CANARA BANK vs THANKAMANI on 21 June 2017

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 recovery of an aggregate sum of Rs.13,86,752/- with further interest on the sum of Rs.7,27,423/- @16.25% per annum with monthly rests being the amount due under the machinery loan account and @14.25% per annum with monthly rests on the sum of Rs.6,59,329/- being the amount due under the OCC account from the defendants jointly and severally and by sale of the OA schedule property. BRIEF FACTS OF THE CASE

1. The 1st defendant as borrower and the 2nd defendant as guarantor submitted an application for financial assistance for setting up a unit for production of ayurvedic medicines under the name and style ‘Thangam Products’ on 03.10.2007. The applicant bank sanctioned medium term loan of Rs.4.50 lakhs and working capital limit of Rs.4 lakhs on 11.03.2008. In consideration of the applicant bank having granted the above financial assistance, the defendants executed security documents on 11.03.2008. As collateral security for the aforesaid facilities, the 1st defendant created mortgage of her property scheduled in the OA in favour of the applicant bank by deposit of title deeds with the applicant bank’s branch at Karunagappally. The 1st defendant executed letter evidencing deposit of title deed on 28.02.2008. The defendants acknowledged the debt and security on 05.03.2010 with respect to both the loan accounts.

2. After availing the credit facilities, the defendants have committed breach of the agreed terms and conditions in repayment of the dues. Hence the applicant caused to issue a demand notice to the defendants on 21.06.2011, but they have not liquidated the dues. As per the accounts kept by the applicant bank, an amount of Rs.6,91,957/- is due under the medium term loan as on 12.07.2011. The interest and other charges accrued from 13.07.2011 to 03.11.2011 in the term loan account would come to Rs.36,907/-. Total penal interest levied in the term loan account is Rs.9,612/- and the capitalization effect is Rs.1,441/-, which has been deducted from the claim amount. As per the account kept by the applicant bank, an amount of Rs.6,25,694/- is due under the OCC account as on 30.06.2011. The interest and other charges accrued from 01.07.2011 to 03.11.2011 in the OCC account would come to Rs.33,635/-. It is stated that the applicant has not levied penal interest in the OCC account.

3. The 1st defendant filed written statement contending inter alia that the OA is barred by limitation. The declaration of NPA is not in accordance with the circular issued by RBI. There is no valid mortgage as alleged in the OA and the 1st defendant has not executed a letter evidencing deposit of title deed on 28.02.2008. The acknowledgment as seen in Exts.A9 and A10 is not correct and hence its execution is denied. The account maintained by the bank is not proper and the averment to the effect that an amount of Rs.6,91,957/- is due as on 12.07.2011 is incorrect and hence denied. The capitalization of interest in the account is not permissible and it is against the dictum laid down by the Hon’ble Apex Court in the decision in Central Bank of India vs. Ravindra. The entry of Rs.4,699/- as on 31.07.2010 towards debit interest capitalized is not permissible. The applicant bank has capitalized interest in the account from 30.09.2010 to 30.06.2011, which is not permissible. This defendant has not agreed for any rate of interest and even in Exts.A1 and A3, there is no mention as regards the rate of interest. It is contended that the applicant is not entitled for any reliefs claimed in the OA and it is prayed to dismiss the same with costs.

4. The 2nd defendant was duly served with summons. But he neither appeared nor was he represented and thus the 2nd defendant was set exparte as early on 19.07.2013.

5. The evidence on the side of the applicant bank consists of the proof affidavit of its Senior Manager, AW1 and Exts.A1 to A15. The 1st defendant as DW1 filed counter proof affidavit reiterating the averments made by her in the written statement, but no evidence has been adduced on her side.

6. Heard arguments of the applicant bank and the 1st defendant 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:

7. The primary contention raised by the applicant is that the OA is barred by limitation and therefore it is liable to be dismissed. A perusal of the loan documents would reveal that the 1st defendant had executed Ext.A9 and Ext.A10 acknowledgments of debt and security on 05.03.2010 acknowledging the liability under the machinery loan account and OCC account respectively. The OA was filed within three years from 05.03.2010 i.e., on 04.11.2011. It could be further inferred that sale deed No.1755/2007 dated 26.06.2007 of SRO, Karunagappally and sale deed No.2081/2007 dated 03.08.2007 of SRO, Karunagappally were deposited with the applicant bank on 27.02.2008 with intent to create equitable mortgage over the properties belonging to the 1st defendant and that the 1st defendant had executed letter dated 28.02.2008 confirming the deposit of title deeds with the applicant bank on 27.02.2008. In such backdrop, it can be construed that the OA was filed well within the period of limitation prescribed under the Act and there is no merit in the aforesaid contention of the 1st defendant.

8. Another contention raised by the 1st defendant is that declaration of NPA is not in accordance with the circular issued by RBI and that the account maintained by the bank is not proper and the amount shown as outstanding is incorrect. A perusal of the statement of account would throw light on the fact that after availing the credit facilities on 11.03.2008, the defendants have not remitted even a single paise towards the loan accounts. Moreover, the 1st defendant could not adduce any evidence to buttress her aforesaid contentions. Therefore, the contentions raised supra do not hold water.

9. Yet another contention raised by the 1st defendant is that there is no valid mortgage as alleged in the OA and at the time of advancing the loans, the applicant bank had obtained several signed blank papers and the bank would have forged such documents in order to contend that a valid mortgage is created. It is the further contention of the 1st defendant that she has not executed a letter evidencing deposit of title deed on 28.02.2008. Nonetheless, the materials available on record would prove the contra. No prudent man will sign and issue blank papers to anyone. Moreover, no one can believe that any banker will release huge loans without getting necessary security documents executed from the borrowers and the guarantors. It becomes obvious that once it is pleaded and proved by the bank that security documents have been signed by the defendants on receiving the loans, the presumption would arise and the same has to be rebutted by the defendants. Even this rebuttal could be given by direct evidence or by bringing on record the preponderance of probabilities also. In the instant case, the presumption has not been rebutted by the 1st defendant even by the preponderance of probabilities. In the above backdrop, the contentions raised by the 1st defendant do not deserve any consideration of the Tribunal.

