UNION BANK OF INDIA vs Parameswara Mangalam Steels (P) Ltd on 7 March 2019

O R D E R

1. This application has been filed under Sec.19(1) of the RDDBFI Act by the Applicant Banks to recover from the Defendants a sum of Rs.75,34,70,038/-, due as on 28.02.14, together with subsequent interest @ 17.75% per annum with monthly rests from the date of application till the date of realization to the 1st applicant and another sum of Rs.39,69,53,749.07/-, due as on 28.02.14, together with subsequent interest @ 17.75% per annum with monthly rests from the date of application till the date of realization to the 2nd applicant and by sale of the mortgaged and hypothecated properties, more fully described in „A‟ , „B‟ & „C‟ Schedule of the application and with cost.

2. The brief averments of the application filed by the Applicant Bank are as follows:- D-1 is a company and D-2 to D-5 are the Directors of the company. D-1 applied for loans with applicants‟ bank for the purpose of their business and the same was sanctioned by the applicants. D-2 to D-5 have agreed to stand as Guarantors for the said loans. Initially 1st Applicant bank sanctioned OCC to a limit of Rs.660 lakhs, Term Loan to a limit of Rs.266 lakhs and FLC/ILC to a limit of Rs.750 lakhs. In consideration with the applicant banks sanctioning the loan the defendants executed necessary loan documents under consortium arrangement with the 2nd applicant bank, Punjab National Bank, on 21.10.09. The applicant bank entered into Inter-se Agreement dated 21.10.09, by which the 1st applicant bank has been constituted as agent and empowered to take action on behalf of 2nd applicant bank.

D-1 for the purpose of their business has availed the loans in stages from 2009 onwards from the 1st applicant bank. D-1 and D-2 with an intention to create equitable mortgage have deposited the documents relating to the schedule mentioned properties which belongs to them, with the 1st applicant bank at Trichy on 23.10.08 and as the evidence for the same, have executed a registered memorandum dated 30.10.09 to that effect. D-2 to D-5 has executed Agreement of Guarantee on 21.10.09 to secure the liability undertaken by D-1 in respect of the above facilities. The liability of D-2 to D-5 is joint, several and co-extensive with that of D-1. In order to further secure the liability under the said facilities, D-1 and D-2, further created mortgage by deposit of Title Deeds on 23.10.09 with an intention to secure the liabilities of D-1 to the applicant. The creation of mortgage was also registered with SRO on 30.10.09 by D-1 and D-2 in respect of the properties mortgaged by them to the applicant banks. The said limits were originally sanctioned on 30.09.09, with conditions that they will carry floating rate of interest. As per sanction terms, the loan is collaterally secured by mortgaging immovable property of D-1 & D-2, further secured by D-2 to D-5 as guarantors and they executed General form of Guarantee.

At the request of D-1/D-2 to D-5, applicant bank No.2 had lent advance/various credit facilities on 21.10.09 as per details given hereunder and also to secure the amount outstanding under the said facilities, D-1 executed the following loan and security documents under consortium arrangement with the 1st applicant bank:

Facility Limit (Rs, in lakh) Rate of interest Document Cash credit (Hypothecation) 440.00 BPLR + 2% = 13% at present Joint deed of hypothecation dt.21.10.09

Consortium agreement dt.21.10.09 Facility agreement dt.21.10.09 ILC/FLC 408.00 --- Term Loan 251.00 BPLR + 2.25% = 13.25% at present

D-2 to D-5 have executed Agreement of Guarantee on 21.10.09 to secure the liability undertaken by D-1 in respect of the above facilities. Further in order to secure the liability under the said facilities, D-1 and D-2 further created mortgage by deposit of Title Deeds(s) on 23.10.09 with the intention to secure the liabilities of D-1 to the applicant. The creation of mortgage was also registered with SRO on 30.10.09 by D-1 and D-2 in respect of the properties mortgaged by them to the applicant banks. Thereupon the applicant banks executed a Consortium Agreement dated 21.10.09 with 1st applicant bank as Lead Bank. The applicant banks have entered into Inter- Se Agreement dated 21.10.09 by which the 1st applicant bank has been constituted as agent and empowered to take action on behalf of the 2nd applicant bank etc. In respect of security documents executed/created by D-1/company, charge/modification of charge have been filed with ROC and Certificate of Registration of charge have been obtained.

