UNION BANK OF INDIA vs M/S.VASAN HEALTH CARE PVT LTD on 7 March 2024

: - O R D E R - :

This is an OA filed under Section 19 of the RDB Act, 1993 by M/s. Andhra Bank in OA No.405/2017 before the DRT-II, Chennai for recovery of a sum of Rs.151,81,32,700.50p along with interest against three defendants. The Applicant Andhra Bank merged with Union Bank of India and substituted as per the orders of the Tribunal. During the pendency the 2nd Defendant expired and his legal heirs are substituted which included the Defendant No.3 being the widow of Defendant No.2. The OA is transferred to this Tribunal consequent to the notification of DFS dated 04.10.2022. Thereafter the matter proceeded before this Tribunal which is renumbered as TA No.36 of 2022.

FACTS OF THE CASE:-

1.0 The Applicant Bank pleads that the 1st Defendant being a private limited company engaged in the business of providing eye care and other health care services with several branches all over India, approached the Bank for grant of Term Loan facility for its business purposes. The Applicant Bank had sanctioned `Rupee Term Loan’ credit facility of Rs. 125.00 crores vide sanction letter No.0848/1/1603 dated 13-2-2014.

1.1 As per sanction terms the said term loan is repayable in 24 equal quarterly installments after a moratorium period of 1 year from the date of first disbursement and together with interest @13.50 % (floating) p.a. on monthly rests. Further, the loan was sanctioned against exclusive charge on assets created out of the Term Loan at various 37 proposed locations of Eye Care Hospitals allocated to the Applicant Bank and also Lien on Escrow account to be opened for collection of 37 branches of the 1st Defendant Company. Accordingly, all the Defendants 1 to 3 have executed necessary loan documents on 17-02-2014 such as Composite Agreement, CIBIL consent letter, General Form of Guarantee, etc. The sanctioned loan amount was credited to the Loan Account No. 084830100003712 in the name of the 1st Defendant on 19-02-2014. When the said loan balance becoming overdue, the Defendants have agreed to pay `overdue/additional’ interest @2% in addition to the contractual rate of interest.

1.2 The Applicant Bank states that the Defendants 1 to 3 has committed default in repayment of the dues, the loan account bearing No.084830100003712 has become out of order and the loan account has been classified as Non Performing Asset (NPA) on 17-11-2015 in the books of Applicant Bank’s Mount Road Branch as per the existing guidelines.

1.3 The Applicant Bank issued a legal notice on 27-01-2017 to all the Defendants calling upon the Defendants 1 to 3 to pay the amount due as on 20-12-2016. All the Defendants have received and acknowledged the said legal notice. The 1st Defendant through its Chairman & Managing Director, (who is the 2ndDefendant), had sent a reply dated NIL (received on 21-02-2017) requesting the Applicant Bank to withdraw the legal notice. The said reply notice was examined. Suitable rejoinder notice dated 08.03.2017 was issued by the Bank.

1.4 The Applicant Bank further submits that the rate of interest applicable for the above loan transaction at the time of sanction was 13.50% (floating) p.a. with monthly rests. The Applicant Bank submits that a sum of Rs.151,81,32,700.50 is due and payable as on 18-02-2017 by all the Defendants jointly and severally to the Applicant Bank. The Defendants 2 & 3 are the guarantors to the loan transaction of the borrower Defendant No.1.

CASE OF THE DEFENDANTS:-

2.0 Upon filing of the OA, notices were issued by the Ld. Predecessor and one counsel appeared on 20.10.2017 for all the defendants undertaking to file the written statement. Later on the next date Defendants 2 & 3 unrepresented, thereafter they were represented by the Ld. Counsel.

2.1 On 08.01.2018 the applicant bank intimated that the Ld. NCLT had granted moratorium to proceed against the Defendant No.1 Company.

