UNION BANK OF INDIA vs SHYAM ALIAS SYAMRAJ ALIAS on 19 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.6,82,949/- due under the term loan account together with future interest @10% per annum with monthly rests from the defendants jointly and severally and by sale of the OA schedule properties; the sum of Rs.56,17,603/- due under the CCH account together with future interest @11.50% per annum with monthly rests from the defendants jointly and severally and by sale of the OA schedule properties; the sum of Rs.4,03,426/- due under the vehicle loan account together with future interest @10% per annum with monthly rests from the defendants jointly and severally and by sale of the OA schedule properties; the sum of Rs.27,81,630/- due under the bank guarantee account together with future interest @16.25% per annum with monthly rests from the defendants jointly and severally and by sale of the OA schedule properties and the sum of Rs.3,44,065/- due under the current account together with future interest @15.25% per annum with monthly rests from the defendants jointly and severally and by sale of the OA schedule properties. BRIEF FACTS OF THE CASE

1. The applicant is a body corporate constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 having its head office at 239, Vidhan Bhavan Margh, Mumbai and various branches among other places including one at Alappuzha

District, Kerala. The 1st defendant is the proprietor of M/s.Arjuna Constructions engaged in undertaking construction works and he approached the applicant bank and availed a term loan of Rs.6.5 lakhs after executing a demand promissory notice dated 16.09.2005 for Rs.6.50 lakhs and term loan agreement dated 16.09.2005. The 2nd defendant came to the applicant on 26.09.2005 and deposited the property admeasuring 3.38 Ares described as item No.1 in the schedule to the OA, her property with title deed Nos.1585/1998 and 2070/1998 of Alappuzha SRO and created charge over the property to secure the term loan amount with interest. The applicant has drawn memorandum of deposit of title deed in this regard.

2. It is submitted by the applicant, that at the request of the 1st defendant, the applicant granted a cash credit hypothecation facility to the tune of Rs.8.50 lakhs on 11.11.2005 and for this transaction, the 1st defendant executed demand promissory notice dated 11.11.2005 undertaking to repay the CCH amount together with interest @12.75% per annum with quarterly rests. The 1st defendant also executed hypothecation goods agreement and hypothecated the stock of construction materials in favour of the applicant and created charge over it to secure the CCH amount with interest. The 2nd defendant stood as surety to CCH account and the term loan account and executed letter of guarantee undertaking to repay the amount due in both the accounts. The 3rd defendant also stood as surety to both the transactions and executed a composite letter of guarantee for the total amount of Rs.15 lakhs with interest being the limit of the term loan as well as CCH facility. The 3rd defendant deposited her title deed in respect of 5½ cents of property with all improvements thereon described as item No.2 in the schedule to the OA and created charge over it to secure the advances that are already given and to be given to the 1st defendant.

3. It is the case of the applicant that at the request of the 1st defendant, the limit of CCH facility was enhanced to Rs.19 lakhs and the 1st defendant executed demand promissory notice for Rs.19 lakhs granted on 08.03.2006 and entrusted the same to the applicant. The 1st defendant also executed letter of continuity and hypothecation agreement of goods and debts in favour of the applicant bank. The 2nd defendant executed a letter of guarantee to cover the enhanced CCH limit and the existing term loan facility with interest and made herself liable for repayment of the amount of demand made by the applicant. The 2nd defendant also executed a letter of extension of mortgage whereby the property in Sy.No.616/11A/3 of Pazhaveedu Village already mortgaged by her will continue to be security for the CCH limit of Rs.19 lakhs and interest.

4. It is submitted by the applicant that again at the request of the 1st defendant, the CCH limit was enhanced to Rs.25 lakhs on 27.05.2006 and the 1st defendant executed demand promissory notice and entrusted the same to the applicant. The 1st defendant also executed letter of continuity and hypothecation goods agreement in favour of the bank. The 1st defendant had deposited title deed No.2397/2006 of Alappuzha SRO with respect to 1.41 Ares (3.500 cents) of property described as item No.3 in the schedule to the OA, including the shop rooms therein and created charge over the same by way of equitable mortgage to secure the amounts availed from the applicant. Thereafter, at the request of the 1st defendant, the CCH limit was enhanced to Rs.50 lakhs on 28.09.2006 and he executed demand promissory notice, letter of continuity and hypothecation goods agreement in favour of the applicant.

5. It is urged by the applicant that while the 1st defendant was continuing the transaction with the applicant, he requested the applicant to give a bank guarantee for Rs.25 lakhs and for and on behalf of M/s.Vijaya Constructions in favour of M/s.National Small Industries Corporation Ltd. The 1st defendant executed letter of counter indemnity for the bank guarantee undertaking to repay the amount with interest covered by the bank guarantee issued by the applicant. Accordingly, the applicant had issued a bank guarantee for Rs.25 lakhs and the beneficiary of the bank guarantee viz., National Small Industries Corporation Ltd. invoked the bank guarantee and the amount was paid by the applicant for and on behalf of the 1st defendant on 16.06.2008.

6. It is submitted by the applicant that the 1st defendant had availed a vehicle loan of Rs.3.92 lakhs from the applicant on 03.04.2006 and executed demand promissory notice on 03.04.2006. The 1st defendant had also executed a hypothecation vehicle agreement and hypothecated the ambassador car purchased by him. Thus, in fact, the 1st defendant had availed a CCH facility of Rs.50 lakhs, term loan of Rs.6.46 lakhs, vehicle loan of Rs.3.92 lakhs and a letter of guarantee of Rs.25 lakhs, a collective total of Rs.85.38 lakhs from the applicant. The defendants 4 and 5 stood as surety to the above transactions totaling to Rs.85.38 lakhs and executed letter of guarantee dated 05.09.2007 undertaking to repay the amount together with interest. Apart from the above, defendants 4 and 5 had deposited certificate of purchase of property admeasuring 1 Acre 44 cents in Sy.Nos.118/12-13 & 117/3 of Punnayoorkkulam Village described as item No.4 in the schedule to the OA and created equitable mortgage to secure the above transactions.

