SOUTH INDIAN BANK vs ROSAMMA VARKEY on 29 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 Act’) for recovery of a sum of Rs.2,10,13,667/- [Rs. Two Crores Ten Lakhs Thirteen Thousand Six Hundred and Sixty seven only] with further interest on the sum of Rs.2,03,26,641/- [Rs. Two Crores Three Lakhs Twenty Six Thousand Six Hundred and Forty one only] @15% per annum with monthly rests together with penal interest @2% per annum from the defendants 1 to 6 personally and from their assets, jointly and severally. BRIEF FACTS OF THE CASE

1. The defendants 1 and 2 are mother and son, and defendants 3 to 6 are close relatives of defendants 1 and 2 and guarantors to the transactions referred to in the OA. At the request of the 1st defendant, defendants 1 and 2 (2nd defendant was then a minor) were granted a housing loan of Rs.30 lakhs on 19.10.2004 for construction of house. The 2nd defendant had attained majority on the date of filing the OA. Later, at the request of the defendants, defendants 1 and 2 were granted a fully secured loan [(FSL) (O)] of Rs.140 lakhs on 30.06.2010 for the purpose of investment in their business concerns and defendants 3 to 6 volunteered to guarantee the transaction. The above two limits were secured by equitable mortgage of 27.20 cents of land in Sy.No.215/2 in Ollur Village, Thrissur Taluk. On 30.06.2010, the applicant bank sanctioned a demand promissory notice (DPN) loan of Rs.150 lakhs to defendants 1 and 2 by a separate sanction letter and the same was secured by the personal guarantee of defendants 3 to 6 and that the said limit is not covered by the equitable mortgage.

2. It is the case of the applicant that DPN loan of Rs.150 lakhs was granted to defendants 1 and 2 as per sanction letter dated 30.06.2010. The defendants 1 and 2 executed a credit facility agreement on 30.06.2010 undertaking to repay Rs.30 lakhs before 31.08.2010, Rs.30 lakhs before 31.10.2010 and then 76 monthly installments of Rs.1.19 lakhs from January, 2011 and the interest would be serviced as and when debited including holiday period. In consideration of the applicant bank having granted DPN loan of Rs.150 lakhs and a FSL (O) of Rs.140 lakhs to defendants 1 and 2, defendants 3 to 6 executed agreement of guarantee on 30.06.2010.

3. It is urged by the applicant that defendants 1 and 2 availed the facility and withdrew money from the applicant bank for their business, but the conduct of the accounts was irregularity and the loan accounts were classified as NPA w.e.f. 01.02.2011. Repeated demands made by the applicant to regularize the accounts were of no effect and hence the bank issued final recall notice to defendants 1 to 6 by registered post on 04.01.2012.

4. It is submitted by the applicant that as per the statement of account maintained by them, an amount of Rs.2,11,39,766/- is due under the DPN loan account as on 17.01.2013. Interest/compound interest has been charged at such rates and capitalized at such periodical rests as permitted by RBI. The periodic penal interest debited in the account is Rs.6,87,026/- and interest on penal interest would come to Rs.1,26,099/-. After deducting the interest on penal interest, an amount of Rs.2,10,13,667/- is claimed in the OA.

5. The defendants were duly served with summons. Though the defendants 1, 2 and 4 to 6 had filed vakalat, they did not choose to file written statement and counter proof affidavit despite sufficient opportunity granted. As such, the chance of filing written statement and counter proof affidavit of defendants 1, 2 and 4 to 6 stood closed on 08.02.2016. Subsequently, when the matter was taken up for hearing on 28.03.2016, learned counsel appearing for the 2nd defendant submitted that he had relinquished the vakalat for the 2nd defendant and filed relinquishment letter dated 19.03.2016. Accordingly, name of the 2nd defendant has been called in the open Tribunal thrice and as none appeared and represented, he was set exparte on 28.03.2016. Subsequently, even though Advocate P.Shrihari has filed vakalat for the 2nd defendant on 23.05.2016, he did not file any petition to set aside the exparte order passed against the 2nd defendant and as such, the 2nd defendant remained exparte in the proceeding. Though the 3rd defendant had filed vakalat as early on 22.03.2013 and written statement on 18.04.2013, the vakalat filed for the 3rd defendant has been rejected on 09.04.2013 for want of curing the defects noted by the Registry. The Tribunal had in its proceeding dated 01.09.2014 directed the concerned Advocate to come on record by filing fresh vakalat; however, no vakalat is seen to have been filed so far. In such circumstance, the contentions raised by the 3rd defendant in his written statement cannot be considered by the Tribunal. When the matter was taken up for final hearing on 22.03.2017, none appeared and represented for the defendants.

