INDUSIND BANK LIMITED vs RAJESH P.R on 1 December 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.13,24,015.79 together with interest @16.75% per annum with monthly rests from the defendants personally, jointly and severally and by sale of ‘A’ and ‘B’ schedule properties. BRIEF FACTS OF THE CASE

1. The 1st defendant approached the applicant bank to grant a loan of Rs.15 lakhs for the purpose of purchasing a house boat. Considering the request, on 15.07.2006 the Alappuzha Branch of the applicant sanctioned a term loan to the limit of Rs.15 lakhs to the 1st defendant on the terms and conditions contained in the sanction letter dated 15.07.2006. The 1st defendant hypothecated the house boat described in ‘A’ schedule in favour of the applicant bank as security for the loan transaction and executed agreement of hypothecation dated 15.07.2006 to that effect. The defendants 2 and 3 undertook to pay the debt due to the bank under the aforesaid loan and executed guarantee deed dated 15.07.2006 in favour of the applicant bank.

2. It is the case of the applicant that the 3rd defendant agreed to create equitable mortgage by deposit of title deeds over 1 Hectare (2.5 Acres) of land and improvements therein comprised in Sy.No.10/12 of Kainakary North Village, detailed in ‘B’ schedule to the OA and executed an agreement to create mortgage dated 15.07.2006. On 15.07.2006, the 3rd defendant personally appeared and deposited sale deed No.1289/2006 and settlement deed No.249/1963 along with tax receipt and possession certificate with the then Branch Head of the applicant bank with intent to create a valid equitable mortgage as collateral security for payment of the amount due to the applicant under the above transaction. The deposit of title deeds by the 3rd defendant is recorded by the applicant as per memorandum dated 16.07.2006.

3. It is urged by the applicant that in spite of repeated requests, the defendants have not paid the amount due to the applicant bank. Thus, the applicant caused to issue a lawyer notice dated 01.07.2009 to the defendants. However, it evoked no positive response from the defendants. As per the statement of account maintained by the applicant bank, an amount of Rs.13,24,015.79 is due from the defendants as on 13.07.2009. It is submitted that penal interest has been charged in the term loan account @2% per annum, but the same has not been capitalized. The applicant bank is entitled for realization of the aforesaid amount due from the defendants personally, jointly and severally and by sale of the OA schedule properties.

4. The defendants and filed written statement submitting that it is true that the 1st defendant availed a loan for purchase of house boat by hypothecating the boat to the bank. It is contended that the bank did not take any steps to proceed against the hypothecated goods before proceeding against any of the security or person stood as guarantors to the loan transaction. The loan had been declared as NPA during the beginning of 2007 and the bank had taken steps under the SARFAESI Act against the property and after exonerating all the proceedings under the Act, the bank had made a publication in Malayala Manorama daily dated 19.02.2008 for sale of the property.

5. It is submitted by defendants 1 and 2 that the bank had successfully auctioned schedule ‘B’ property in favour of Mr.Shameen Khan for Rs.20 lakhs on 18.03.2008 and the said Shameen Khan deposited Rs.5 lakhs in the loan account towards 1/4th of the condition while bidding the auction on 18.03.2008. But the present statement of account or the application filed by the bank is silent about the auction and the proceeds received in the auction. The applicant is having no manner of right to charge interest at the commercial rate of interest after declaring the loan account as NPA. The documents produced by the applicant bank is either concocted or fabricated for the purpose of the case. The guarantee deed and hypothecation agreement are incomplete and the same were created using the blank signed forms of the defendants at the time of availing the loan.

6. It is urged by defendants 1 and 2 that these defendants are having no connection with the 3rd defendant shown in the OA and, therefore, the OA is bad for mis-joinder of proper party. The auction purchaser of the property is not made a party to the present OA proceedings, thereby the proceedings are bad for non-joinder of necessary party. The statement of account is not attested as provided in the Act and hence the same is not acceptable under law. No proper pleading had been taken by the bank to get over the limitation and the bank is silent in respect of their inaction against the hypothecated goods. The defendants 1 and 2 prayed to dismiss the OA with costs by accepting the contention of these defendants.

7. The 3rd defendant was duly served with summons. But he neither appeared nor was he represented and thus the 3rd defendant was set exparte on 04.11.2010.

8. The evidence on the side of the applicant bank consists of the proof affidavit of its Manager (AW1) and Exts.A1 to A12. The evidence on the side of defendants 1 and 2 consists of their counter proof affidavit and the document produced by them was got marked as Ext.B1.