7. It is urged by the applicant that after the 1st defendant availed the above facilities from the applicant, he did not make proper and regular repayments. On 01.07.2008, the 1st defendant came to the applicant bank and executed debit balance confirmation letter acknowledging and accepting the correctness of the outstanding amount in the term loan account as on 30.06.2008 as Rs.5,83,271/- and agreed to liquidate the liability immediately. With respect to the vehicle also, the 1st defendant executed a debit balance confirmation letter dated 01.07.2008 confirming and acknowledging his indebtedness to the bank as on 30.06.2008 for the outstanding amount of Rs.3,60,136/- and agreed to pay the amount.

8. It is submitted by the applicant that the 1st defendant was operating current account with the applicant for his business purpose and he is liable to pay the overdrawn amount as if it is a loan availed by him and in the current account, there is an outstanding balance of Rs.3,44,065/- as on 20.09.2009. As the defendants did not come forward to repay the outstanding amount and liquidate the liability, the applicant through their Advocate issued a lawyer notice dated 28.08.2009 to the defendants calling upon them to repay the outstanding amount. The lawyer notice was accepted by defendants 3

to 5 and the 5th respondent sent a reply to the lawyer notice through her Advocate.

9. It is submitted that the applicant bank did not charge any penal interest or capitalized it in CCH account. In terms of the term loan agreement executed by the 1st defendant, the applicant charged penal interest with respect to the defaulted installments and the total amount of penal interest so charged in the term loan account is Rs.25,525/-. While the 1st defendant availed the vehicle loan, there was a specific agreement executed by him wherein he had agreed to pay penal interest for the defaulted installments. Accordingly, the applicant charged penal interest with respect to the defaulted installments and the total amount of penal interest so charged in vehicle loan account is Rs.13,026/-. The applicant did not capitalize the penal interest in any of the above accounts.

10. As per the statement of accounts maintained by the applicant bank in the name of the 1st defendant, as on 20.09.2009 there is an outstanding balance of Rs.6,82,949/-, Rs.56,17,603/-, Rs.4,03,426/-, Rs.27,81,630/- and Rs.3,44,065/- in the term loan account, CCH account, vehicle loan account, invoked bank guarantee account and current account respectively. It is submitted by the applicant that the entire amount of Rs.98,29,673/- is to be recovered from the defendants jointly and severally and also by sale of the mortgaged properties.

11. Though defendants 1 to 3 had entered appearance and sought adjournment for filing written statement and counter proof affidavit, they did not file the same despite sufficient opportunity

granted. As such, the chance of filing written statement and counter proof affidavit by the 1st defendant and defendants 2 & 3 stood closed respectively on 25.11.2014 and 15.01.2016.

12. The 4th defendant filed written statement contending inter alia that this defendant never mortgaged his property or stood as surety to anybody and has not executed any document for creating mortgage. This defendant has no knowledge about the loan transaction stated in the above OA and he is not aware of Annexures- A1 to A33 and is denied. This defendant specifically denies the averment that he stood as surety to the transaction totaling to Rs.85,38,000/- and execution of letter of guarantee dated 05.09.2007 undertaking to repay the amount with interest and that execution of Annexure-A32 is denied. The averment in para 5(9) that defendants 4 and 5 had deposited certified copy of certificate of purchase of property admeasuring 1 acre 44 cents in Sy.No.118/12- 13 & 117/3 of Punnayoorkulam Village and created equitable mortgage to secure the transaction is totally denied by this defendant. It is to be noted that the alleged document produced as per the case of the applicant is a certified copy of purchase certificate and the applicant bank is not even tried to get an original certificate for creating the alleged mortgage.

13. It is submitted by the 4th defendant that after receiving notice under S.13(2) of the SARFAESI Act, this defendant caused to send a detailed reply to that notice stating that this defendant has no connection or transaction with the Alleppey Branch of the applicant bank. This defendant not stood as a guarantor to M/s.Arjuna

Construction or any other institution and had not created any mortgage with the properties to any bank and that he has not obtained any money from the applicant bank and enjoyed the fruit of that. In the reply it is clearly stated that this defendant is totally blind and is aged 61 years. After sending the reply to the applicant bank, this defendant filed a police complaint before Vadakkekkad Police and the police has registered a crime as 119/2009. Before filing the OA, the applicant caused to issue a lawyer notice dated 28.08.2009 and after receiving the same, the 4th defendant issued a reply notice dated 23.09.2009 to the applicant through his lawyer and the same is received by the applicant’s Advocate.

14. It is the case of the 4th defendant that 1 acre 44 cents in Sy.No.118/12, 13 & 117/3 of Punnayoorkulam Village are originally acquired by two documents. The property with measurements 8x38.75, 21.5x47.75 acquired as per document No.830/1952 of Andathode SRO in Re-Sy.Nos.118/13, 12 part, 117/13 part are the properties assigned by the father of this defendant to 5th defendant, Laxmi Amma, who is the mother of defendants 4 and 5; the 4th defendant and to Narayanan Nair, who is the brother of Laxmi Amma. The properties with measurements 12.5 x 31.5 acquired as per document No.831/1952 of Andathodu SRO is acquired as per a settlement deed. Narayanan Nair left the house and not heard of for more than 50 years and the mother of this defendant is also died. Hence, the property has to be devolved upon defendants 4 and 5. The alleged mortgage created is without making Narayanan Nair as a party and thus it can be seen that there is no valid mortgage. The 4th defendant is relying on the judgment rendered by the Hon’ble High

Court of Kerala in the case titled Viswambaran.P.N vs. T.P.Sanu & others [2018 (3) KHC 73 (FB)] to buttress his case.

15. It is urged by the 4th defendant that he has no knowledge about Annexure-A35 document and hence denied and he has not created or intended to create any mortgage with respect to the property narrated or described in item No.4 of the OA. This defendant totally denies the averments made in para 10 of the OA, as this defendant has no connection or knowledge about the above said loan transaction denies Annexures-A36 and A37 and the balance confirmation letters, if any, executed by the 1st defendant in favour of the applicant bank and it is not binding on this defendant. This defendant is not aware of Annexure-A38 account and is not liable to pay the amount shown with interest. Issuance of Annexure-A39 notice is admitted by this defendant and a detailed reply has been sent through an Advocate. The averments in paras 13 to 17 are totally denied, since there is no transaction between this defendant and the applicant bank. The applicant is not entitled to get a relief as prayed for and it is prayed to dismiss the OA as against this defendant.