10. The 1st defendant had also contended that capitalization of interest in the loan account is not permissible and it is against the dictum laid down by the Hon’ble Apex Court in the case titled Central Bank of India vs. Ravindra. It could be discernible from the documents on record that the applicant bank has charged penal interest of Rs.9,612/- in the medium term loan account and its capitalized effect would come to Rs.1,441/-. However, obviously the said sum of Rs.1,441/- has been deducted from the OA claim amount. It is assertively submitted by the applicant bank that it has not levied any penal interest in the OCC account and that the description shown as ‘debit interest capitalized’ in the OCC account from 31.07.2010 to 30.06.2011 would only mean that normal interest accrued in the said account has been added to the outstanding amount and not otherwise. The statement of account in respect of the OCC facility would substantiate the aforesaid submission of the applicant bank and contentions to the contra are unsustainable.

11. It is also contended by the 1st defendant that he has not agreed for any rate of interest and even in Ext.A1 deed of hypothecation and A3 demand promissory notice, there is no mention as regards the rate of interest. The Tribunal had gone through Exts.A1 and A3 and it is found that at clause 4 of Ext.A1 executed by the 1st defendant, the rate of interest is mentioned as 14.25% per annum with monthly rests and at clause 10 therein, it is mentioned that in the event of default in repayment of any one installment, the borrower shall be liable to pay overdue interest @2% per annum over and above the rate of interest charged on the advance from the date of such default till regularizing or clearing the account in full, as the case may be. On perusal of Ext.A3, it could be seen that the 1st defendant had agreed to pay interest @13% per annum with monthly rests or at such rates as may be revised by the bank from time to time. In the above circumstance, the 1st defendant cannot contend that he has not agreed for any rate of interest in the credit facilities availed by her.

12. The case of the applicant bank regarding recovery of the sum of Rs.7,27,423/- claimed as due under Exts.A11 and A12 statements of account relating to the term loan as on 03.11.2011 together with pendente lite and post decree interest on the sum of Rs.7,17,811/- from the defendants jointly and severally and by sale of the OA schedule property; and the sum of Rs.6,59,329/- claimed

as due under Exts.A13 and A14 statements of account relating to the OCC facility as on 03.11.2011 together with pendente lite and post decree interest from the defendants jointly and severally and by sale of the OA schedule property, is proved by the proof affidavit of its Senior Manager, AW1 and Exts.A1 to A15.

13. 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 interest pendente-lite and post-decree interest @14.25% per annum with monthly rests in both the loan accounts.

ORDER

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

(i) the sum of Rs.7,27,423/- (Rupees seven lakhs twenty seven thousand four hundred and twenty three only) due under the term loan account with further interest on the sum of Rs.7,17,811/- (Rupees seven lakhs seventeen thousand eight hundred and eleven only) @14.25% per annum with monthly rests from 04.11.2011 till realization from the defendants jointly and severally and by sale of the OA schedule property;

(ii) the sum of Rs.6,59,329/- (Rupees six lakhs fifty nine thousand three hundred and twenty nine only) due under the OCC account with further interest thereon @14.25% per annum with monthly rests from 04.11.2011 till realization from the defendants jointly and severally and by sale of the OA schedule property; and

(iii) also its costs from the defendants jointly and severally and by sale of OA schedule property.

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

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

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

18. 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 21st day of June, 2017]

(S.V.GOWRAMMA)

Presiding Officer

A P P E N D I X

Witness for Applicant: AW1: G.Nandakumar, Senior Manager of the applicant bank. Witness for Defendant(s):

DW1: Thankamony @ Vijaya (1st defendant)

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 11.03.2008 Deed of hypothecation regarding machinery executed by the 1st defendant in favour of the applicant bank. A2 11.03.2008 Cash credit agreement executed by the 1st defendant in favour of the applicant bank. A3 11.03.2008 Demand promissory notice for Rs.4 lakhs executed by the 1st defendant in favour of the applicant bank. A4 11.03.2008 Guarantee agreement for Rs.8.50 lakhs executed by the 2nd defendant in favour of the applicant bank. A5 11.03.2008 Guarantee covering letter executed by the 2nd defendant in favour of the applicant bank. A6

26.06.2007 Sale deed No.1755/2007 of Karunagappally SRO. A7

03.08.2007 Sale deed No.2081/2007 of Karunagappally SRO. A8

28.02.2008 Letter evidencing deposit of title deed executed by the 1st defendant in favour of the applicant bank. A9

05.03.2010 Acknowledgment of debt and liability executed by the 1st defendant acknowledging the liability under the machinery loan account. A10 05.03.2010 Acknowledgment of debt and liability executed by the 1st defendant acknowledging the liability under the OCC account. A11 … Certified copy of the statement of account relating to the machinery loan/term loan. A12 … Statement showing the penal interest and accrued unapplied interest and other charges under the machinery loan/term loan account. A13 … Certified copy of the statement of account relating to the OCC limit.

A14 … Statement showing the accrued unapplied interest and other charges under the OCC account. A15 … Statement showing the rate of interest applied in both the loan accounts from time to time.

Defendants’ Exhibits – Nil

(PRESIDING OFFICER)

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 17th day of June, 2017

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

T.A No.127/2016 (O.A No.457/2011) Between Canara Bank

…Applicant And Thankamony @Vijaya & another. …Defendants

FINAL ORDER