FEDERAL BANK vs M/s ANON BUILDERS on 20 August 2018

FINAL ORDER

The applicant bank has filed Original Application [for brevity herein after referred as “OA”] on 15.01.2016 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.48,16,846.41 due under the first Cash Credit Facility with interest @15.58% per annum with monthly rests on Rs.47,00,689.91 from the defendants 1 to 4 jointly and severally and a sum of Rs.21,51,870.91 due under the second Cash Credit Facility with interest @ 16.48% per annum with monthly rests on Rs.21,33,799.71 from the defendants 2 to 5 jointly and severally and by sale of Schedule „A‟ property to the OA. BRIEF FACTS OF THE CASE

1. The applicant is a Banking Company within the meaning of Banking Regulation Act, constituted under the Companies Act, 1956, having its Registered Office at Alwaye and a branch amongst other places at Kalluvathukkal in Kollam District and is entitled to sue and be sued in its name. Sri.Terrance Boy Antony, Senior Manager and Principal Officer of the applicant who is conversant with the facts of the case and is competent to verify the application and represent the bank to file this application.

2. The defendants had availed the credit facilities and executed the loan documents on 04.02.2013 and 30.04.2013. The OA is filed on 15.01.2016 and is within the limitation prescribed under under section 24 of the RDDBFI Act, 1993.

3. It is the case of the applicant bank that the 1st defendant is a partnership firm carrying on the business of building construction. The 2nd and 3rd defendants are the partners of the 1st defendant firm and co- obligant/guarantors for the credit facility availed by 1st defendant.

4. During the years of 2013, the 1st defendant approached the applicant seeking financial assistance for executing contract work. Considering the request of the defendants, the applicant sanction a Cash Credit Facility of Rs.45,00,000/- and in acceptance and as security for the credit facility, defendants have executed Demand Promissory Note dated 04.02.2013 for an amount of Rs.45,00,000/- promising to repay the said amount with interest thereon and have executed a Security Delivery Letter dated 04.02.2013 and Agreement for Hypothecation for Contractors (Cash credit).

5. In addition to that defendants 2 and 4 on 04.02.2013 deposited the Original Sale Deed No.4295 dated 25.11.2006 of SRO, Varkala relating to 11.40 Ares in Re.Sy.No.148/8 (old Sy.No.423) more fully described as schedule „A‟ to the OA. The defendants 2 and 4 also confirmed the deposit of title deed and creation of mortgage vide letter dated 05.02.2013.

6. It is submitted by the applicant that the 5th defendant is a private limited company registered under Companies Act 1956 and defendants 2 and 3 are its Managing Director and Director respectively. The 4th defendant along with defendants 2 and 3 stood as co-obligant for the credit facility availed by the 5th defendant. The 4th defendant executed the loan documents through power of attorney holder Sri.Appukuttan Pillai, the 2nd defendant herein.

7. During the April 2013, the 5th defendant approached the applicant seeking financial assistance i.e. Cash Credit limit of Rs.75,00,000/- towards working capital requirements. The applicant after considering the request of the defendants sanctioned a Cash Credit Facility for Rs.75,00,000/-. The 5th defendant as per board resolution dated 29.04.2013 had authorized the managing director and director i.e., Defendants 2 and 3 to avail loan/ execute documents for an on behalf of the 5th defendant. Accordingly, they have executed Demand Promissory Note dated 30.04.2013 for an amount of Rs.75,00,000/-, security delivery letter dated 30.04.2013, Agreement for Hypothecation for Contractors (Cash Credit) and Agreement for Hypothecation of Goods as Primary Security.

8. Further the defendants 2, 3 and 4 had executed guarantee agreement, guaranteeing the due repayment and discharge, on demand of all amounts due and payable to the bank by the Principal outstanding in the books in respect of the credit facility availed by the 5th defendant together with interest, banking and other charges and expenses that the bank may incur in the course of business. As a further security to the credit facility of Rs.75,00,000/-, defendants 2 and 4 extended the mortgage already created over schedule „A‟ property to the OA and extended the scope of the mortgage vide letter dated 02.05.2013.

9. It is submitted by the applicant that the defendants failed and neglected to regularize the loan accounts as per the terms and conditions specified in the loan agreement despite of letter and personal contracts made by the applicant. Hence, the applicant caused to issue demand notice under Section 13(2) of the Act to the defendants on 06.10.2015 calling upon them to pay the entire amount due to under the respective loan accounts. But they failed to settle the liabilities and as on 15.01.2016 an amount of Rs.48,16,846.41 is due under the Cash Credit

Account No.12595600003219 and an amount of Rs.21,51,870.91 due under the Cash Credit Account No.12595500003509. Hence, the applicant is constrained to file this Original Application for recovery of the said amounts.

10. After filing of the OA, the applicant bank has taken out the summons on the defendants as directed by the Tribunal and has filed the proof of service on 29.03.2016. The summons issued to the defendants were duly served on them and service of summons was completed as per the regulations. Though the defendants filed vakalath on 30.11.2016, but they failed to file written statement in time. Hence the chance of filing written statement was closed on 25.05.2017.