16. The 5th defendant filed written statement contending at the outset that the above OA is not maintainable either in law or on facts and hence liable to be dismissed. It is contended inter alia that the above OA is barred by limitation and the same is instituted by an incompetent person and hence the OA is liable to be dismissed in limine. The statements of the applicant in para 5(B) of the application are not known to this defendant. The statements of the applicant in para 5-2, 3, 4, 5, 6 and 7 of the application are within the knowledge of the applicant and the 1st defendant only and hence denied by this defendant. Therefore, the statement that all the defendants are jointly and severally liable to pay the amount together with future interest at the agreed rate of 16.25% with monthly rests from 21.09.2009 till realization is not correct and hence denied by this defendant. This defendant is not liable to pay any amount to the applicant.

17. It is contended by the 5th defendant that she never stood as surety to any transaction between the applicant and the 1st defendant and she never executed any documents in favour of the applicant and that the letter of guarantee (Annexure-A33) is fraudulently created one. The handwriting and signature shown in Annexure-A33 is not that of this defendant and are forged, fraudulently created by the applicant bank in collusion with the 1st defendant and some others. This defendant never deposited certificate of purchase of her property and created an equitable mortgage with the applicant bank as alleged and Annexure-A35 is also fraudulently created by the applicant.

18. It is the case of the 5th defendant that she had borrowed Rs.50,000/- from one Mr.Kannan through one Mr.Sabu for which the original documents of her property admeasuring 1 Acre 44 cents in Punnayurkulam Village such as purchase certificate, location certificate, assignment deed No.918/1974 of Andathode SRO etc. were given as security. The said Sabu and Kannan in collusion with the 1st defendant and the then Manager of the applicant bank fraudulently created the documents mentioned in the OA to make undue benefits for them and the applicant bank. This defendant had never gone to the applicant bank and not signed in any papers in favour of the bank and she has no connection with the other defendants except the 4th defendant, who is the brother of this defendant and also a co-owner of this defendant’s aforesaid property along with others and he has also not executed any document in favour of the applicant bank.

19. It is submitted by the 5th defendant that she filed OS No.482/2009 before the Hon’ble Munsiff Court, Chavakkad against the applicant and the said Sabu and Kannan and others for injunction and obtained a temporary injunction against them not to trespass etc. into the property of this defendant and it is known to the applicant and suppressing this fact, the OA is filed. This defendant could not make the 1st defendant in the OA, in that suit as a defendant as his name and address were not known to her then. The 5th defendant came to know his name and address only when she was served with a lawyer notice dated 28.08.2009 issued by the counsel for the applicant bank, and immediately she filed a criminal complaint against the said Sabu, Kannan, applicant bank’s then Manager and the 1st defendant before the Hon’ble Judicial First Class Magistrate Court, Kunnamkulam as MP 4637/2009 and it was forwarded to Vadakkekad Police for investigation and the police registered a crime as 478/2009 against them and subsequently without proper investigation and under the high influence of the accused, the police referred the complaint. Against that, this defendant lodged a protest complaint as MP 7701/2009 before the same court against the said accused and it is pending enquiry before the court.

20. It is urged by the 5th defendant that she is totally unaware of the loan transactions of the applicant with the 1st defendant and she never stood as surety to such transactions and her properties were never offered and pledged as security. This defendant has no connection either with the 1st defendant or M/s.Arjuna Constructions. No charge is created on the property of this defendant as alleged in the OA and her property was never mortgaged with the applicant bank for any transaction. No mortgage is created in favour of the applicant with respect to item No.4 property in the schedule to the OA. The averment of the applicant that all the defendants are jointly and severally liable to pay the amount with interest etc. is false and hence denied by this defendant and that this defendant is not liable to pay any amount.

21. It is submitted by the 5th defendant that the averments of the applicant in para 5-10, 5-11, 5-13 and 5-14 are within the knowledge of the applicant and the 1st defendant and hence denied by this defendant. The averments in para 5-12, 5-15, 5-16 and 5-17 is not correct and hence denied by this defendant. Since this defendant has no transaction with the applicant bank, they cannot proceed against this defendant personally or against this defendant’s property detailed as item No.4 to the OA for recovery of the amount due from the 1st defendant. The above OA is bad for non-joinder of necessary parties. It is submitted that none of the reliefs sought in this application is entertainable and legally sustainable and the 5th defendant prayed to dismiss the OA with costs.

22. The evidence on the side of the applicant bank consists of the proof affidavit of its Chief Manager (AW1) and Exts.A1 to A45, additional proof affidavit of its Senior Manager (AW2) and Exts.A46 to to A48. The 4th defendant has not filed any counter proof affidavit within the time granted and as such, the chance of filing the same stood closed on 25.11.2014. Thereafter, the 4th defendant as DW1 has filed counter proof affidavit on 25.04.2017, along with I.A 2560/2018 to accept the same on 22.10.2018, to which the applicant counsel has no objection, hence, IA stood allowed by accepting the counter proof affidavit and Exts.D4[1] to Exts.D4[8]. The 5th defendant as DW2 filed counter proof affidavit on 06.09.2010 along with documents which are marked as Exts.D5[a] to Exts.D5[h]; additional counter proof affidavit on 13.01.2016 along with Exts.D5[i] to D5[m]; and further additional counter proof affidavit is filed on 30.03.2016 along with Exts.D5[n] to D5[q] and additional counter proof affidavit is filed on 06.06.2018 with Exts.D5[r] and D5[s].

23. 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 as prayed for in the OA?

(ii) What order?

Findings:

Point No.1: Allowed in part

Point No.2: As per order

Reasons:

24. According to the 4th defendant, item No.4 property set out in the schedule to OA vis., 1 acre 44 cents in Sy.No.118/12, 13 & 117/3 of Punnayoorkulam Village is originally acquired by two documents i.e., document Nos.830/1952 and 831/1952. The property with measurements 8x38.75, 21.5x47.75 comprised in Re- Sy.Nos.118/13, 12 part, 117/13 was acquired as per document No.830/1952 of Andathode SRO and the property with measurements 12.5 x 31.5 was acquired as per document No.831/1952 of Andathodu SRO, which is acquired as per a settlement deed. It is also submitted that Narayanan Nair left the house and not heard of for more than 50 years and the mother of this defendant is also died. As such, item No.4 property has to be devolved upon defendants 4 and 5.

