M/s Deutsche Bank AG vs M/s S N KM and Sons Timbers Private Limited on 22 September 2023

FINAL ORDER

1. This application is filed by the applicant bank under Section 19(1) of Recovery of Debts and Bankruptcy Act, 1993 against the defendants’ seeking issuance of a Recovery Certificate for recovery of a sum of Rs.10,18,642.12p with further interest at the rate of 13.20% per annum with monthly rests from the date of filing of this application till the date of realisation along with costs of the application.

2. It is the case of the applicant that the defendants approached the applicant bank for grant of business installment loan vide application dated 06.05.2016 and considering the said request the applicant sanctioned a loan of Rs.25,00,000/- on 19.02.2016 repayable in 24 Equated Monthly Installments of Rs.1,19,090/- each commencing from 05.06.2016 till 05.05.2018. It is stated that the defendants executed necessary loan and security documents on 19.05.2016. It is also stated that the defendants 2 and 3 executed personal guarantee dated 19.05.2016 thereby guaranteeing due repayment of the credit facility availed by the 1st defendant.

3. It is also the case of the applicant that the defendant violated the terms and conditions of sanction, committed default in repayments and failed to regularize the loan accounts despite repeated request and hence the applicant issued legal notice dated 18.12.2017 calling upon the defendants to clear the outstanding dues. It is stated that despite the said notice the defendant did not come forward to clear the dues and hence the applicant is constrained to file this application for recovery of its legitimate dues.

4. The defendant filed reply statement denying each and every averments contained in the application and submit that this Tribunal lacks territorial jurisdiction to entertain this application. It is contended that the amount claimed is not proper and the applicant has claimed interest against the contractual rates. It is contended by the defendants that the OA is not maintainable, the amount claimed is improper and not supported by documents and in order to support the claim the defendants have given various calculations giving details of the amounts deposited etc. Thus submitting the defendants prayed for dismissing the OA claim.

5. The applicant bank filed its proof affidavit along with 8documents, which are marked as Exhibits A-1 to A-12, the details of which are as under: - Sl. No. Date Description of Documents Exhibits

1. 20.09.1991 Certificate of Establishment of place of business in India A 1

2. 05.04.1988 License No.BOM-41 issued by the RBI A 2

3. 22.02.2018 Power of Attorney A 3

4. 06.05.2016 Loan Application Form A 4

5. 19.05.2016 Loan Agreement A 5

6. 19.05.2016 Personal guarantee executed by the 2nd defendant A 6

7. 19.05.2016 Personal guarantee executed by the 3rd defendant A 7

8. 18.12.2017 Legal notice A 8

9. 26.12.2017 Proof service of legal notice on 1st defendant A 9

10. 26.12.2017 Proof of service of the legal notice on 2nd defendant A10

11. 26.12.2017 Proof of service of the legal notice on 3rd defendant A11

12. 13.03.2018 Statement of Accounts A12

8. Defendants filed Counter Proof Affidavit reiterating the contentions made in the reply statement and marked three documents Exhibits B-1 to B-3 viz., Authorisation Letter, Mark Sheet of the 2nd respondent and Balance sheet of the 1st defendant.

9. Heard the Ld. Counsels for both sides. Perused the records.

10. Having heard the Ld. Counsels for the applicant and after perusing the records, the Tribunal framed the following points for consideration: -

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?

11. 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-12. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-12 strenuously contended that the claim of the applicant stands established, as such, the applicant is entitled for a recovery certificate.

12. Ld. Counsel for Applicant Bank would contend that even as per the Reply Statement filed, the defendants have not denied availing of credit facility, execution of loan and security documents and as such the said admission is sufficient enough to allow the claim of the applicant. Ld. Counsel would also contend that the statement of accounts filed is proper and supported by appropriate certificate under Bankers’ Book Evidence Act and Information Technology Act and hence the contention of the defendants regarding the amount claimed cannot be countenanced.

13. Further, the applicant bank has filed the statement of accounts accompanied by certificates under Bankers’ Book Evidence Act and therefore the claim of the defendants that the amount claimed is not proper and supported by documents fails.

15. 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 by the defendant. Further, the Tribunal on careful perusal of the unrebutted Proof Affidavit of AW-1 besides Exhibits A-1 to A-12 is fully satisfied that the applicant has established its claim. This point is answered accordingly.

Point No.2

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

16. 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. Further, Hon’ble Supreme Court, in the 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.”. Further, 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.

17. While it is the case of the applicant that the applicant bank is entitled for contractual rate of interest till discharge of the entire outstanding dues, however, the defendant would contend that in so far as pendente lite and future interest is concerned, the contractual rate of interest may not be applied. It is to be stated that the claim of the applicant bank includes the rate of interest and other charges payable as per the contract. The Tribunal already held that the applicant bank is entitled for the amount claimed in the OA. As already stated, the Tribunal has awarded contractual rate of interest as claimed by the applicant bank till the date of filing the OA and in view of the fact that the subject loan being is a business loan and the lending rate had considerably come down, the Tribunal is of the view that the defendant is entitled for a reduced rate of interest. Therefore, under these circumstances, the Tribunal is inclined to grant pendente lite and future interest @ 9% p.a. simple on the OA claim amount from the date of filing till the date of realization. Point No.2 is answered accordingly.

18. In view of the afore mentioned discussions, the OA is disposed off in the following manner: - (a) TA No. 428 of 2023 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.10,18,642.12p with further interest @9% per annum (simple) from the date of filing of the application till the date of realization in full, from the defendants jointly and severally after deducting all the amounts received by them during the pendency of OA, and also by selling the other assets of the defendants.

(c) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant, the defendants 2 and 3 is personally liable for all such amounts due.

(d) Applicant is permitted to realize cost of the proceedings and shall file cost memo within 7 days from the date of receipt of the copy of the order.

(e) The Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of this final order.

21. Communicate a copy of the order to the parties concerned in terms of Section 19(21)(i) of the RDB Act, read with Rule 16 of DRT (Procedure) Rules, 1993. (Dictated to PS, transcribed by him, corrected, signed and pronounced by me in Open Court on this the 22nd day of September, 2023) Sd/- (T. RAJESH) PRESIDING OFFICER DRT-II, CHENNAI