Thereupon the defendants in 2011 got renewal and enhancement of OCC from Rs.6.60 crores to Rs.42 Crores and ILC/FLC from Rs.7.50 crores to Rs.18 crores as per sanction letter dated 11.03.11 from 1st applicant bank and the defendants in 2011 got renewal and enhancement of CC from Rs.4.40 crores to Rs.28 Crores and ILC/FLC from Rs.4.08 crores to Rs.7

crores as per sanction letter dated 03.08.11 from the 2nd applicant bank. In respect of said facilities and also to secure the amount outstanding under the said facilities D-1 has executed all necessary loan document dt.16.03.11 in favor of the 1st applicant bank and documents dt.10.08.11 in favor of the 2nd applicant bank. D-2 to D-5 have executed Agreement of Guarantee, to secure the liability undertaken by D-1. D-1 has also filed modification of charges with ROC for the enhanced limits. Subsequently, the 1st applicant bank has renewed the limits on 11.09.12. Further, the 1st applicant bank has sanctioned an Adhoc OCC limit of Rs.6.00 crores on 26.02.13. Accordingly, in respect of said facilities and also to secure the amount outstanding under the said facilities, D-1 have executed Demand Promissory Note, Composite agreement Dt.27.02.13. D-2 to D-5 have executed further agreement of guarantee dt.27.02.13 to secure the enhanced/further facilities. D-1 and D-2 created further mortgage on 27.02.13 by deposit of title deeds by delivery on 23.10.09. The fact of creation of further mortgage is also confirmed by D-1 and D-2 by letter dt.27.02.13. In respect of security documents executed/created by D-1/company, charge/modification of charge have been filed with ROC and Certificate of Registration of charge have been obtained. The defendants No.1 to 5 have executed Balance & Security confirmation letter from time to time. D-1 was not regular and periodic in repayment of loans and had defaulted in repayment of loan. As such as the account was classified as NPA on 30.05.13 by 1st applicant bank and on 31.08.13 by 2nd applicant bank. The applicant banks had made several requests in this regard to the defendants but it evoked no response. A final recall notice for entire outstanding under SARFAESI Act has been made by 1st applicant bank vide letter dt.01.07.13 and by 2nd applicant bank on 13.09.13 and 12.10.13. Despite demands, defendants have not regularized the account. The applicant bank No.1 took possession of the unit on 04.10.13, served the possession notice to the defendants and published the same in English and Tamil Newspapers. The 2nd applicant bank has also issued final notice and also invoked the guarantee executed by D-1 and D-2 to D-5 vide their notices dt.13.09.13 and 12.10.13 respectively. They have also issued possession notice to defendants on 10.01.14. Further, both the applicant banks have issued sale notice on 13.02.14 to the defendants and published the same in newspapers on 14.02.14. There is no response from the defendants. Hence, the Applicant Bank has filed the OA for recovery of Rs.75,34,70,038/-,due as on 28.02.14, to the 1st applicant bank and Rs.39,69,53,749.07ps/-, due as on 28.02.14, to the 2nd applicant bank with interest and costs.

3. The Defendants were set ex-parte.

4. The Applicant Bank, in order to prove its claim, has filed Proof Affidavit executed by one Mr. M. Gopinath, who is the Chief Manager of the Applicant Bank and marked the documents as Exh. A-1 to A-94, in support of its claim in the OA. A cumulative analysis of both the Proof Affidavit and documents marked by the Applicant Bank would prove the claim of the Applicant Bank in the OA. Therefore, this Original Application is allowed. The Applicant Bank is entitled for a final order on the following lines:-

The Applicant Banks are entitled to recover from the Defendants a sum of Rs.75,34,70,038/- together with subsequent interest @ 17.75% per annum with monthly rests from the date of application i.e.02.04.14 till the date of realization to the 1st applicant and another sum of Rs.39,69,53,749.07ps/-, together with subsequent interest @ 17.75% per annum with monthly rests from the date of application i.e.02.04.14 till the date of realization to the 2nd applicant and also the costs.