25. It is the specific case of the 4th defendant that he is totally blind and he never stood as surety to the loan transaction as alleged in the OA and had not executed Ext.A32 letter of guarantee dated 05.09.2007 for Rs.85,38,000/-. It is the further contention of the 4th defendant that he had not created any mortgage over item No.4 property mentioned in the OA as alleged by the applicant bank.

26. On perusal of records, the Tribunal could find that the 4th defendant is a visually impaired person which is evident from the identity card for persons with disabilities issued by District Social Welfare Officer, Thrissur and the certificate issued by the Medical College Hospital, Thrissur. It is the case of the applicant bank that the

4th defendant stood as surety to the loans availed by the 1st defendant from the bank and executed Ext.A32 letter of guarantee dated 05.09.2007 for Rs.85.38 lakhs undertaking to repay the amount together with interest. It could be discernible from records that the only document produced by the applicant bank purported to be executed by the 4th defendant is Ext.A32 letter of guarantee dated 05.09.2007 for Rs.85.38 lakhs as security for the financial assistance granted to the 1st defendant.

27. A cursory glance of Ext.A32 letter of guarantee would reveal that there is no thumb impression of the 4th defendant in the said document, instead signature is appended therein after mentioning his name. Even though the applicant is contending that the 4th defendant had executed Ext.A32 letter of guarantee, no procedure is seen to have been followed by the applicant bank in the matter of execution of a loan document by a visually impaired person and except Ext.A34 agreement alleged to be executed by the 4th defendant, no other material has been produced by the applicant bank to substantiate that the 4th defendant being a blind person stood as surety to the credit facilities aggregating to Rs.85.38 lakhs extended to the 1st defendant.

28. It is the further case of the applicant that the 4th defendant along with the 5th defendant had created equitable mortgage over item No.4 property viz., 1 acre 44 cents in Sy.No.118/12, 13 & 117/3 of Punnayoorkulam Village by depositing certified copy of purchase certificate No.14459/1977 dated 02.03.1977 issued by the Land Tribunal, Chavakkad as security for the loans availed by the 1st defendant. To buttress their case, the applicant has produced Ext.A35 memorandum of deposit of title deeds dated 06.09.2007 drawn by the applicant bank. It could be seen that defendants and had not executed any document/memorandum evidencing the creation of mortgage over item No.4 property.

29. The records would reveal that upon receipt of the demand notice dated 08.08.2008 issued under S.13(2) of the SARFAESI Act, the 4th defendant sent a reply dated 20.10.2008 denying the execution of Ext.A32 letter of guarantee and creation of mortgage over item No.4 property. Meanwhile, the 4th defendant filed a complaint before Vadakkekkadu Police and the Police had registered the crime as CC 119/2009. It could be seen from records that the Sub-Inspector of Police, Vadakkekkadu obtained a statement dated 14.10.2010 from Sri.Venugopal, Senior Manager of the applicant bank wherein it is averred that the auditors of the bank had found out some irregularities in the loan transactions with the 1st defendant by pledging the title deeds; and Mr.Balaswamy Pilla, who was the Chief Manager of the applicant bank during the relevant time, has been suspended in this regard. It is also stated therein that there is a liability to the tune of Rs.98,29,673/- towards the loans granted and the bank has filed OA No.322/2009 before the Debts Recovery Tribunal, Ernakulam. The Police has submitted a final report in this regard before the Judicial First Class Magistrate Court, Kunnamkulam.

30. It could be explicitly seen that the signature of the 4th defendant found in Ext.A32 letter of guarantee does not tally with the signature found in the documents filed before the Tribunal wherein besides the thumb impression, in some of the documents the 4th defendant has put his signature as well. As per the direction of the Tribunal, along with a memo dated 19.09.2018 the applicant bank has produced a copy of the specimen signature form obtained from the 4th defendant at the time of opening the account with its Thrissur Branch in the year 1988 which contains the thumb impression of the 4th defendant and he has not affixed any signature therein. Further, the applicant bank failed to establish before the Tribunal that the 4th defendant approached the bank and executed any document evidencing the creation of mortgage over item No.4 property by handing over the title deeds relating to the aforesaid property. On a conspectus of the pleadings and evidence available on record, the Tribunal could come to a conclusion that the 4th defendant had not executed Ext.A32 letter of guarantee dated 05.09.2007 in favour of the applicant bank and had not created any valid mortgage over item No.4 property.

31. It is the further case of the applicant bank that the 5th defendant stood as surety to the credit facilities availed by the 1st defendant and executed Ext.A33 letter of guarantee dated 05.09.2007 for Rs.85.38 lakhs in favour of the applicant bank. It is also submitted by the applicant bank that apart from the above, the defendants 4 and 5 had deposited Ext.A34 certified copy of purchase certificate in respect of item No.4 property and the applicant bank has drawn Ext.A35 memorandum of deposit of title deed in this regard.

32. It is emphatically contended by the 5th defendant that she never stood as surety to any transaction between the applicant and the 1st defendant and has not executed any documents in favour of the applicant and that Ext.A33 letter of guarantee is a fraudulently created document. It is strenuously submitted that the handwriting and signature shown in Ext.A33 is not that of this defendant and the same are forged and fraudulently created by the applicant bank in collusion with the 1st defendant and some others. It is contended by the 5th defendant that she never deposited certificate of purchase of her property and has not created any equitable mortgage over item No.4 property as alleged by the applicant bank and that she is not liable to pay any amount due to the applicant bank from the 1st defendant.

33. It is the case of the 5th defendant that she had borrowed Rs.50,000/- from one Mr.Kannan through one Mr.Sabu for which the original documents of item No.4 property admeasuring 1 Acre 44 cents in Punnayurkulam Village such as purchase certificate, location certificate, assignment deed No.918/1974 of Andathode SRO etc. were given as security. Thereafter, the said Sabu and Kannan in collusion with the 1st defendant and the then Manager of the applicant bank fraudulently created the documents mentioned in the OA to make undue benefits for them and the applicant bank and that this defendant had never gone to the applicant bank and not signed in any loan papers in favour of the bank.

