicant bank respectively on 12.04.2010, 01.10.2010 and 12.08.2011 remains outstanding with an amount of Rs.11,31,280/-, Rs.17,15,253/- and

Rs.7,97,120.50 as on the date of OA. The applicant bank has proved his case by coming out with cogent evidence, and the defendants had also not refuted the claim made by the applicant bank before this Tribunal.

13. The records would reveal that the 1st defendant is only a proprietary concern of the 2nd defendant. A proprietary concern is neither a living person nor a juristic person entitled to sue or be sued in its name. Therefore, the applicant bank is not entitled to get any relief against the 1st defendant proprietary concern.

14. It is the admitted case of the applicant bank that they had debited a sum of Rs.33,185/-, Rs.5,324/- and Rs.31,494/- by way of penal interest/overdue interest respectively in term loan A/c No.074003261000001, term loan A/c No.074003261000004 and cash credit A/c No.074002000001119. It is well settled that penal interest cannot be capitalized and no interest can be charged on penal interest. The applicant bank, therefore, is not entitled to get any interest on the aforesaid penal interest of Rs.33,185/-, Rs.5,324/- and Rs.31,494/-.

15. Having regard to the amounts advanced, the interest and the penal interest applied and the default committed, I am of the view that the applicant bank is entitled to get interest pendente-lite and post-decree interest @11.15% per annum with monthly rests on the amount found due under the term loan A/c No.074003261000001, @11.40% per annum with monthly rests on the amount found due under the term loan A/c No.074003261000004

and @12.40% per annum with monthly rests on the amount found due under the cash credit A/c No.074002000001119.

FINAL ORDER

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

(i) the sum of Rs.11,31,280/- (Rupees eleven lakhs thirty one thousand two hundred and eighty only) due under the term loan A/c No.074003261000001 with further interest on the sum of Rs.10,98,095/- (Rupees ten lakhs ninety eight thousand and ninety five only) @11.15% per annum with monthly rests from 25.09.2015 till realization from defendants 2 and 3;

(ii) the sum of Rs.17,15,253/- (Rupees seventeen lakhs fifteen thousand two hundred and fifty three only) due under term loan A/c No.074003261000004 with further interest on the sum of Rs.17,09,929/- (Rupees seventeen lakhs nine thousand nine hundred and twenty nine only) @11.40% per annum with monthly rests from 25.09.2015 till realization from the 2nd defendant;

(iii) the sum of Rs.7,97,120.50 (Rupees seven lakhs ninety seven thousand one hundred twenty and Paise fifty only) due under cash credit A/c No.074002000001119 with further interest on the sum of Rs.7,65,626.50 (Rupees seven lakhs sixty five thousand six hundred twenty six and Paise fifty only) @12.40% per annum with monthly

rests from 25.09.2015 till realization from the 2nd defendant; and

(iv) also its costs from defendants 2 and 3, in proportion to the amounts ordered to be recovered from them.

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

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

19. 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 22nd day of September, 2018]

(S.V.GOWRAMMA)

Presiding Officer

A P P E N D I X Witness for Applicant: AW1: V.P.Sajju, Manager of the applicant bank.

Witness for Defendant(s): Nil

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 12.04.2010 Credit sanction advice issued to the 1st defendant by the applicant. A2 12.04.2010 Demand promissory notice for Rs.10 lakhs executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in

A3 12.04.2010 Term loan agreement executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in favour of the applicant bank. A4 12.04.2010 Letter executed by the 2nd defendant in favour of the applicant bank. A5 12.04.2010 Letter of undertaking executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in favour of the applicant bank. A6 12.04.2010 Agreement of guarantee executed by the 3rd defendant in favour of the applicant bank. A7 01.10.2010 Demand promissory notice for Rs.15 lakhs executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in

A8 01.10.2010 Term loan agreement executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in favour of the applicant bank. A9 01.10.2010 Letter executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in favour of the applicant bank. A10 01.10.2010 Letter of undertaking executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in favour of the applicant bank. A11 12.08.2011 Credit sanction advice issued to the 1st defendant. A12 12.08.2011 Demand promissory notice for Rs.5 lakhs executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in favour of the applicant bank. A13 12.08.2011 Letter enclosing demand promissory notice for Rs.5 lakhs executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in favour of the applicant bank. A14 12.08.2011 Letter of hypothecation executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in favour of the applicant bank. A15 … Letter of hypothecation of machinery executed by the 2nd defendant for his behalf and acting on behalf of the 1st defendant in

A16 07.02.2013 Revival letter executed by the 2nd defendant acknowledging the liability under the term loan accounts and the cash credit account. A17 … Certified copy of the statement of account relating to the term loan of Rs.10 lakhs. A18 … Certified copy of the statement of account relating to the term loan of Rs.15 lakhs. A19 … Certified copy of the statement of account relating to the cash credit limit. A20 … Statement showing the rate of interest applied in the term loan accounts and the cash credit account from time to time.

(PRESIDING OFFICER)

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 22nd day of September, 2018

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

TA No.1323/2016 (OA No.465/2015) Between Indian Overseas Bank …Applicant And M/s.Anjaneya Power Laundry & 2 others. …Defendants

FINAL ORDER