CANARA BANK vs Ms STV Digital Cable Ads Videos and Photos on 18 February 2021

FINAL ORDER

1. This application is filed by the applicant bank under Section 19(1) of Recovery of Debts due and Bankruptcy Act, 1993 (formerly Recovery of Debts Due to Banks and Financial Institutions Act, 1993) against the defendants for recovery of a sum of Rs.21,96,483/- together with interest thereon @10.65% p.a. together with penal interest @2% monthly rests under the MSE-Services Term Loan facility from the date of the OA till the date of realization in full along with costs of this application.

2. Brief facts of the Applicants case is as follows:- The Applicant Bank submits that the first defendant is represented by its partners namely the defendants 2 and 3, to run their business operations, approached the bank for purchasing video equipments. The Applicant Bank considered the same and sanctioned MSME Term Loan to the tune of Rs.19,50,000/- on 20.02.2015 as against the primary security of hypothecation of assets created out of loan proceeds and the first defendant has agreed in principle to repay the loan in sixty EMI's without fail commencing from March, 2015 and collateral security of immovable property belonging to the second defendant.

2.1 Applicant further submits that they have remitted the loan amount to the 1st Defendant based on the invoice bills given by M/s.STV Digital Cable Ads Videos & Photos to purchase the Video Equipments and Accessories from the supplier, M/s. Computer World, Vellore. The first defendant had offered the primary security of all hypothecated assets created out of bank finance in favour of the bank and also undertaken to repay the loan amount in 60 EMIs of Rs.32,500/- each commencing from March, 2015 together with interest as and when due without committing any default and also executed the following loan security documents in favour of the bank. i. Application Form for Loans to Micro and Small Enterprises by D1 on 20.02.2015. ii. Sanction Letter with terms and conditions on 20.02.2015. iii. Deed of Hypothecation executed on 20.02.2015 by defendants. iv. Guarantee Agreement executed by D2 on 20.02.2015. v. Guarantee covering letter executed by D2 on 20.02.2015. vi. Guarantee Agreement executed by D3 on 20.02.2015. vii. Guarantee covering letter executed by D3 on 20.02.2015. viii. Letter of undertaking executed on 20.02.2015 by the defendants.

2.2 It is further submitted by the Applicant Bank that the second defendant had offered his immovable property situate at Plot No.5, Thellur Village, Anaicut Taluk, Vellore District by depositing the original title deeds and also executed MOD registered with SRO, Vellore. It is relevant to mention that the unit of the first defendant is covered under CGTMSE scheme and the applicant bank has periodically renewed the same by remitting charges to the said authority. Subsequent to availing of credit facilities, to their shock and dismay, the defendants have not remitted the monthly EMI's in terms of sanction letter and loan security documents and thus committed chronic default, which warranted the applicant bank to initiate SARFAESI Proceedings by causing demand notice on 20.06.2016 to the defendants. The Applicant submits that they smelt some foul play in the submissions of title deeds on discreet enquiry and investigation with the office of SRO concerned, the applicant bank found to be fake and bogus. Hence they are not enforcing their legal claim against the aforesaid property belonging to the second defendant since the title deeds and MOD found to be fake and bogus.

2.3 Ever since from the date of availing of the credit facilities, the defendants have made paltry remittances to the tune of Rs.3,94,286/- to the loan account as evident from the statement of accounts. The defendants have committed chronic default and the loan account had become irregular and consequently declared as NPA on 20.04.2016 in terms of RBI guidelines. The defendants 2 & 3 had admitted their acts of omission and commission of the said offence vide their letter dated 31.01.2017 addressed to the applicant bank and sought time till February, 2017 to remit the entire outstanding loan amount. Adding fuel to the fire, on their personal inspection found no hypothecated assets available at the premises of the 1st Defendant. Thus the applicant bank is left with no other security available to recover the outstanding loan amount. The Applicant Bank is reliably given to understand that the defendants have also cheated other banks to make unlawful enrichment at the cost of public money. Since the defendants have not come forward to repay the outstanding loan amount, the applicant bank is left with no other option than to approach this Tribunal by way of the present OA for recovery of the debts due from the defendants.