34. The materials on record would disclose the fact that the 5th defendant filed OS No.482/2009 before the Hon’ble Munsiff Court,

Chavakkad against the applicant bank and the aforesaid Sabu and Kannan and others seeking permanent prohibitory injunction and the aforesaid suit was decreed on 19.10.2013 granting permanent prohibitory injunction against the applicant bank and the aforesaid Sabu and Kannan and restraining them from trespassing the plaint schedule property i.e., item No.4 property in the OA and obstructing the peaceful possession and enjoyment of the plaint schedule property.

35. Challenging the aforesaid judgment and decree dated 19.10.2013 in OS No.482/2009, the applicant bank filed A.S.19/2016 before the Sub-Court, Chavakkad and the said appeal was dismissed with costs as per judgment dated 09.03.2018 by confirming the judgment and decree dated 19.10.2013 in OS No.482/2009 of the learned Sub-Court, Chavakkad. It was observed by the Hon'ble Sub- Court in the aforesaid judgment that while being examined as PW1, the plaintiff/5th defendant herein has given evidence in accordance with the pleadings and she specifically deposed that defendants 1 to 3 (3rd defendant mentioned in the judgment is the applicant bank in the instant OA) with dishonest intention exerted fraud on the 5th defendant and availed the loan. It was also observed in the aforementioned judgment that non-cross examination of PW1 for the 3rd defendant (applicant bank) leads to the inference that the party has virtually admitted the evidence given by PW1 in chief examination; in other words, the evidence of PW1 with regard to fraud stands unrebutted and uncontroverted; if it is so, there is no reason to discard or ignore or disbelieve the evidence of PW1; if the said evidence is believed, the allegation of fraud is to be taken as proved. It could be seen from the aforesaid judgment that though opportunity was granted to cross-examine PW1 and to give defense evidence, such opportunity was not availed by the applicant bank.

36. It is well settled that fraud vitiates everything. "Fraud and justice never dwell together" (fraus et jus nunquam cohabitant) is a pristine maxim, which has never lost its temper over all these centuries. It could be construed from the aforementioned judgment and the other documents produced by the 5th defendant before the Tribunal that fraud has been played on her in the execution of Ext.A33 letter of guarantee dated 05.09.2007 and the creation of mortgage over item No.4 property. Further, the signature appended in Ext.A33 letter of guarantee does not tally with the signatures found in the documents produced by the 5th defendant before the Tribunal.

37. It could be discernible from records that the signature of the 5th defendant found in the statement dated 30.10.1995 filed by the 5th defendant along with others before the Munsiff Court, Chavakkad does tally with the signatures found in the plaint in OS No.482/2009 filed by the 5th defendant before the Munsiff Court, Chavakkad on 18.06.2009, vakalat dated 19.06.2009 filed before the Munsiff Court, Chavakkad in OS No.482/2009, written statement dated 12.03.2010 filed by the 5th defendant in OA No.322/2009, vakalat dated 17.03.2011 filed by the 5th defendant before Munsiff Court in OS No.43/1993, signature verification dated 28.05.2012 issued by Canara Bank, Guruvayoor Branch, Thrissur and the counter proof affidavit dated 31.08.2010 and additional counter proof

affidavits dated 12.01.2016, 29.03.2016, 05.06.2018 and 06.09.2018 filed before the Tribunal in the instant OA.

38. In the light of the above, it could be construed that Ext.A33 letter of guarantee is not executed by the 5th defendant and the said document is a forged one. Furthermore, no evidence has been adduced by the applicant bank to show that defendants 4 and 5 approached the applicant bank during the relevant period and created mortgage over item No.4 property to secure the credit facilities aggregating to Rs.85.38 lakhs extended to the 1st defendant. Ext.A34 memorandum produced by the applicant bank is drawn by the bank itself and there is no letter/memorandum evidencing the deposit of title deed with the applicant bank with the intention to create mortgage is seen executed by defendants 4 and 5; and even the applicant bank has no case that defendants 4 and 5 being the co- owners of item No.4 property had executed any letter/memorandum evidencing the deposit of title deed in favour of the applicant bank.

39. In addition to the above, even though the applicant is claiming that they granted loans to the 1st defendant on the security of item No.4 property and certified copy of purchase certificate No.14459/1977 of Chavakkad SRO was deposited by defendants 4 and 5, no reason has been cited by the applicant bank as to why they had not chosen to obtain the original purchase certificate or the prior title deeds relating to item No.4 property. However, the applicant bank by placing reliance on the judgment dated 22.07.2009 rendered by the Hon’ble High Court of Madras in the case titled Indian Bank vs. M/s.Punjab National Bank submitted that there is no legal embargo for creation of the equitable mortgage by deposit of certified copies of original title deeds. As submitted by defendants 4 and 5, the original documents are with them only; and the 5th defendant has produced the original document Nos.830/1952 and 831/1952 of Ponnani SRO, which are the prior title deeds of purchase certificate No.14459/1977, along with the counter proof affidavit dated 06.09.2018 before the Tribunal. All these would go to show that there is no valid equitable mortgage over item No.4 property to secure the loans granted to the 1st defendant. For the foregoing reasons, the applicant bank is not entitled to get any relief as against defendants 4 and 5 and item No.4 property belonging to them.

40. The records would further reveal that the applicant bank filed RSA No.590/2018 before the Hon’ble High Court of Kerala challenging the judgment and decree passed by the Munsiff Court, Chavakkad in OS No.482/2009 and the judgment passed by the Sub- Court, Chavakkad in A.S.No.19/2016, and an interim stay has been granted by the Hon’ble High Court for a period of three months as per order dated 14.06.2018 in IA No.1676/2018 in R.S.A No.590/2018.

41. It is the further contention of the 5th defendant that the OA is barred by limitation and the same is instituted by an incompetent person and hence the OA is liable to be dismissed in limine.