6. The evidence on the side of the applicant bank consists of the proof affidavit of its Chief Manager (AW1) and Exts.A1 to A4.

7. 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:

8. On a conspectus of the pleadings and evidence available on record, the Tribunal could find that pursuant to the application dated 28.06.2010, the applicant bank had sanctioned DPN loan of Rs.150 lakhs to defendants 1 and 2 as per Ext.A1 sanction letter dated 30.06.2010 and defendants 1 and 2 as borrowers and defendants 3 to 6 as guarantors had countersigned Annexure-A1 sanction letter in token of having accepted the terms and conditions thereof. As security for the loan, defendants 1 and 2 executed Ext.A2 credit facility agreement dated 30.06.2010 and defendants 3 to 6 executed Ext.A3 agreement of guarantee dated 30.06.2010 agreeing to pay and satisfy the applicant bank two days after demand all monies and liabilities already advanced to the 1st defendant together with interest, costs, charges and other expenses.

9. Records indicate that after availing the DPN loan of Rs.150 lakhs on 30.06.2010, the defendants committed default in repayment of the loan. Consequently, the applicant bank issued a recall notice to defendants 1 to 6 by registered post on 04.01.2012, but there was no positive response from the side of the defendants to pay off the debt. In view of the huge amount involved and since the arrears/overdues had been mounting up day by day, the applicant bank was constrained to take the recovery measures. As per Ext.A4 statement of account produced by the applicant bank, an amount of Rs.2,11,39,766/- is due under the DPN loan account as on 17.01.2013. After excluding the capitalized penal interest of Rs.1,26,099/-, the applicant bank is claiming an amount of Rs.2,10,13,667/- due under the DPN loan account of Rs.150 lakhs availed on 30.06.2010. The applicant bank has proved its case by coming out with proof affidavit of its Chief Manager, AW1 and by producing the original documents, which are marked as Exts.A1 to A4.

10. Having regard to the amount advanced, the interest and the penal interest applied and the chronic 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.

FINAL ORDER

11. The OA is allowed with costs.

12. The applicant bank is allowed to recover the sum of Rs.2,10,13,667/- (Rupees two crores ten lakhs thirteen thousand six hundred and sixty seven only) with further interest on the sum of Rs.2,03,26,641/- (Rupees two crores three lakhs twenty six thousand six hundred and forty one only) @15% per annum with monthly rests from 18.01.2013 till realization and also its costs from the defendants 1 to 6 personally and from their assets, jointly and severally.

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

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

15. 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 29th day of September, 2018]

(S.V.GOWRAMMA)

Presiding Officer

A P P E N D I X Witness for Applicant: AW1: M.L.Jose, Chief Manager of the applicant bank.

Witness for Defendant(s): Nil

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 30.06.2010 Sanction letter issued by the applicant bank sanctioning DPN loan of Rs.150 lakhs to defendants 1 and 2. A2 30.06.2010 Credit facility agreement executed by defendants 1 and 2 in favour of the applicant bank. A3 30.06.2010 Agreement of guarantee executed by defendants 3 to 6 in favour of the applicant bank. A4 … certified copy of the statement of account relating to the DPN loan.

Exhibits on the part of the defendants Nil

(PRESIDING OFFICER)

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 29th day of September, 2018

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

TA No.1443/2016 (OA No.52/2013) Between The South Indian Bank Ltd. …Applicant And Rosamma Varkey & 5 others. …Defendants

FINAL ORDER