CANARA BANK vs M.R. MANOJ on 21 November 2018

FINAL ORDER

This Original Application is 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.41,15,451.63 due under the overdraft facility together with interest @17% per annum with monthly rests from the defendant and by sale of the OA schedule properties; and a sum of Rs.1,01,829.81 due under the term loan account together with interest @17% per annum with monthly rests from the defendant and by sale of the OA schedule properties.

BRIEF FACTS OF THE CASE

1. The defendant is carrying on business in flex board printing etc. under the name and style ‘M/s.Dixe’ as its sole proprietor. The defendant submitted an application on 21.08.2006 for grant of overdraft facility for an amount of Rs.19 lakhs and a term loan of Rs.1 lakh before the applicant bank. Pursuant thereto, the applicant bank sanctioned and granted a secured overdraft facility of Rs.19 lakhs and term loan of Rs.1 lakh as per letter of sanction dated 26.09.2006. In consideration of having granted the secured overdraft facility of Rs.19 lakhs, the defendant executed composite hypothecation agreement in favour of the applicant bank on 26.09.2006, whereby he hypothecated the properties scheduled to the OA with the applicant bank.

2. In consideration of having granted the term loan of Rs.1 lakh, the defendant executed composite hypothecation agreement in favour of the applicant bank on 12.10.2006, whereby he hypothecated the properties scheduled to the OA with the applicant bank. On 12.10.2006, the defendant executed a receipt in favour of the applicant bank admitting, acknowledging the confirming the receipt of Rs.1 lakh from the applicant bank and a letter of undertaking in respect of the credit guarantee fund scheme for small industries. Thereafter on 31.05.2009, the defendant executed a written acknowledgment of liability admitting and confirming the liability due to the applicant bank and also undertook that the agreement, securities and obligations already created in favour of the applicant bank would continue to subsist until such time the defendant clears off the loan liability.

3. It is submitted by the applicant that the defendant did not adhere to the repayment schedule in respect of the loans availed by the firm and the accounts had become grossly irregular. Consequently, the loan accounts had been classified as NPA on 06.07.2007. Subsequently, the applicant bank issued notice of suit through their counsel on 25.06.2010 demanding the defendant to discharge the loan liability. According to the applicant bank, as on 31.01.2011, an amount of Rs.41,15,451.63 is due under the overdraft account and an amount of Rs.1,01,829.81 is due under the term loan account. Interest has been charged as per the guidelines issued by RBI from time to time and also the Head Office circulars of the applicant bank. The applicant bank is also entitled for overdue interest @2% per annum over and above the prescribed rate on account of the defendant’s failure to pay and regularize the loan account. No penal interest was capitalized in the loan accounts.

4. The defendant filed written statement contending inter alia that it is true that the defendant had availed an overdraft facility of Rs.19 lakhs and term loan of Rs.1 lakh from the applicant bank for starting a business. Since the defendant was in urgent need of money, he was constrained to execute the agreement and other stamp papers and white papers given by the bank. The averment of the applicant that the defendant had executed a written acknowledgment in favour of the applicant bank admitting and acknowledging the debt on 31.05.2009 is not correct. At the time of signing the same, it was only a stamped white paper and there is no acknowledgment of liability. It is only a created document to get over the limitation period for filing the OA and that the OA is filed after the period of limitation and hence the same is to be dismissed for the sole reason.

5. It is urged by the defendant that he was paying the installments correctly, but the bank without informing the defendant had increased the interest rate in excess and calculated the amount. The actual interest to be calculated is 13.5%; instead of that, the bank has unilaterally increased the interest rate contrary to the guidelines issued by RBI, that too without notice to the defendant and calculated large amounts as due. The excess amount calculated after claiming interest more than 13.5% is to be waived and the defendant is not liable to pay the same. The account of the applicant comes under the Debt Relief Scheme. There is no cause of action for the applicant as the OA is barred by limitation. The applicant is not entitled to get any of the reliefs claimed in the OA and it is prayed to dismiss the OA.

6. The defendant filed counter proof affidavit reiterating the contentions raised by him in the written statement.

7. The evidence on the side of the applicant bank consists of the proof affidavit of its Branch Manager, AW1 and Exts.A1 to A10. Although the defendant as DW1 filed counter proof affidavit, he has not adduced any documentary evidence to support his case.

