Indian Bank vs Mr. M. Raju on 28 March 2024

FINAL ORDER

1. The Application is filed under Section 19 (1) of the Recovery of Debt And Bankruptcy Act, 1993 seeking for issuance of a Recovery Certificate for Rs. 10,63,355.97p (Rupees Ten Lakhs Sixty Three Thousand Three Hundred Fifty Five and Ninety Seven paisa only) due in the Education loan availed by the deceased borrower who was a minor .

2. The above TA was originally filed before DRT-I and got transferred to this Tribunal and renumbered as above.

3. The applicant contends that an Education loan for Rs.4,00,000/- was sanctioned and disbursed to the deceased borrower as the deceased borrower and 1st defendant had submitted an application in this regard the loan was sanctioned and disbursed as the 1st defendant had executed on behalf of himself and the deceased minor borrower. Apart from the above, the 2nd defendant stood as a guarantor and credit facility was also secured by mortgage of schedule properties owned by the 1st defendant. It is also contended that a letter of undertaking was also executed by the deceased borrower after attaining majority.

4. The Applicant further contents that despite availing the credit facility by obliging to pay back the amount, the 1st defendant failed in compliance of the same and as the bank had followed up the dues with 1st defendant as the borrower had expired on 12.6.2008 and the debt was subsequently acknowledged by the 1st defendant on 9.4.2011. It is also contended that the 1st defendant had with an ulterior motive settled the schedule mortgaged properties in favour of 3rd and 4th defendants and through them sold out the property to the 5th defendant. Hence according to the applicant the defendants 3 to 5 cannot have a better title than the 1st defendant who had mortgaged the property in favour of applicant. On the above set of facts the applicant is seeking recovery of the amount due in the account and also seeking a prayer to allow recovery of the same by proceedings against and by sale of scheduled mortgaged properties.

5. The defendants entered appearance and filed their reply statement contending that the applicant had illegally insisted for collateral property when no collateral is required for credit facilities availed by the borrower and only for the Educational Loans above 7.5 lakhs collateral can be insisted. The defendant is also contending that even after the death of the deceased borrower the and after having intimation as to the death the bank had deposited subsequent fees. Another contention taken is that according to the Indian Bank Association Guidelines, it is mandatory to arrange for an insurance policy for the students.

6. The Applicant let in evidence through AW1, filed proof affidavit in conformation with pleading and got marked Ext A1 to A22. The 1st defendant had filed their proof affidavit in conformity with the pleadings in the reply statement.

7. Heard, the following issues arise for consideration: -

(i) Whether the Applicant is entitled for a Recovery Certificate as prayed for? (ii Whether the insistence of the collateral security for Educational Loan as alleged by the defendant will disentitle the applicant from proceedings against the mortgaged property?

(iii) What orders are to be passed? All these issues are decided together.

8. The applicant’s case as to the availement of the facility execution of loan documents defaults and transfer of mortgaged property, during the subsistence of mortgaged are not in dispute. The defendant had no dispute as to the case put forth by the applicant in this regard. The execution of loan documents and binding nature of the same are not in dispute. The only contention taken by the 1st defendant is that the Educational Loan as availed by the borrower does not require any collateral. It is true that for Educational loans even up to 4 lakhs the banks are not insisting for collateral securities. Even if the case of the defendant in this regard is to be accepted, the same does not invalidate the creation of security interest. If at all the borrower or the guarantor is having any objection in this regard the same has to the raised at appropriate time and not after the proceedings are initiated for recovery of the defaulted amount. Having executed the mortgage, without raising any objection and having availed the credit facility, the borrower cannot be allowed to turn back and contend that the collateral security cannot be enforced even in default.

9. It is also admitted that the mortgage properties has been settled in favour of defendants 3 and 4 who in turn settled the same in favour of the 5th defendant during the subsistence of mortgage and as such the said transfer will not preclude the applicant from proceedings against mortgaged property.

10. The Applicant evidence remain un-rebutted and hence proved. The documents produced by the Applicant are found to be admissible and are sufficient to prove TA claim. Hence the Applicant is to be found entitled for the TA claim. Even though the defendant had contended that the guidelines mandate obtaining insurance of the borrower, no evidence is produced in this regard. Even assume that insurance is mandatory, the same will not stand in way of the applicant to claim back the amount due in the loan account.

11. The TA claim is made within limitation and there is no capitalization of penal interest. However as the TA claim is arrived at by calculating interest at agreed rate, which this Tribunal considers as on the higher side and also taking note of the facts that no collateral properties are generally insisted for credit facilities of this nature and also that the borrower had expired pendente lite and future interest is awarded at 6% simple.

12. In view of the above, the following order is passed: - (a) TA No.552 of 2023 stands allowed.

(b) Applicant is permitted to recover an amount of Rs.10,63,355.97p (Rupees Ten Lakhs Sixty Three Thousand Three Hundred Fifty Five and Ninety Seven paisa only) with future and pendente lite interest @ 6% simple per annum from the date of filing of the OA/TA till realization, after giving credit to all the amount recovered and received during the pendency of the OA/TA, from the defendants 1 and 2 jointly, severally and personally and their assets including the schedule mortgaged properties, irrespective of the fact that the properties are already settled in favour of 5th defendant.

(c) A Recovery Certificate is to be drawn and issued to the recovery Officer to enable recovery of the as per the above terms.

(d) Applicant is allowed to realize cost of the proceeding for which cost memo is to be filed in 7 days’ time from the date of receipt of the copy of the order.

13. Communicate a copy of the order to the parties concerned in terms of section 19(21)(i) of the RDB Act, read with Rule 6 of DRT (Procedure) Rules, 1993. (Dictated to PS, transcribed by him, corrected, signed and pronounced by me in the Open court, this the 28th day of March, 2024)

Sd/- (T.RAJESH)

PRESIDING OFFICER

DRT-II, CHENNAI