3.0 In the Reply Statement filed by the 3rd Defendant it is alleged as follows:- This defendant hereby files this reply statement for himself and also on behalf of the first and second defendants. This defendant at the outset hereby denies all the averments contained in the OA except those which are specifically admitted herein. The present litigation itself is legally unsustainable for the reason that the person who has initiated the present litigation does not hold legal authority to initiate the legal proceedings on behalf of the applicant herein without any resolution passed by its Board of Directors, as such without any authority the General Manager, Personnel Wing has executed Power of Attorney in favour of Smt. Manomani. S, as such the Act done without proper authority is null and void, the power of attorney itself becomes void in the eye of law and the OA is liable to be dismissed in limine. This defendant further submits that the power of attorney is alleged to have been executed on 11.09.2006, but the date of franking of stamp duty has been made on 06.09.2005 and not executed in accordance with law, cannot be enforced for any purpose under the Indian Contract Act.

3.1 The alleged guarantee covering letter dated 20.02.2015 alleged to have been executed by this defendant restricts the limit of the guarantor to Rs.19,50,000/- at the maximum but the applicant has prayed for recovery of more than the above maximum limit of Rs.19,50,000/- thus the relief sought is against the alleged guarantee agreement. The payments made by the defendants have not been given due credit by the Applicant Bank, further the interest rates are excessive and against the RBI guidelines and CGTMSE scheme. Further the signatures obtained in the alleged loan and guarantee agreements were obtained in blank papers and were later filled up and the interest rates as mentioned therein are only after thought and not as agreed upon. The applicant has illegally without any proper authority has applied penal interest thus the same cannot be claimed herein. The certificates as required under the Bankers Act and other relevant laws are not provided herein as such the alleged statement of account cannot be relied upon. This defendant categorically denies the execution of letters dated 31.01.2017 by himself and the second defendant and puts the applicant to strict proof of the same. This defendant denies the receipt of any notice under SARFAESI Act. Further only to maintain this OA, the applicant bank has alleged fraudulent act done by the defendants in execution of mortgage thus the applicant has not approached this Tribunal with clean hands, as such the OA is liable to be dismissed. For the above mentioned reasons this defendants prays for dismissal of the OA.

4.0 In the light of the above, the points that arise for consideration by this Tribunal are:

1. Whether the applicant bank has established its claim against the defendants? If so, for what amount?

2. Whether the applicant bank is entitled for pendent lite and future interest, if so, at what rate?

Point No.1:-

Whether the applicant bank has established its claim against the defendants? If so, for what amount?

5.0 The applicant bank in its endeavor to establish its claim against the defendant examined its official as AW1 and got marked exhibits Ex. A-1 to A-13. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-13 strenuously contended that the claim of the applicant stands established, as such, the applicant is entitled for a recovery certificate.

5.1 Ld. Counsel further submitted that even as per the written statement filed by the 3rd defendant, the defendants have not denied availing of credit facilities from the applicant bank and execution of loan security documents in favour of the applicant bank. Since the defendants failed to submit their counter proof affidavit, the so called defense put forth by the defendants in the written statement remain unsubstantiated thereby the claim of the applicant stands unrebutted, thus contending praying the Tribunal to allow the claim as prayed for.

5.2 As rightly contended by the Ld. Counsel for the applicant except filing of written statement by the 3rd defendant, the defendants did not choose to file their counter proof affidavit despite sufficient opportunities and conditional order in substantiating the pleas taken in reply statement. The defendants also failed to avail the opportunity in making their submissions before this Tribunal. Admittedly as stated herein, as per the scheme of adjudication under the RDB Act, this Tribunal shall receive proof affidavit from the applicant and counter proof affidavit from the defendants and for the purpose of adjudicating the claim or counter claim as the case may be. In this regard reliance can be placed on rule 12(10) of DRT (Procedure) Rules which is reproduced herein below:- “Rule 12(10) If the defendant denies his liability to pay the claim made by the applicant, the Tribunal may act upon the affidavit of the applicant who is acquainted with the facts of the case or who has on verification of the record sworn the affidavit in respect of the contents of application and the documents as evidence.”

Since the defendants despite opportunity, failed to file counter proof affidavit, the defense put forth in the reply statement remains unsubstantiated and the claim of the applicant stands unrebutted.