42. On perusal of records, this Tribunal could find that the 1st defendant executed Exts.A36 and A37 debit balance confirmation letters dated 01.07.2008 acknowledging the liability under the term loan and vehicle loan accounts as on 30.06.2008. In addition to the above, indisputably, the 1st defendant had created equitable mortgage over item No.3 property in favour of the applicant bank on 11.07.2006 to secure the term loan and CCH facility availed by him; the 2nd defendant had created equitable mortgage over item No.1 property in favour of the applicant bank on 27.09.2005 to secure the term loan and CCH facility availed by the 1st defendant and the 3rd defendant had created equitable mortgage over item No.2 property in favour of the applicant bank on 11.10.2005 to secure the term loan and CCH facility availed by the 1st defendant. The OA has been filed within three years from the date of acknowledgment of debt by the 1st defendant and within 12 years from the date of creation of equitable mortgage over item Nos.1 to 3 properties in favour of the applicant bank. In such backdrop, it cannot be heard to contend that the OA is barred by limitation.

43. As far as the contention of the 5th defendant as to the competency of the person who has filed the OA is concerned, the above OA was instituted by the Chief Manager of the applicant bank being the Authorised Officer and Power of Attorney holder and he is competent to file the OA as per the provisions of law. Therefore, there is no merit in the aforesaid contention of the 5th defendant.

44. The evidence adduced by the applicant bank would go to show that the 1st defendant had been granted a term loan of Rs.6.50 lakhs on 16.09.2005 and according to the applicant bank, out of Rs.6.50 lakhs, the 1st defendant had availed only Rs.6.46 lakhs. As security for the aforesaid loan, the 1st defendant executed Ext.A1 demand promissory notice and Ext.A2 term loan agreement in favour of the applicant bank. As collateral security for the aforesaid term loan of Rs.6.50 lakhs, defendants 1, 2 and 3 created equitable mortgage over item Nos.3, 1 and 2 properties respectively mentioned in the OA schedule and the applicant bank has drawn memorandum of deposit of title deeds in this regard. The 1st defendant executed Ext.A36 debit balance confirmation letter dated 01.07.2008 acknowledging his liability under the term loan account as on 30.06.2008.

45. The 1st defendant had availed CCH facility of Rs.8.50 lakhs on 11.11.2005 and the said facility was enhanced to Rs.19 lakhs on 08.03.2006, Rs.25 lakhs on 27.05.2006 and Rs.50 lakhs on 28.09.2006. As security for CCH facility of Rs.8.50 lakhs, the 1st defendant executed Ext.A6 demand promissory notice and Ext.A7 hypothecation agreement in favour of the applicant bank. The defendants 2 and 3 executed Exts.A8 and A9 letters of guarantee for Rs.15 lakhs as security for the term loan of Rs.6.50 lakhs and the CCH facility of Rs.8.50 lakhs. As collateral security, the 3rd defendant had created equitable mortgage over item No.2 property and the applicant bank has drawn Ext.A11 memorandum of deposit of title deed in this regard.

46. While the CCH facility was enhanced to Rs.19 lakhs on 08.08.2006, the 1st defendant executed Ext.A12 demand promissory notice, Ext.A13 letter of continuity and Ext.A14 hypothecation goods agreement in favour of the applicant bank as security for the aforesaid enhanced limit. Further, the 2nd defendant had executed Ext.A15 letter of guarantee for Rs.26 lakhs as security for the term loan and CCH facility granted to the 1st defendant; and that the 2nd defendant had also extended the benefit of mortgage created over item No.1 property by executing Ext.A16 letter of extension of mortgage in favour of the applicant bank as collateral security for the aforesaid limit.

47. On 27.05.2006, the CCH facility was enhanced to Rs.25 lakhs and the 1st defendant executed Ext.A17 demand promissory notice, Ext.A18 letter of continuity and Ext.A19 hypothecation agreement as security for the enhanced CCH limit. Item No.3 property mentioned in the OA schedule has been given as collateral security for the aforementioned limit and Ext.A21 memorandum of deposit of title deed has been drawn by the applicant to that effect. On 28.09.2006, the CCH facility has been further enhanced to Rs.50 lakhs and the 1st defendant executed Ext.A22 demand promissory notice, Ext.A23 letter of continuity and Ext.A24 hypothecation agreement as security for the aforesaid enhanced limit.

48. The records would further reveal that on 04.08.2007, the 1st defendant submitted Ext.A25 letter of request to the applicant bank for a bank guarantee of Rs.25 lakhs for and on behalf of M/s.Vijaya Constructions in favour of M/s.National Small Industries Corporation Ltd. Accordingly, the applicant bank issued a bank guarantee for Rs.25 lakhs and on 07.08.2007 the beneficiary viz., M/s.National Small Industries Corporation Ltd. has invoked Ext.A27 bank guarantee No.ILC 000 1407 issued by the applicant bank. On 09.08.2007, the 1st defendant executed Ext.A26 counter indemnity for the bank guarantee issued to M/s.National Small Industries

Corporation Ltd. by the applicant bank. Ext.A28 is the certified copy of the statement of account relating to the bank guarantee facility.

49. It could be discernible from records that the 1st defendant availed a vehicle loan of Rs.3.92 lakhs from the applicant bank on 03.04.2006 as per Ext.A30 letter of sanction dated 03.04.2006. As security for the vehicle loan, the 1st defendant executed Ext.A29 demand promissory notice and Ext.A31 hypothecation agreement and hypothecated the Ambassador car purchased by him. The 1st defendant executed Ext.A37 debit balance confirmation letter dated 01.07.2008 acknowledging his liability under the vehicle loan as on 30.06.2008.

50. It is the case of the applicant that the 1st defendant was operating current account No.336801010310102 with the applicant bank for his business transaction and he used to draw and overdraw amounts from time to time; and that the 1st defendant is liable for the overdrawn amount as if it is a loan availed by him. As per Ext.A38 statement of account, an amount of Rs.3,44,065/- is due under the current account as on 20.09.2009.

51. It is submitted by the applicant bank that after availing the aforementioned facilities, the defendants did not make proper and regular repayments. Therefore, the applicant through their advocate got issued Ext.A39 lawyer notice dated 28.08.2009 to the defendants calling upon them to pay the amounts due; but even thereafter the defendants did not choose to clear the liability. As per Exts.A28, A38, A43, A44 and A45 statements of accounts maintained by the applicant bank, an amount of Rs.27,81,630/-; Rs.3,44,065/-;

Rs.6,82,949/-; Rs.56,17,603/- and Rs.4,03,426/- is due under bank guarantee facility, current account, term loan account, CCH account and vehicle loan account respectively as on 20.09.2009.