8. 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:

9. The admitted factual matrix in the present case is the availment of an overdraft facility of Rs.19 lakhs and term loan of Rs.1 lakh from the applicant bank respectively on 26.09.2006 and 12.10.2006.

10. As regards the contention raised by defendant as to the limitation aspect is concerned, the records reveal that the defendant had executed Ext.A7 letter dated 31.05.2009 in favour of the applicant bank admitting and acknowledging the liabilities due under the loan accounts pertaining to the overdraft facility and the term loan availed by him from the applicant bank, wherein he declared that all the securities, documents, agreements, instruments and obligations shall continue to remain in force until the loan amounts are fully discharged by him. The applicant bank filed the OA on 14.02.2012 i.e., within three years from 31.05.2009. Therefore, there is no merit in the contention raised by the defendant that the OA is barred by limitation and the Tribunal finds that the OA filed by the applicant on 14.02.2012 is well maintainable before it.

11. It is the further contention of the defendant that since he was in urgent need of money, he was constrained to execute the agreement and other stamp papers and white papers given by the bank and the averment of the applicant that the defendant had executed a written acknowledgment in favour of the applicant bank admitting and acknowledging the debt on 31.05.2009 is incorrect. It is also contended that at the time of signing the same, it was only a stamped white paper and there is no acknowledgment of liability and that the said document is a created one to get over the limitation period for filing the OA.

12. Evidently, the defendant has no case that he had not executed Ext.A7 letter of acknowledgment of liability, but he is submitting that at the time of signing the same, it was only a stamped white paper and there is no acknowledgment of liability. Having admitted the execution of Ext.A7 document, it is not open for the defendant to turn around and dispute the contents therein. Further, no prudent man will sign and issue blank papers to anyone. In the above circumstance, the aforesaid contention of the applicant does not merit any consideration of the Tribunal.

13. At this juncture, the Tribunal wishes to recall the observation made by Hon’ble Supreme Court in Grasim Industries Limited and another v. Agarwal Steel [(2010) 1 SCC 83] wherein it is held that when a person signs a document, presumption is that he has read the document properly and understood it and only then affixed his signatures thereon, unless there is proof of force or fraud and that such presumption is much stronger in case of businessmen and it reads thus: “6. In our opinion, when a person signs a document, there is a presumption, unless there is proof of force or fraud, that he has read the document properly and understood it and only then he has affixed his signatures thereon, otherwise no signature on a document can ever be accepted. In particular, businessmen, being careful people (since their money is involved) would have ordinarily read and understood a document before signing it. Hence the presumption would be even stronger in their case.”

14. Yet another contention of the defendant is that without notice to the defendant, the bank has unilaterally increased the interest rate contrary to the guidelines issued by RBI, whereas the actual interest to be calculated was 13.5% per annum and hence the applicant bank is not entitled to recover the amount claimed in the OA.

15. On perusal of records, it could be seen that in the ‘interest clause’ in Exts.A3 and A4 composite hypothecation agreements respectively dated 26.09.2006 and 12.10.2006 executed by the defendant in favour of the applicant bank, it was expressly agreed between the parties to the agreement that notice of variation of rate of interest from time to time as per the directions of RBI/or as per prime lending rate fixed by the bank is waived. It could be further discernible from Exts.A3 and A4 executed by the defendant that the interest payable by him shall be subject to the change in prime lending rate/prime term lending rate of the bank from time to time as determined and/or interest that may be levied/prescribed by the bank and /or RBI from time to time and this deed shall be construed as if such revised rate/s of interest were agreed to be paid by the borrower and hereby secured. In the light of the above, especially when the defendant himself has waived the notice of variation of interest, now he cannot turn around and contend that the applicant bank has unilaterally increased the interest rate without notice to him.

16. According to the applicant bank, the rates of interest applied by it is as permitted by or do not run counter to any of the particular directives of the Reserve Bank of India. Except contending in a vague fashion that the interest claimed is excessive, the defendant could not point out specifically the violation of the directions of the Reserve Bank of India by the applicant bank and that he could not specifically point out any entry in Exts.A9 and A10 statements of accounts having been debited inconsistent with any of the directives issued by the Reserve Bank of India or the clauses contained in any of the agreements executed by him in favour of the applicant bank. Therefore, the mere allegation of the defendant that the interest charged is excessive and without any basis does not hold water.