2.2 It is seen from the record that all the Defendants have filed their written statement jointly on 01.11.2018. The gist of the written statement is that the allegations made in the OA are false and incorrect and that the OA is barred under limitation. They also submit that there is no cause of action to file the OA and the account statement filed by the applicant bank is wrong and is prepared only as tailor made to file the OA. The same is not maintained in the ordinary course of business banking. The statement of accounts have not been properly certified and signed under the Bankers Book Evidence Act. The same cannot be read in evidence. The breakup of the balance shown in the account statement is incorrect.

2.3 It is also their case that the 1st Defendant is a reputed Company with 200 Eye Care Hospitals and Dental Clinics spread across 120 cities in 19 states with a cliental base of six million patients support by huge medical and non medical staff. The Defendants admit that the applicant bank is a creditor and quantum of money claimed is correct.

2.4 It is submitted on behalf of the 2nd Defendant that due to inadvertent reasons certain payments could not be made and the same was communicated. The applicant bank is aware of the financial position and the situation where many creditors have filed petitions for winding up of the Company. The Defendants also participated in the JLF.

2.5 The Defendants have identified prospective investors / purchasers and it may take some time to settle the issues. On the other hand it is also their case that OA is full of vague allegations and suppression of facts. The Defendants prays for dismissal of the OA.

SEQUENCE OF EVENTS DURING THE PENDENCY OF THE CASE:- 3.0 While the OA was pending, the Defendant No.2 is reported dead on

26.03.2021 and my Ld. Predecessor by an order dated 26.09.2022 had allowed the IA No.1754/2022 condoning the delay of 296 days in filing IA Dy.No.887/2021( to bring the LRs on record). This Tribunal by an order dated 21.02.2023 allowed the LRs of Defendant No.2, to be brought on record, which included the Defendant No.3 also (in IA No.3/2023). Thereafter, the LRs who were substituted later have also filed their version.

4.0 The version of the subsequently added Defendants 2(a) to 2(c) succeeding the deceased the Defendant No.2 is that they had no transaction whatsoever with the bank and that of Defendant No.1. It is also submitted in view of the CIRP Proceedings initiated against the 1st Defendant Company, the liability does not bind them. It is further pleaded that these Defendants are unable to take over the estate of deceased D2 in view of the encumbrance subsisting on the properties belong to the Defendant No.2. They elaborated 24 properties all belonging to the 2nd Defendant, which were encumbered with different financial institutions. It is also submitted that there is an order passed by the Income Tax Department attaching these properties and therefore the Defendants have not succeeded to the estate of Defendant No.2 and the claim against them be dismissed. However, it is also pleaded that they adopt the written statement filed earlier by Defendants 1 to 3.

4.1 It is also pointed out that without prejudice to the above, these Defendants submit that a Resolution Plan, including settlement of Financial Creditors have been approved by the Hon’ble NCLT-1, Chennai as on 03.02.2023 in IA (IBC)/288 (CHE)/2022 in CA/1/IB/2017. Hence, nothing survives for the Applicant to prosecute herein when the alleged Debt has been settled. The Order copy of the Hon’ble NCLT-1, Chennai dated 03.02.2023 is enclosed. Moreover, since the 1st Defendant (Corporate Debtor before the NCLT) – Principal Borrower has been settled and discharged, nothing survives against the alleged Guarantors, much less against the

Legal Heirs of the Defendant No.2.

EVIDENCE ON RECORD:-

5.0 It is seen from the Order Sheet that on 05.09.2018, the applicant has filed the affidavit along with the documents at Exh.A1 to A21 and the same were verified and marked. The Ld. Predecessor had kept the matter for exparte arguments by an order dated 01.11.2018, thereafter the written statement was allowed to be filed and CPA (Defendant’s evidence) was allowed to be filed. Since the same was not filed, the opportunity was closed on 05.04.2019. Thereafter the merger of the Andhra Bank was reported and the present Applicant Bank is allowed to be substituted. On 22.07.2021, the LRs of Defendant No.2 were ordered to be substituted. It is also seen that the CIRP Proceedings before the NCLT is reported to the Ld. Predecessor on 21.06.2022.

5.1 It is also reported by the applicant bank during the pendency of proceedings that the Ld. NCLT on 03.03.2023 had passed an Order approving the resolution plan. According to the resolution plan, this applicant had received a sum of Rs.41,39,92,555.88p and the balance recoverable stood at Rs.281,41,97,841.13p as on 30.06.2023. The relief against Defendant No.1 is thus not pressed.