5. The Defendants are directed to pay to the 1st applicant, jointly and severally, a sum of Rs.75,34,70,038/- together with subsequent interest @ 17.75% per annum with monthly rests from 02.04.14 till the date of realization. The Defendants are directed to pay to the 2nd applicant, jointly and severally, a further sum of Rs.39,69,53,749.07ps/-, together with subsequent interest @ 17.75% per annum with monthly rests from 02.04.14 till the date of realization and also the costs. On failure to pay the above said debt to the Applicant Bank, the Applicant Bank is directed to bring the mortgaged and hypothecated properties, more fully described in „A‟ , „B‟ & „C‟ Schedule of the application, for sale to realize its dues and costs.

6. The Registry is directed to prepare DRC in terms of this final order. The Applicant Bank shall file memo of costs within 15 days from the date of this order. Registry is directed to communicate the copy of this order to both parties as provided in Rule 16 of the Debts Recovery Tribunal (Procedure) Rules, 1993. Dictated to PS, taken down, transcribed, typed by him, corrected and pronounced by me in the open court this the 07th March, 2019. Sd/- (Su. WILLYAHM) PRESIDING OFFICER

SCHEDULE – “A”

In Tiruchirapalli District, in Ariyalur Registration District, in Chettikulam Sub Registration, in Lalgudi Taluk, in Priyakurukkai Village the lands situate in the survey numbers mentioned hereunder and the extent thereon, a total extent of 7.49 Acres belongs to M/s.Parameswara Mangalam Steels (p) Ltd., with building, sheds and with other structures thereon, SI.No. Survey Number Extent in Acres

1. 324/2F 0.77 ½

2. 324/2F 0.87 ½

3. 1.42

4. 324/3B 0.48

5. 324/3C 0.68

6. 323/3B 0.77

7. 273/4A 0.30

8. 320/5A 0.61

9. 324/3A 1.58

Total 7.49

SCHEDULE – “B”

In Tiruchirapalli District, in Ariyalur Registration District, in Chettikulam Sub Registration, in Lalgudi Taluk, in Priyakurukkai Village the lands situate in the survey numbers mentioned hereunder and the extent thereon, P.S.Krishnamurthy a total extent of 34.26 Acres with building, sheds and with other structures thereon, SI.No. Survey Number Extent in Acres

1. 1.27

2. 1.32

3. 322/7A 0.77

4. 322/11C 0.44

5. 322/7C 0.88

6. 322/11B 0.44

7. 0.30

8. 0.35

9. 0.75

10. 1.04

11. 322/7B 0.77

12. 322/11A 0.54

13. 331/1A 1.06

14. 1.65

15. 331/1C 0.57

16. 331/1B 0.41

17. 1.14

18. 0.42

19. 3.18

20. 323/5A 0.85

21. 323/4B 0.52

22. 323/4A 0.51

23. 322/6B 0.82

24. 1.64

25. 0.70

26. 323/16B 0.41

27. 323/1A 0.94

28. 323/7A 0.04

29. 0.26

30. 0.27

31. 0.78

32. 323/5B 0.23

33. 323/7B 0.59

34. 321/1A 0.44

35. 0.78

36. 0.77

37. 320/2A 0.56

38. 1.56

39. 0.88

40. 321/1B1 0.42

41. 321/5B 0.53

42. 0.95

43. 1.10

44. 321/7B 0.41

Total 34.26

SCHEDULE – “C”

List of machineries and movables – as per enclosure.

List out all items movable, Machineries in Document no.92.