52. The Tribunal during the pendency of the OA had passed an order of attachment on 08.12.2015 vide IA No.2443/2015 over the property scheduled thereto belonging to the 1st defendant. The applicant bank, therefore, is entitled to realise the amount found due by sale of the attached property also.

53. On the showing of the applicant bank itself, as could be seen from para 14 of the OA and para 14 of the proof affidavit of its Chief Manager, AW1, it has debited a sum of Rs.25,525/- and Rs.13,026/- by way of penal interest in the term loan and vehicle loan 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.25,525/- and Rs.13,026/-.

54. Having regard to the amounts advanced, the interest and penal interest applied and the chronic default committed, I am of the view that the applicant bank is entitled to get pendente-lite and post- decree interest @10% per annum with monthly rests on the term loan account, @11.50% per annum with monthly rests on the CCH account, @10% per annum with monthly rests on the vehicle loan account, @16.25% per annum with monthly rests on the bank guarantee account and @15.25% per annum with monthly rests on the current account, as prayed for.

FINAL ORDER

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

(i) the sum of Rs.6,82,949/- (Rupees six lakhs eighty two thousand nine hundred and forty nine only) due under the term loan account with further interest on the sum of Rs.6,57,424/- (Rupees six lakhs fifty seven thousand four hundred and twenty four only) @10% per annum with monthly rests from 21.09.2009 till realization from defendants 1 to 3 jointly and severally and by sale of OA schedule item Nos.1 to 3 properties;

(ii) the sum of Rs.56,17,603/- (Rupees fifty six lakhs seventeen thousand six hundred and three only) due under the CCH account with further interest thereon @11.50% per annum with monthly rests from 21.09.2009 till realization from defendants 1 to 3 jointly and severally and by sale of OA schedule item Nos.1 to 3 properties;

(iii) the sum of Rs.4,03,426/- (Rupees four lakhs three thousand four hundred and twenty six only) due under the vehicle loan account with further interest on the sum of Rs.3,90,400/- (Rupees three lakhs ninety thousand and four hundred only) @10% per annum with monthly rests from 21.09.2009 till realization from the 1st defendant;

(iv) the sum of Rs.27,81,630/- (Rupees twenty seven lakhs eighty one thousand six hundred and thirty only) due under the bank guarantee account with further interest thereon @16.25% per annum with monthly rests from 21.09.2009 till realization from the 1st defendant;

(v) the sum of Rs.3,44,065/- (Rupees three lakhs forty four thousand and sixty five only) due under the current account with further interest thereon @15.25% per annum with monthly rests from 21.09.2009 till realization from the 1st defendant; and

(vi) also its costs from defendants 1 to 3 and by sale of OA schedule item Nos.1 to 3 properties, in proportion to the amounts ordered to be recovered from them.

(vii) If the sale proceeds of OA schedule item Nos.1 to 3 properties are insufficient to satisfy the debt found due under this final order, the applicant bank is entitled to proceed against the property attached under IA No.2443/2015.

56. The schedule to the OA and schedule of property attached under IA No.2443/2015 shall be appended to this order.

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

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

59. 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 19th day of November, 2018]

(S.V.GOWRAMMA)

Presiding Officer

A P P E N D I X Witness for Applicant: AW1: C.A.Abraham, Chief Manager and Power of Attorney holder of the applicant bank. AW2: Johnson David, Senior Manager and Principal Officer of the applicant bank.

Witness for Defendant(s):

DW1: Sachidanandan (D4)

DW2: Parameswari Amma (D5)

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 16.09.2005 Demand promissory notice for Rs.6.50 lakhs executed by the 1st defendant in favour of the applicant bank. A2 16.09.2005 Term loan agreement executed by the 1st defendant in favour of the applicant bank. A3 12.05.1998 Sale deed No.1585/1998 of Alappuzha SRO. A4 10.06.1998 Sale deed No.2070/1998 of Alappuzha SRO. A5 27.09.2005 Memorandum of deposit of title deed drawn by the applicant bank. A6 11.11.2005 Demand promissory notice for Rs.8.50 lakhs executed by the 1st defendant in favour of the applicant bank. A7 11.11.2005 Hypothecation goods agreement executed by the 1st defendant in favour of the applicant bank. A8 11.11.2005 Letter of guarantee for Rs.15 lakhs executed by the 2nd defendant in favour of the applicant bank. A9 11.11.2005 Letter of guarantee for Rs.15 lakhs executed by the 3rd defendant in favour of the applicant bank. A10 20.11.1986 Sale deed No.3700/1986 of Alappuzha SRO. A11 11.10.2005 Memorandum of deposit of title deeds drawn by the applicant bank. A12 08.03.2006 Demand promissory notice for Rs.19 lakhs executed by the 1st defendant in favour of the applicant bank. A13 08.03.2006 Letter of continuity executed by the 1st defendant in favour of the applicant bank. A14 08.03.2006 Hypothecation goods agreement executed by the 1st defendant in favour of the applicant bank. A15 08.03.2006 Letter of guarantee executed by the 2nd defendant in favour of the applicant bank. A16 08.03.2006 Letter of extension of mortgage executed by the 2nd defendant. A17 27.05.2006 Demand promissory notice for Rs.25 lakhs executed by the 1st defendant in favour of the applicant bank. A18 27.05.2006 Letter of continuity executed by the 1st defendant in favour of the applicant bank. A19 27.05.2006 Hypothecation goods agreement executed by the 1st defendant in favour of the applicant bank. A20 08.05.2006 Sale deed No.2397/2006 of Alappuzha SRO. A21 11.07.2006 Memorandum of deposit of title deed drawn by the applicant bank. A22 28.09.2006 Demand promissory notice for Rs.50 lakhs executed by the 1st defendant in favour of the applicant bank. A23 28.09.2006 Letter of continuity executed by the 1st defendant in favour of the applicant bank. A24 28.09.2006 Hypothecation goods agreement executed by the 1st defendant in favour of the applicant bank. A25 04.08.2007 Letter of request given by the 1st defendant for the bank guarantee. A26 09.08.2007 Counter indemnity executed by the 1st defendant in favour of the applicant bank. A27 07.08.2007 Bank guarantee No.ILC 000 1407 issued by the applicant bank and invoked by the beneficiary. A28 15.09.2009 Statement of account relating to the bank guarantee facility. A29 03.04.2006 Demand promissory notice for Rs.3.92 lakhs executed by the 1st defendant in favour of the applicant bank. A30 03.04.2006 Letter of sanction issued by the applicant bank sanctioning term loan of Rs.3.92 lakhs to the 1st defendant. A31 03.04.2006 Hypothecation of vehicles agreement executed by the 1st defendant in favour of the applicant bank. A32 05.09.2007 Letter of guarantee for Rs.85.38 lakhs. A33 05.09.2007 Letter of guarantee for Rs.85.38 lakhs.