5.2 There is no evidence on the part of the Defendants.

ARGUMENTS:-

6.0 The matter is heard. The Ld. Counsel appearing for the applicant bank had furnished the written arguments also. The same is perused. It is also pointed out in the written argument that the case of the applicant is proved with the evidence if AW1 and the documents marked are highlighted to prove the transaction the

agreements of loan and the terms and conditions thereof. The statement of accounts is relied to establish the dues against the Defendants.

6.1 None argued for the Defendants.

POINTS FOR DETERMINATION:-

7.0 With the above available material on record the only point that arises for determination in the above OA is:- “Whether the applicant bank is eligible for the Recovery Certificate? If so to what amount? And against whom?

ANSWERS FOR THE POINT FOR DETERMINATION:- 8.0 It is needless to say that the Defendants 1 to 3 have clearly admitted the transaction and the liabilities. At Paragraph 10 of the written statement, it is only stated that money claimed by the applicant bank is incorrect and the account statement do not reveal the correct entries. The amount is disputed. In this context, the evidence of AW1 that is Shri.V.Gurusubramaniam AGM is perused. The same is at Exh.A21. The entries are from 18.02.2014 concerning the account statement pertaining to Defendant No.1 Company. The effective balance recoverable at Page – 72 of the Proof Affidavit and the same is consistent with the claim made in the OA. There is a separate certificate annexed to the statement of accounts. After going through the lengthy certificate, the same is found to be in accordance with the IT Act and the Evidence Act, which suffices to believe the correctness of the entries. There is no evidence on behalf of the Defendants to demolish the say of AW1 (Official of the Andhra Bank). Therefore, the say of AW1 goes unrebutted. This Tribunal has also perused the other documents which are filed in original. Suffice it to say that the perusal of the documentary evidence goes to establish the claim of the applicant bank as pleaded in the OA is due from the Defendant No.1 Company.

8.1 However, this Tribunal cannot be oblivious to the subsequent developments. It is pointed out by the Ld. Counsel for the applicant in the written arguments that the applicant had realized an amount of Rs.41,39,92,555.88p. It is also pointed out in the affidavit filed by Shri.M.L.R.Sreekanth, AGM of Union Bank of India that a sum of Rs.1,85,00,000/- is also received from E-CB (now merged with Union Bank of India) from the surplus proceeds of sale of e-auction of the property offered as security to E-CB. However in the said affidavit dated 27.05.2023, the amount due remains at Rs.281,41,97,841.13p.

8.2 Since the applicant bank is not pressing any relief against the Defendant No.1 Company consequent to the part realizations under the resolution plan approved, no order of recovery can be passed against the Defendant No.1 Company. In the written arguments filed by the applicant bank it is stated that “hence the applicant bank is entitled to recover the remaining balance amount of Rs.281,41,97,841.13p (Two Eighty one Crores, Forty One Lakhs Ninety Seven Thousand Eight Hundred and Forty One and Paise Thirteen Only) from the Defendants 2(a) to 2(c) and 3 as per applicable law in this regard.

8.3 As far as the liability of LRs of Defendant No.2 is concerned, this Tribunal has perused Exh.A7, which is the General Form of Guarantee. The recitals at Para – 3 of the Exh.A7 assumes significance to find out whether the guarantors under Exh.A7 includes their Legal Heirs and survivors and whether such document binds the legal heirs. The relevant portion of Para-3 is as under:- “The Guarantee shall continue in force notwithstanding the discharge of the principal by operation of law or my death of the death of any one of us and shall cease only on payment of the amount guaranteed hereunder either by me or any one of us.”

These terms executed voluntarily by Defendants 2 & 3 as guarantors of Defendant No.1 - the Principal borrower binds the legal representative of Defendant No.2 which also includes the Defendant No.3. The right to sue survives against the LRs of such guarantors. Therefore, the liability of LRs of Defendant No.2 to discharge the debt in favour of the bank survives to the extent of their inheritance to the estate of the deceased Defendant No.2, which includes Defendant No.3 also.