17. It is claimed by the defendant, that the loans availed by him come under the Debt Relief Scheme. Nonetheless, no material has been produced by the defendant to support his case. According to the applicant bank, the Debt Relief Law does not cover the loans availed by the defendant, and he utilized the loan amounts to generate profit for his commercial venture and thus the defendant had derived benefit from the loans availed from the bank. In the above circumstance, the aforesaid contention of the defendant does not deserve any consideration of the Tribunal as he could not produce any scrap of evidence to show that the credit facilities availed by him would come under the aforesaid Scheme.

18. A perusal of Exts.A9 and A10 statements of accounts pertaining to the overdraft facility and the term loan would vouch for the fact that the applicant bank has debited a sum of Rs.99,129.83 and Rs.4/- respectively in the aforementioned accounts. 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.99,129.83 and Rs.4/-.

19. The case of the applicant bank regarding recovery of the sum of Rs.41,15,451.63 claimed as due under Ext.A9 statement of account relating to the overdraft facility as on 31.01.2012 with further interest on the sum of Rs.40,16,321.80 at the contractual rate @17% per annum with monthly rests from 01.02.2012 to 13.02.2012 together with interest pendente lite and post decree interest from the defendant and by sale of the OA schedule properties; and a sum of Rs.1,01,829.81 claimed as due under Ext.A10 statement of account relating to the term loan as on 31.01.2012 with further interest on the sum of Rs.1,01,825.81 at the contractual rate @17% per annum with monthly rests from 01.02.2012 to 13.02.2012 together with interest pendente lite and post decree interest from the defendant and by sale of the OA schedule properties, is proved by the proof affidavit of its Branch Manager, AW1 and Exts.A1 to A10.

20. Having regard to the amounts advanced, the quantum of 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 @15% per annum with monthly rests in both the loan accounts.

FINAL ORDER

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

(i) the sum of Rs.41,15,451.63 (Rupees forty one lakhs fifteen thousand four hundred fifty one and Paise sixty three only) due under the overdraft account with further interest on the sum of Rs.40,16,321.80 (Rupees forty lakhs sixteen thousand three hundred twenty one and Paise eighty only) @17% per annum with monthly rests from 01.02.2012 to 13.02.2012 and thereafter @15% per annum with monthly rests from 14.02.2012 till realization from the defendant and by sale of the OA schedule properties;

(ii) the sum of Rs.1,01,829.81 (Rupees one lakh one thousand eight hundred twenty nine and Paise eighty one only) due under the term loan account with further interest on the sum of Rs.1,01,825.81 (Rupees one lakh one thousand eight hundred twenty five and Paise eighty one only) @17% per annum with monthly rests from 01.02.2012 to 13.02.2012 and thereafter @15% per annum with monthly rests from 14.02.2012 till realization from the defendant and by sale of the OA schedule properties; and

(iii) also its costs from the defendant and by sale of OA schedule properties.

22. The schedule to the OA shall be appended to this order.

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

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

25. 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 21st day of November, 2018]

(S.V.GOWRAMMA)

Presiding Officer

A P P E N D I X Witness for Applicant: AW1: Ganesh.R, Branch Manager of the applicant bank.

Witness for Defendant(s):

DW1: M.R.Manoj

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 21.08.2006 Application for loan submitted to the applicant by the defendant. A2 26.09.2006 Sanction letter issued by the Regional Office of the applicant bank sanctioning the credit facilities to the defendant. A3 26.09.2006 Composite hypothecation agreement executed by the defendant in favour of the applicant bank. A4 12.10.2006 Composite hypothecation agreement executed by the defendant in favour of the applicant bank. A5 12.10.2006 Receipt evidencing the acceptance of Rs.1 lakh by the defendant. A6 … Letter of undertaking executed by the defendant in favour of the applicant bank. A7 31.05.2009 Letter of acknowledgment of debt executed by the defendant. A8 25.06.2010 Recall notice issued to the defendant by the applicant bank with regard to the loan of Rs.19 lakhs. A8(a) 25.06.2010 Recall notice issued to the defendant by the applicant bank with regard to the loan of Rs.1 lakh. A9 … Certified copy of the statement of account relating to the overdraft facility. A10 … Certified copy of the statement of account relating to the term loan.

Exhibits on the part of the defendant Nil

(PRESIDING OFFICER)

(PRESIDING OFFICER)

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 21st day of November, 2018

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

TA No.199/2016 (OA No.84/2012) Between Syndicate Bank

…Applicant And M.R.Manoj …Defendant

FINAL ORDER