11. The evidence on the side of the applicant bank consists of the proof affidavit of its Senior Manager and Principal Officer, AW1 and Exhibits A1 to A22 were marked on the side of applicant and closed their side of evidence.

12. 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:-

13. The evidence of the applicant bank by way of proof affidavit of its Senior Manager and Principal Officer, reiterates the facts pleaded in the OA and the affidavit is corroborated by the above referred Exhibits A1 to A22 which clearly establishes the case of the applicant bank to allow the present OA. Added to this, the non-filing of written statement by defendants inspite of filing Vakalath 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.

14. 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.48,16,846.41 [Rupees Forty eight lakhs sixteen thousand eight hundred forty six and paise forty only] with further interest on the sum of Rs.46,78,053.32 [Rupees Forty six lakhs seventy eight thousand fifty three and paise thirty two only] (i.e., Rs.48,16,846.41 – penal interest of Rs.1,38,793.09) @13.58% per annum with monthly rests from 16.01.2016 till realization and also its costs from the defendants 1 to 4 jointly and severally.

(c) the sum of Rs.21,51,870.91 [Rupees Twenty one lakhs fifty one thousand eight hundred seventy and paise ninety one only] with further interest on the sum of Rs.21,32,165.62 [Rupees Twenty one lakhs thirty two thousand one hundred sixty five and paise sixty two only] (i.e.,Rs.21,51,870.91 – penal interest of Rs.19,705.29) @14.48% per annum with monthly rests from 16.01.2016 till realization and also its costs from the defendants 2 to 5 jointly and severally.

(d) In the event of failure of the defendants to pay the OA claim amount, the bank is at liberty to sell the schedule „A‟ property to the OA 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 moveable/immoveable properties of the defendants 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.

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 steno, transcribed by him, corrected by me and then pronounced in the open court on this the 20th day of August, 2018]

(S.V.GOWRAMMA) Presiding Officer

A P P E N D I X Witness for Applicant: AW1: Terrance Boy Antony, Senior Manager & Principal Officer Manager of the applicant bank.

Witness for Defendants: Nil

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents A1. 04.02.2013 Original Partnership Letter. A2. 04.02.2013 Demand Promissory Note for an amount of Rs.45,00,000/- A3. 04.02.2013 Security deliver letter executed by the defendants 1 to 4 in favour of the applicant. A4. 04.02.2013 Agreement of hypothecation for contractors (Cash Credit) executed by the defendants 1 to 4 in favour of the applicant. A5. 25.11.2006 Sale Deed No.4295 of SRO Warkala. A6. 05.02.2013 Letter confirming deposit of title deed executed by the defendants 2 and 4. A7.

Certificate of incorporation of the 5th defendant. A8. 05.02.2013 General Power of attorney executed by the 4th defendant in favour of the 1st defendant. A9. 29.04.2013 Extract of the resolution of the Board Meeting of 5th defendant company. A10. 30.04.2013 Demand Promissory Note for an amount of Rs.75,00,000/- executed by defendants 2, 3 & 5 in favour of the applicant. A11. 30.04.2013 Security deliver letter executed by the defendants 2,3 & 5 in favour of the applicant. A12. 30.04.2013 Agreement of hypothecation for contractors (Cash Credit) executed by the defendants 2,3 & 5 in favour of the applicant. A13. 30.04.2013 Agreement for hypothecation of goods as primary security executed by defendants 2,3 & 5 in favour of the applicant A14. 30.04.2013 Agreement for guarantee executed by defendants 2, 3 and 4 in favour of the applicant A15. 02.05.2013 Letter in lieu of redeposit of title deed. A16. 06.10.2015 Demand Notice issued under section 13(2) SARFAESI ACT. A17.

Statement of account pertaining to Cash Credit Account No.12595600003219.

A18.

Statement of account pertaining to Cash Credit Account No.12595500003509. A19.

Statement showing the penal interest and capitalization of penal interest charged in the Cash Credit Account No.12595600003219. A20.

Statement showing the penal interest and capitalization of penal interest charged in the Cash Credit Account No.12595500003509. A21.

Statement showing varying rate of interest applied in Cash Credit Account No.12595600003219 A22.

Statement showing varying rate of interest applied in Cash Credit Account No.12595500003509.

Defendants Exhibits – Nil

[PRESIDING OFFICER]

SCHEDULE- ‘A’

(Property mortgaged by Defendant No.2 and 4 covered under Sale Deed No.4295 dated 25.11.2006 SRO Varkala.)

All that piece and parcel of land to an extent of 11.40 Ares comprised in Resurvey.No.148/8 (old Survey No.423) situated in Chemmaruthy Village, Chirayinkizh Taluk, Thiruvananthapuram District together with all buildings existing and/or to be constructed and all improvements thereon. Boundaries:(as per title deed)

East : Property of Vijayan

South : Property belonging to Sadasivan

West : Road

North : Property of Sivaprasad

[PRESIDING OFFICER]

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 20th day of August, 2018

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

Between Federal Bank Ltd., Registered Office Aluva, Kalluvathukkal Branch, Kollam District.

…Applicant And M/s.Anon Builders & others

...Respondents

FINAL ORDER