9. 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:

10. On a conspectus of the pleadings and evidence available on record, the Tribunal could find that the 1st defendant availed a term loan of Rs.15 lakhs from the applicant bank’s Alappuzha Branch on 15.07.2006 as per sanction letter dated 15.07.2006 for the purpose of purchasing a house boat. As security for the aforesaid term loan, the 1st defendant executed Ext.A1 agreement of hypothecation dated 15.07.2006 whereby he hypothecated the house boat described in ‘A’ schedule to the OA in favour of the applicant bank and defendants 2 and 3 executed Ext.A2 guarantee deed dated 15.07.2006 in favour of the applicant bank guaranteeing to pay off the debt due to the bank under the aforesaid loan account.

11. It could be further indicated from the evidence adduced by the applicant bank that as collateral security for the aforementioned term loan of Rs.15 lakhs availed by the 1st applicant, the 3rd defendant created equitable mortgage over 1 Hectare (2.5 Acres) of land and improvements therein comprised in Sy.No.10/12 at Kainakary North Village, detailed in ‘B’ schedule to the OA by deposit of title deeds and executed Ext.A3 agreement to create mortgage dated 15.07.2006. The records would indicate that on 15.07.2006, the 1st defendant deposited Ext.A4 sale deed No.1289/2006, Ext.A5 settlement deed No.249/1963, Ext.A6 tax receipt and Ext.A7 possession certificate relating to ‘B’ schedule property with the applicant bank with intent to create a valid equitable mortgage as security for repayment of the amount due to the applicant under the subject loan transaction. The deposit of title deeds by the 3rd defendant is recorded by the applicant as per Ext.A8 memorandum dated 16.07.2006.

12. The materials on record would reveal that as the defendants failed to repay the loan as per the terms of sanction despite repeated requests and follow-ups, the applicant bank caused to issue Ext.A9 lawyer notice dated 01.07.2009 to the defendants calling upon them to repay the amount due; however, according to the applicant bank, there was no positive response from the defendants. As per Ext.A10 certified copy of the statement of account produced by the applicant bank, an amount of Rs.13,24,015.79 (inclusive of penal interest of Rs.24,919.46) is due under the term loan account as on 13.07.2009.

13. According to defendants 1 and 2, the applicant bank had auctioned schedule ‘B’ property in favour of Mr.Shameen Khan for Rs.20 lakhs on 18.03.2008 and the said Shameen Khan deposited Rs.5 lakhs in the loan account towards 1/4th of the condition while bidding the auction on 18.03.2008; however, the statement of account or the application filed by the bank is silent about the auction and the proceeds received in the auction. It is also contended by defendants 1 and 2 that the auction purchaser of the property is not made a party to the present OA proceedings, thereby the proceedings are bad for non-joinder of necessary party.

14. Per contra, it is the case of the applicant bank that as the defendants failed to repay the loan, the bank initiated proceedings under the provisions of the SARFAESI Act and made a publication in Malayala Manorama daily dated 18.02.2008 for sale of schedule ‘B’ property mortgaged by the 3rd defendant. However, the sale did not materialize as there were no bidders for auctioning the property, which is situated in a waterlogged area and that the title deeds relating to ‘B’ schedule property is still with the applicant bank only.

15. The records would reveal that as pointed out by the applicant bank, the sale of schedule ‘B’ property did not happen on the notified date and the original title deed relating to the aforementioned property and the related documents are produced by the applicant bank before the Tribunal on 28.05.2010. In such

circumstance, the aforesaid contention of defendants 1 and 2 does not deserve any consideration of the Tribunal.

16. It is the further contention of defendants 1 and 2 that the documents produced by the applicant bank is either concocted or fabricated for the purpose of the case and that guarantee deed and hypothecation agreement are incomplete and the same were created using the blank signed forms of the defendants at the time of availing the loan. Nonetheless, despite vaguely contending so, defendants 1 and 2 could not substantiate their case by adducing any iota of evidence and therefore, the mere allegation of the defendants does not hold water.

17. It is also contended by defendants 1 and 2 that these defendants are having no connection with the 3rd defendant shown in the OA and, therefore, the OA is bad for mis-joinder of party. Nevertheless, the records would show that defendants 2 and 3 had jointly executed Ext.A2 guarantee deed dated 15.07.2006 whereby they agreed that the credit facility of Rs.15 lakhs granted to the 1st defendant together with interest, costs, charges and expenses chargeable by the bank shall be payable by them jointly and severally to the bank two days after demand and without demur merely upon the bank sending to the guarantors a demand notice requiring payment of the amount.