Sd/- (Su. WILLYAHM) PRESIDING OFFICER

LIST OF DOCUMENTS FILED BY THE APPLICANT BANK S. No. Date Description of document Exhibits

1. 30.09.09 Letter of Sanction of 1st applicant bank Ex.A-1

2. 21.10.09 Minutes of the Board meeting of defendant No.1 dt. 21.10.09 Ex.A-2

3. 21.10.09 Consortium agreement dated 21.10.09 entered between M/s. Parameswara Mangalam Steels (P) Limited, Andhra Bank and Punjab National Bank Ex.A-3

4. 21.10.09 Facility agreement-consortium term loan to M/s. Parameswara Mangalam Steels (P) Ltd, entered by the defendant No.1 with Andhra Bank and Punjab National Bank Ex.A-4

5. 21.10.09 Promissory note executed by the 1st defendant for Rs.11 Crores in favor of Andhra Bank and Punjab National Bank Ex.A-5

6. 21.10.09 Joint deed of hypothecation agreement dt. 21.10.09 executed by the 1st defendant in favor of Andhra Bank and Punjab National Bank. Ex.A-6

7. 21.10.09 Inter Se agreement entered between applicant banks Ex.A-7

8. 25.02.05 Regd. Sale deed No.716/2005 executed by Aathi Nadar and Arivalagan in favor of S. Saravanan Ex.A-8

9. 18.03.05 Regd. Sale deed No.1010/2005 executed by Periyasamy and Mallakurichan in favour of S. Saravanan Ex.A-9

10. 19.04.05 Regd. Sale deed No.1544/2005 executed by N. Baskaran in favour of M/s. Dhandapani Cements Pvt. Ltd. Ex.A-10

11. 19.04.05 Regd. Sale deed No.1545/2005 executed by D. Chinnasamy in favour of M/s. Dhandapani Cement Pvt. Ltd. Ex.A-11

12. 18.01.07 Regd. Sale deed No. 215/2007 executed by M/s. Kalaimagal Saba through its receivers S. Navaneetha Krishnan and K.R. Hariharan in favour of M/s. Dhanapani Cements. Ex.A-12

13. 21.10.09 Regd. Sale deed No.4592/2009 executed by M/s. Dhandapanni Cements Pvt. Ltd in favour of M/s. Parameswara Managalam Steels Pvt. Ltd Ex.A-13

14. 18.03.05 Regd. Sale No.1008/2005 executed by Pottokkannu and S. Muthusmay in favour S. Saravanan Ex.A-14

15. 21.10.09 Regd. Sale deed No.4591/2009 executed by S. Saravanan in favour of M/s. Parameswara Mangalam Steels Pvt. Ltd. Ex.A-15

16. 11.01.07 Patta Pass Book in favour of S. Saravanan Ex.A-16

17. 04.08.09 E.C. No. 2997 from 01.01.1987 to 03.08.09 Ex.A-17

18. 04.08.09 E.C. No. 2998 from 01.01.1987 to 02.08.09 Ex.A-18

19. 04.08.09 E.C. No. 2999 from 01.01.1987 to 02.08.09 Ex.A-19

20. 04.08.09 E.C. No. 3000 from 01.01.1987 to 02.08.09 Ex.A-20

21. 04.08.09 E.C. No. 3001 from 01.01.1987 to 02.08.09 Ex.A-21

22. 23.10.09 Memorandum of deposit of title deeds executed by the 1st defendants in favor of Andhra Bank Ex.A-22

23. 15.06.05 Regd. Sale deed 2498/2005 executed by R. Pitchai Pillai in favour of M/s. Dhandapani Cements Ex.A-23

24. 18.01.07 Regd. Sale deed No.214/2007 executed by M/s. Kalaimagal Saba through its receivers S. Navaneetha Krishnan and K.R. Hariharan in favour of M/s. Dhandapani Cements. Ex.A-24

25. 21.10.09 Regd. Sale No.4589/2009 executed by M/s. Dhandapani Cements Pvt. Ltd in favour of Mr. P.S. Krishna Murthy. Ex.A-25

26. 25.02.05 Regd. Sale deed No.715/2005 executed by Arunachalam and Ramasamy in favour of S. Saravanan Ex.A-26

27. 25.02.05 Regd. Sale deed No.717/2005 executed by Saminathan, Duraisamy, Ramasamy and Jayapal in favour of S. Saravanan Ex.A-27

28. 25.02.05 Regd. Sale deed No.718/2005 executed by Pitchai Pillai, Ramachandran and Madiyalagan in favour of S. Saravanan Ex.A-28

29. 18.03.05 Regd. Sale No.1317/2005 executed by A. Muthukkannu in favour S. Saravanan Ex.A-29