8.4 It is also pertinent to note that Defendant No.3 herself stood as guarantee to the loan transaction availed by Defendant No.1. Therefore her liability to pay the debt cannot be effaced out in to-to and further as one of the LRs of D2.

8.5 Though the subsequent developments were brought to the notice regarding the part realization of the debt as noted above, the same is to be properly accounted for as regards the rate of interest to be awarded by this Tribunal, which is being done for the period of lis-pendens. Therefore, the amounts of due submitted under the written synopsis of the applicant cannot be decreed directly. While awarding the interest during pendency of the litigation before this Tribunal, it is to be noted that the matter was pending before the Ld. NCLT concerning the Defendant No.2 as intimated on 08.01.2018 to the Ld. Predecessor. The matter was fixed for the exparte arguments by 03.12.2018 and thereafter, an opportunity was granted to the Defendants to file CPA. The Covid period ensued and there was not much progress. Thereafter the merger has taken place concerning the original applicant and the order substituting the present applicant was made on 02.03.20201. In the meantime, the applicant had taken time to bring the LRs of D2 who expired, and the delay of 296 days in filing the IA was condoned by the Ld. Predecessor on 26.09.2022. Thereafter by the notification of DFS dated 04.10.2022, the matter is transferred to this Tribunal which allowed IA No.3/2023 to bring the LRs on record, by an order dated 21.02.2023. The period consumed for the disposal of the case and the progression of the case if taken note of and the time taken to the fruition of the litigation cannot be attributed to the Defendants. For the above reasons, this Tribunal finds it justified to award the interest lis-pendens at the rate of 9% p.a. from the date of registration of the OA till the date of award and at the rate of 6% p.a. till the date of realization on such sum.

8.6 However the Ld. Counsel appearing for the applicant bank submits that the guarantors have not offered any securities in support of the guarantee deed except in their personal capacity. Therefore after considering the entire gamut of events, the evidence on record both affidavit and the documentary evidence, this Tribunal is of the considered opinion that the applicant had proved their rights of recovery to the amount pending due and consequently the following

: - O R D E R - :

A) The OA is allowed with costs. B) The Defendant No.3 is hereby ordered to pay to the Applicant the sum of Rs.151,81,32,700.50 (Rupees One Hundred Fifty One Crore Eighty One Lacs

Thirty Two Thousand Seven Hundred and Paise Fifty Only) along with interest at the rate of 9% p.a. from the date of registration of the OA (26.08.2017) till this date and thereafter at the rate of 6% p.a. on the sums falling due till the date of realization. The Defendant No.3 is personally liable being the guarantor and also as one of the LRs of D2.

C) It is further hereby ordered that the bank would be at liberty to recover the aforesaid amount from Defendant No.3 personally and also by proceeding against the LRs of D2, who are Defendants 2(a) to 2(c) and D3 to the extent of each of them succeeding to the personal estate of the Late Defendant No.2. D) It is also ordered that any other amount remitted or realized, if any, during the course of the proceedings, shall be adjusted towards the loan account. F) The Defendants 2(a) to 2(c) are liable only to the extent of their respective shares of succession to the estate of deceased D2 if any. G) No relief is claimed against Defendant No.1 in the circumstances that the applicant bank is not pressing any remedy against D1 Company as submitted in the written arguments. 8.0 The applicant bank is directed to file costs memo within two weeks of the receipt of this order.

9.0 Issue recovery certificate in favour of the applicant bank in terms of this final order if the proper memo of calculations regarding the outstanding dues pursuant to this order with the statement of accounts is furnished. Such statement of accounts and the memo of calculations properly signed by the AR of the bank be filed within 15 days on receipt of this order.

10.0 Communicate a copy of this order to the parties concerned as per Rules.

Sd/-

(A.S.JAYACHANDRA)

PRESIDING OFFICER

DRT-I, CHENNAI

(Dictated to PS on the system corrected, signed and pronounced by me on this 7th day of March, 2024)