18. Furthermore, as collateral security for the term loan of Rs.15 lakhs availed by the 1st applicant, the 3rd defendant created equitable mortgage over ‘B’ schedule property to the OA by deposit of title deeds and executed Ext.A3 agreement to create mortgage dated

15.07.2006. The 3rd defendant deposited Ext.A4 sale deed No.1289/2006, Ext.A5 settlement deed No.249/1963, Ext.A6 tax receipt and Ext.A7 possession certificate relating to ‘B’ schedule property with the applicant bank with intent to create a valid equitable mortgage as security for repayment of the amount due to the applicant under the subject loan transaction, and that the deposit of title deeds by the 3rd defendant is also recorded by the applicant as per Ext.A8 memorandum dated 16.07.2006.

19. In the light of the above, defendants 1 and 2 cannot turn around and say at this juncture that they are having no connection with the 3rd defendant and the OA is bad for mis-joinder of parties. In the above backdrop, it can be held that the applicant bank has properly arrayed the 3rd defendant as a party in the OA and the aforesaid contention of defendants 1 and 2 does not merit any consideration of the Tribunal.

20. Further, the records would reveal that term loan of Rs.15 lakhs was availed by the 1st defendant on 15.07.2006, Ext.A1 agreement of hypothecation was executed by the 1st defendant on 15.07.2007, defendants 2 and 3 executed Ext.A2 guarantee deed on 15.07.2006 and the equitable mortgage over ‘B’ schedule property was created on 15.07.2006 and the 3rd defendant executed Ext.A3 agreement to mortgage in favour of the applicant bank on 15.07.2006. The applicant bank presented the OA before the Tribunal for recovery of the amount due under the aforesaid term loan on 14.07.2009. In view of the above, it can be construed that the present OA filed by the applicant bank is well within the period of limitation prescribed under S.24 of the RDDBFI Act.

21. It could be seen from Ext.A12 statement produced by the applicant bank, it has debited a sum of Rs.24,919.46 by way of penal interest in the term loan account. It is well settled that penal interest cannot be capitalised 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.24,919.46.

22. The case of the applicant bank regarding recovery of the sum of Rs.13,24,015.79 claimed as due under Ext.A10 statement of account relating to the term loan as on 13.07.2009 together with interest pendente lite and post decree interest on the sum of Rs.12,99,096.33 from the defendants personally, jointly and severally and by sale of ‘A’ and ‘B’ schedule properties, is proved by the proof affidavit of its Manager, AW1 and Exts.A1 to A12.

23. Having regard to the amount 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 @14.75% per annum with monthly rests.

FINAL ORDER

24. The OA is allowed with costs.

25. The applicant bank is allowed to recover the sum of Rs.13,24,015.79 (Rupees thirteen lakhs twenty four thousand fifteen and Paise seventy nine only) with further interest on the sum of Rs.12,99,096.33 (Rupees twelve lakhs ninety nine thousand ninety six and Paise thirty three only) @14.75% per annum with monthly rests from 14.07.2009 till realization and also its costs from the defendants personally, jointly and severally and by sale of ‘A’ and ‘B’ schedule properties.

26. ‘A’ and ‘B’ schedules to the OA shall be appended to this order.

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

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

29. 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 1st day of December, 2018]

(S.V.GOWRAMMA)

Presiding Officer

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

Witness for Defendant(s):

DW1: P.R.Rajesh (D1) Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 15.07.2006 Agreement of hypothecation executed by the 1st defendant in favour of the applicant bank. A2 15.07.2006 Deed of guarantee executed by defendants 2 and 3 in favour of the applicant bank. A3 15.07.2006 Agreement to create equitable mortgage executed by the 3rd defendant in favour of the applicant bank. A4 16.05.2006 Sale deed No.1289/2006 of Pulinkunnu SRO. A5 30.03.1963 Photocopy of settlement deed No.249/1963 of Pulinkunnu SRO. A6 16.06.2006 Tax receipt No.5955791. A7 10.07.2006 Possession certificate issued by Kainakary North Village. A8 16.07.2006 Memorandum recording equitable mortgage by deposit of title deed prepared by the applicant bank. A9 01.07.2009 Copy of lawyer notice issued to the defendants by the applicant bank calling upon them to pay the amount due under the term loan account. A10 … Certified copy of the statement of account relating to the term loan. A11 … Statement showing the rate of interest applied in Ext.A10 account from time to time. A12 … Statement showing the penal interest charged in Ext.A10 account.

Exhibits on the part of defendants 1 and 2

Ext.No. Date Particulars of documents B1 19.02.2008 True copy of publication of sale notice effected in Malayala Manorama daily.

PRESIDING OFFICER

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 1st day of December, 2018

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

TA No.1346/2016 (OA No.279/2009) Between IndusInd Bank Ltd. …Applicant And Rajesh.P.R & 2 others. …Defendants

FINAL ORDER