30. 18.03.05 Regd. Sale No.1318/2005 executed by Maruthamuthu Moopanar, Nallu Sellu and Muthusmay in favour S. Saravanan Ex.A-30

31. 21.10.09 Regd. Sale No.4590/2009 executed by S. Saravanan in favour of Mr. P.S. Krishna Murthy Ex.A-31

32. 23.10.09 Memorandum of deposit of title deeds executed by the 2nd defendant in favor of Andhra bank Ex.A-32

33. 30.10.09 Registered Memorandum of deposit of title deeds executed by the 1st defendant in favor of applicant banks (Doc. No.4712/2009 dt.3010.09) Ex.A-33

34. 30.10.09 Registered Memorandum of deposit of title deeds executed by the 2nd defendant in favor of applicant banks (Doc. No.4711/2009 dt.3010.09) Ex.A-34

35. 21.10.09 General Form of Guarantee executed by Defendant Nos.2 to 5 in favor of applicant banks Ex.A-35

36. 30.09.09 Letter of sanction by Punjab National Bank Ex.A-36

37. 07.12.09 Mortgage on company‟s land property Ac.7.49-ROC registered in favor of the applicant banks Ex.A-37

38. 11.03.11 Letter of sanction of 1st applicant bank Ex.A-38

39. 14.03.11 Extract of Board of resolution of the company accepting the sanction terms and for execution of documents and affixing of common seal etc. Ex.A-39

40. 16.03.11 Promissory note executed by the 1st defendant in favor of Andhra Bank for Rs.42 Crores. Ex.A-40

41. 16.03.11 Composite agreement executed by the 1st defendant in favor of Andhra Bank Ex.A-41

42. 16.03.11 Memorandum of deposit of title deeds executed by the 1st defendant extending mortgage in favor of Andhra Bank and Punjab National Bank Ex.A-42

43. 16.03.11 Memorandum of deposit of title deeds executed by the 2nd defendant extending mortgage in favor of Andhra Bank and Punjab National Bank Ex.A-43

16.03.11 General Form of Guarantee executed by Defendants Nos.2 to 5 in favor of Andhra Bank Ex.A-44

45. 16.03.11 Enhancement of credit limits-Modification of ROC charges Fvg. Andhra Bank from Rs.1676 Lakhs to Rs.6266 Lakhs. Ex.A-45

46. 03.08.11 Letter of Sanction dt.03.08.11- enhancing credit limits by Punjab National Bank Ex.A-46

47. 10.08.11 Acceptance letter dt.10.08.11 by 1st defendant – for terms and conditions enhancing credit limits by PNB Ex.A-47

48. 10.08.11 Copy of Board resolution dt.10.08.11 Ex.A-48

49. 10.08.11 Hypothecation of Goods and Books Debts to Secure Cash Credit Facility in favor of Punjab National Bank Ex.A-49

50. 10.08.11 Hypothecation of Goods and Books Debts to Secure Letter of Credit Facility in favor of Punjab National Bank Ex.A-50

51. 10.08.11 Hypothecation Movable Assets Forming Part of Fixed/Block Assets in favor of Punjab National Bank Ex.A-51

52. 10.08.11 Agreement of Guarantee executed by the defendants 2 to 5 in favor of 2nd applicant bank Ex.A-52

53. 05.09.11 Extract of Board of resolution of the company accepting the sanction terms and for execution of documents and affixing of common seal etc. Ex.A-53

54. 05.09.11 Consortium agreement between the applicant banks and 1st defendant Ex.A-54

55. 05.09.11 Joint deed of Hypothecation deed entered between the 1st defendant and applicant banks.