A34 02.03.1977 Certified copy of purchase certificate No.14459/1977. A35 06.09.2007 Memorandum of deposit of title deed drawn by the applicant bank. A36 01.07.2008 Debit balance confirmation letter executed by the 1st defendant. A37 01.07.2008 Debit balance confirmation letter executed by the 1st defendant. A38 … Certified copy of the statement of account relating to the current account. A39 28.08.2009 Copy of lawyer notice issued to the defendants by the applicant. A40 31.08.2009 Postal receipts evidencing the issuance of Ext.A39 lawyer notice. A41(a) to (c) … Acknowledgment cards signed by defendants 3 to 5. A42 08.09.2009 Reply to Ext.A39 lawyer notice sent by the 5th defendant. A43 … Certified copy of the statement of account relating to the term loan. A44 … Certified copy of the statement of account relating to the CCH facility. A45 … Certified copy of the statement of account relating to the vehicle loan. A46 14.06.2018 Copy of order passed by Hon’ble High Court of Kerala in IA.No.1676/2018 in RSA.No.590/2018. A47 22.01.2013 Copy of judgement passed by Addl.Sub Court, Thrissur in OS.No.1667/2010. A48 07.06.2018 Copy of judgement in C.C.No.590/2010 passed by Judicial First Class Magistrate Court, Kunnamkulam.

Exhibits on the part of the 4th defendant Ext.No. Date Particulars of documents D4 (1) 08.08.2008 Notice sent by the authrized officer to the 4th defendant. D4 (2) 20.10.2008 True copy of the reply notice caused to issue by the 4th defendant to the authorized officer with copy of the postal receipt and acknowledgement. D4 (3) 23.09.2009 True copy of the reply notice to Annexure A39 notice with postal receipt and acknowledgement card. D4 (4) 21.03.2009 FIR No.119/2009 of Vadakkekad Police

Station. D4 (5) 22.04.2016 Election card issued by election commission of India in the name of 4th defendant. D4 (6) 10.08.2003 Identity card for persons with disabilities issued by District Social Welfare Officer, Thrissur. D4 (7) 22.08.1998 Identity card issued by election commission of India. D4 (8) 07.08.2002 Medical Certificate issued from Medical College, Thrissur for disabled persons.

Exhibits on the part of the 5th defendant Ext.No. Date Particulars of documents D5(a) 14.06.2010 Certified copy of the order in MP.No.770/2009 taking cognizance against the applicant bank’s manager and others as CC.No.590/2010 by the Hon’ble JFCM Court, Kunnamkulam. D5(b) 18.12.2009 Certified copy of the criminal complaint MP.No.770/2009 filed by D5 before the Hon’ble JFCM Court, Kunnamkulam and its equivalent English transaction. D5(c) 19.06.2009 Certified copy of the plaint in OS.No.482/2009 and its English Transaction. D5(d) 19.06.2009 Certified copy of temporary injunction petition in the above case with its order and its English Transaction. D5(e) 02.04.2009 Certified copy of the FIR registered by the Guruvayur Police (FIR.No.236) against the applicant bank’s Manager and others in a complaint filed by one Mr.Balakrishnan and its English Transaction. D5(f) 19.01.2010 Certified copy of the report filed by the police in the above case and its English Transaction. D5(g) 05.01.2009 Certified copy of plaint (OS.No.16/2009) filed by the said Balakrishnan against the Manager of applicant bank and others and its English Transaction. D5(h) 05.01.2009 Certified copy of the temporary injunction order in the above case. D5(i) … Certified copy of the vakalath in OS.No.43/1993 Munsiff Court, Chavakkad filed by the 5th respondent along with its English Transaction. D5(j) … Certified copy of the vakalath in OS.No.482/2009 Munsiff Court, Chavakkad

filed by the 5th respondent along with its English Transaction. D5(k) 19.10.2013 Certified copy of the judgment in OS.No.482/2009 passed by the Munsiff Court, Chavakkad. D5(l) … Certified copy of the statement given by the finger print expert Sri.Prasad of FRB, Thrissur before the SI of Police during the course of investigation of crime No.119/2009 relating to the present transaction with the applicant bank. D5(m) …

Certified copy of the statement given by the Senior Manager of the applicant bank Sri.I.K.Venugopal before the SI of Police during the course of investigation of Crime No.119/2009 relating to the present transaction with the applicant bank, confessing about the fraudulent creation of the documents Annexure 33 to 35. D5(n) 30.10.1995 Certified copy of the joint statement filed by Parameswari Amma and others in OS.No.43/1993 before the Munsiff Court, Chavakkad. D5(o) 28.05.2012 Photocopy of signature verification issued by Canara Bank to HDFC bank Ltd. D5(p) 20.06.1995 Pass book issued by the Canara Bank to 5th defendant. D5(q) 11.12.2013 Certified copy of PW8 (Hari Sankar) in CC.590/2010 of the JFMC, Kunnamkulam. D5(r) 09.03.2018 Judgment passed by the Hon’ble Sub Court, Chavakkad in AS.No.19/2016. D5(s) 09.03.2018 Decree passed by the Hon’ble Sub Court, Chavakkad in AS.No.19/2016.

(PRESIDING OFFICER)

[PRESIDING OFFICER]

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 19th day of November, 2018

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

TA No.17/2016 (OA No.322/2009) Between Union Bank of India

…Applicant And P.Shyam alias Syamraj & 4 others. …Defendants

FINAL ORDER