5.3 Therefore, in the light of the discussion as aforesaid, it is clear that the proof affidavit and the documents filed along with by the applicant remain unchallenged and unrebutted. That

apart, the Tribunal on careful perusal of the unrebutted Proof Affidavit of AW-1 besides Exhibits A-1 to A-13 is fully satisfied that the applicant has established its claim. This point is answered accordingly.

6,0 Point No.2:-

Whether the applicant bank is entitled for pendent lite and future interest, if so, at what rate?

6.1 In terms of Sec. 19 (20) of the RDB Act, the Tribunal has been empowered to pass an order regarding payment of interest from the date on or before which payment of the amount is found due, up to the date of realisation or only payment, as it think fit to meet the ends of justice.

6.2 Hon’ble Supreme Court, in its recent judgement ( reported in II 2009 BC pg. 696) in the matter of State Bank of India – vs – Sarath Textiles, held that “Sec. 19 (20) of the RDDB & FI Act confers discretion on the Tribunal to award interest on the applicant being as it thinks fit to meet the ends of justice.”

6.3 Hon’ble Supreme Court of India in the matter of Central Bank of India – vs – N. Raveendra (reported in 2002 [1] SCC pg. 367) held that “Sec. 34 of CPC confers discretion on the Court to award or not to award interest or to award interest at such rate as it deems fit de-horse notwithstanding the contract between the parties.” Sec. 19 (20) of the RDDB & FI Act is akin to Sec. 34 CPC.

6.4. Ld. counsel for the applicant pleaded for grant of contractual rate of interest by contending that the defendants have commercially benefitted by the credit facilities availed from the bank. Ld. Counsel further submitted that subsequent to availing of credit facilities, to their shock and dismay, the defendants have not remitted the monthly EMI's in terms of sanction letter and loan security documents and thus committed chronic default, which warranted the applicant bank to initiate SARFAESI Proceedings by causing demand notice on 20.06.2016 to the defendants. The Applicant submits that they smelt some foul play in the submissions of title deeds on discreet enquiry and investigation with the office of SRO concerned, the applicant bank found to be fake and bogus. Hence they are not enforcing their legal claim against the aforesaid property belonging to the second defendant since the title deeds and MOD found to be fake and bogus. As already stated since the defendants failed to file counter proof affidavit, the averments in the application of the applicant remain unreubutted. Under the circumstances, the Tribunal is not inclined to inform that the contractual rate of interest and therefore the defendants are liable to pay pendent lite future interest @10.65% p.a. together with penal interest @2% p.a. monthly rests from the date of filing the application till the date of realization. Point No.2 is answered accordingly.

7.0 For the reasons stated as above, I find that the applicant bank has successfully proved its OA claim against the defendants, hence it is held that the applicant bank is entitled for a Recovery Certificate for the amounts claimed in the OA with pendent lite future interest @10.65% p.a. together with penal interest @2% p.a. monthly rests from the date of the application till the date of realization, and along with costs of the application. The defendants are also personally liable for the TA claim.

8.0 In the result, application is allowed as under:

(a) The applicant bank is entitled to recover a total sum of Rs.9,86,43,894/-from the defendants together with pendent lite future interest @10.65% p.a. with penal interest @2% p.a. monthly rests from the date of the application till the date of its realization in full, from the defendants.

(b) It is further ordered that in case of default of payment by the defendant, the defendant is personally liable for all such amounts due.

(c) It is further ordered that any amount remitted or realized if any, during the course of the proceedings, shall be given due credit to the loan account of the defendants.

(d) The applicant bank is entitled for costs of this application.

9.0. The applicant bank is directed to file costs memo within two weeks of the receipt of this order.

10.0 Issue recovery certificate in favour of the applicant bank in terms of this final order.

11.0. Communicate a copy of the order to the parties concerned in terms of Rule 16 read with Rule 2(c) of DRT (Procedure) Rules, 1993. (Dictated to PS, transcribed by him, corrected, signed and pronounced by me in the Open Court, this 18th day of February, 2021)

Sd/- (Dr.N.V.BADARINATH) PRESIDING OFFICER DRT-I, CHENNAI