Ex.A-55

56. 05.09.11 Memorandum of deposit of title deeds extending mortgage executed by the 1st defendant Ex.A-56

57. 05.09.11 Memorandum of deposit of title deeds extending mortgage executed by the 2nd defendant Ex.A-57

58. 05.09.11 General Form of guarantee executed by the 2 to 5 defendants in favor of the applicant banks Ex.A-58

59. 05.09.11 Inter Se agreement between applicant banks Ex.A-59

60. 11.09.12 Letter of sanction for renewal of limits by the 1st applicant bank Ex.A-60

61. 27.02.13 Letter of sanction for Adhoc OCC limit of Rs.6 Crores by the 1st applicant bank Ex.A-61

62. 27.02.13 Extract of Board of resolution of the company accepting the sanction terms and for execution of documents and affixing of common seal etc Ex.A-62

63. 27.02.13 Promissory note executed by the 1st defendant for Adhoc OCC limit of Rs.6 Crores in favor of Andhra Bank Ex.A-63

64. 27.02.13 Composite agreement executed by the 1st defendant in favor of Andhra Bank Ex.A-64

65. 27.02.13 Memorandum of deposit of title deeds extending mortgage executed by the 1st defendant in favor of Andhra Bank Ex.A-65

66. 27.02.13 Memorandum of deposit of title deeds extending mortgage executed by the 2nd defendant in favor of Andhra Bank Ex.A-66

67. 27.02.13 General Form of guarantee executed by the 2 to 5 defendants in favor of Andhra banks Ex.A-67

68. 27.02.13 Modification of ROC charges for the limits sanctioned by the 1st applicant bank to the defendant no.1 and documents executed on 27.02.13 Ex.A-68

69. 15.10.11 Confirmation of respect of liabilities with the 1st applicant bank by the defendant no. 1. Ex.A-69

70. 04.04.13 Confirmation of respect of liability in OCC A/c No.019813100000034 with the 1st applicant bank by the defendant no. 1. Ex.A-70

71. 04.04.13 Confirmation of respect of liability in OCC A/c No.019813100000238 with the 1st applicant bank by the defendant no. 1. Ex.A-71

72. 25.05.13 Confirmation of respect of liabilities with the 2nd applicant bank by the defendant no. 1 on 25.05.13 Ex.A-72

73. 25.05.13 Confirmation of respect of liabilities with the 1st applicant bank by the defendant no. 1 on 25.05.13 Ex.A-73

74. 01.07.13 Copy of demand notice under sec.13(2) issued by the 1st applicant to the defendants Ex.A-74

75. -- Acknowledgement for receipt of demand notice Ex.A-75

76. -- Recall Notice issued by the 2nd applicant bank to the defendants Ex.A-76

77. -- Acknowledgement for receipt of recall notice Ex.A-77

78. 04.10.13 Copy of possession notice issued to defendants by the Andhra Bank Ex.A-78

79. -- Acknowledgement for receipt of possession notice by defendants. Ex.A-79

09.10.13 Paper Publication of possession notice in Dinamani by Andhra Bank Ex.A-80

81. 09.10.13 Paper Publication of possession notice in The New Indian Express by Andhra Bank Ex.A-81

82. 12.10.13 Notice under Sec.13(2) of SARFAESI Act issued by the second applicant bank to the defendants Ex.A-82

83. -- Acknowledgments received from the defendants Ex.A-83

84. 10.01.14 Possession notice issued by the second applicant bank to the defendants Ex.A-84

85. -- Acknowledgements received from the defendants Ex.A-85

86. 14.01.14 Paper Publication of possession notice by the 2nd applicant bank in The New Indian Express Ex.A-86

87. 14.01.14 Paper Publication of possession notice by the 2nd applicant bank in Dinamani Ex.A-87

88. 13.02.14 Sale notice dt.13.02.14 issued to defendants by both the applicant banks Ex.A-88

89. 14.02.14 Paper publication by applicant banks as to E-Auction sale inviting tender in The New Indian Express Ex.A-89

90. 14.02.14 Paper publication by applicant banks as to E-Auction sale inviting tender in Dinamani Ex.A-90

91. -- Accounts copy of the CC and LC limits of defendant No.1 with the second applicant bank Ex.A-91

92. -- Accounts copy of the OCC A/Cs of defendant No.1 with the second applicant bank Ex.A-92

93. -- Statement showing computation of interest not debited by the 2nd applicant bank to the CC and LC limits from the date of NPA up to 28.02.14 Ex.A-93

94. -- List of plant and machinery and movable assets and vehicles (C Schedule) Ex.A-94

Sd/- (Su. WILLYAHM) PRESIDING OFFICER