M/s IDBI Bank Ltd., vs Mr. V. Rajendran 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.42,88,099/- together with further interest at the rate of 9.90% per annum with monthly rests from the date of filing of this application till the date of realisation along with costs of the application and for sale of schedule properties.

3. The subject matter of the case is the “Secured Overdraft facility” and “Credit Card facility” availed by the defendants from the applicant.

4. It is the case of the applicant that the 1st defendant approached the applicant bank for sanction of credit facility against delivery cum deposit of commodities (Paddy) on 08.02.2017 and considering the said request the applicant sanctioned finance against warehouse receipt to the tune of Rs.50 lakhs on 09.02.2017 by way of Letter of Intent for the purpose of liquidity support to the farmers for avoiding distress sale. It is also the case of the applicant that the said amount was disbursed to the 1st defendant on 08.08.2017 against Ware House Receipt dated 15.02.2017 subject to terms and conditions. It is also the case of the applicant that the 1st defendant executed various loan documents on 15.02.2017 viz., Facility Agreement for Rs.50 lakhs, Demand Promissory Note for a sum of Rs.50 lakhs, Demand Promissory Note delivery letter and authorization Letter and also executed delivery cum confirmation letter.

3. It is also the case of the applicant that the applicant engaged the 2nd defendant has Collateral Manager to receive the commodities at the storage areas and duly inspect the same, monitor the storage commodities at the storage areas and provide and perform the integrated collateral management services to its branches as may be intimated from time to time. It is stated that the 1st defendant was sanctioned the loan against the agricultural commodities against which the Commodity Arrival Report is issued by the 2nd defendant under whose control the commodities are stored and monitored.

4. It is the further case of the applicant that the applicant bank entered into Memorandum of Understanding with the 2nddefendant for providing collateral management services to act as Service Provider who shall act as an Agent or representative of the bank at each of the storage area(s) within the territory and shall take necessary action to ensure the safety, security and proper upkeep and maintenance of any and all commodities with particular reference to kind, quality maintenance, quantity, grade and weight, the same as maybe inherited to the nature of the commodities so stored, while the same are stored at the relevant storage area.

5. It is the case of the applicant that the 1st defendant defaulted in repayment of credits availed under Warehouse Receipt facility and the same accumulated to a sum of Rs.42,88,099/- as on 24.03.2018 with further interest.

6. It is also the case of the applicant that after availing the credit facilities, the 1st defendant was highly irregular and committed default resulting in the classification of the account as NPA on 31.03.2018. It is stated that the efforts of the applicant to get the account regularized by the defendants were in vain and therefore the applicant issued a margin call notice dated 15.09.2018 followed by a recall notice on 14.03.2018 and thereafter a legal notice on 28.06.2018 calling upon the defendants to clear the outstanding dues, however, the defendants did not come forward to clear the outstanding dues and hence the applicant is constrained to file this OA.

7. It is stated that the 1st defendant without the knowledge of the applicant removed the commodities from the godown owned by M/s VSTP Godown which is being maintained by the 2nd defendant and thereby the 2nd defendant committed fraud and criminal act resulting in the applicant filing a police complaint dated 07.04.2018 against the 2nd defendant with Superintendent of Police, Salem and the same is still pending investigation.

8. It is the case of the applicant that after availing the loan, the defendants were irregular in remitting the loan amount. The efforts of the applicant bank to make the defendants to settle the loan did not yield any result, and hence the applicant approached this Tribunal seeking issuance of a Recovery Certificate allowing recovery of the amount due in the account.

9. Summons were taken out to the defendants and the same were served. As there was no representation on behalf of the defendants on 29.08.2019 they were called absent and set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 19 documents, which were marked as Ex. A-1 to A-19 on 11.08.2022. The Ld. Counsel for Applicant Bank made his submissions on 04.08.2023 and thereafter the matter stood till this date for passing final orders.

10. The following issues arise for consideration in the matter: - (a) Whether the applicant had succeeded in proving the liability of the defendants?

(b) What order as to cost of the proceedings need be passed?

These issues are considered together.

11. Heard the Ld. Counsel for the applicant, perused the OA averments and the record placed before the Tribunal.

12. The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-19 along with the proof affidavit. The documents produced in evidence are all found admissible. The proof affidavit of the applicant bank remained unchallenged and unrebutted. Therefore, on careful consideration of proof affidavit along with exhibits filed on behalf of the applicant bank, besides the material placed before the Tribunal, the Tribunal is satisfied that the applicant bank has successfully proved the OA claim against the defendant. Further, the statement of accounts in respect of the loan account produced and certified under the Banker’s Book Evidence Act, clearly indicates that the amount claimed by the applicant is due from the defendant. It is clear from the statement of accounts that penal interest is not capitalized.

13. In view of the foregoing, it is clearly evident that the application filed by the applicant bank is well within the period of limitation and this Tribunal possesses the territorial and pecuniary jurisdiction to entertain this OA.

14. In view of the fact that the instant loans are availed by the defendants for the purpose of its business and the applicant has claimed interest at contractual rates till the date filing of the OA, this Tribunal is of the view that the pendent lite interest can be awarded at reduced rates and therefore proceeds to award interest at the rate of 9% per annum (simple).

15. In view of the afore mentioned discussions, the OA is disposed off in the following manner: - (a) TA No.879 of 2023 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.42,88,099/- 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 / recovered by them during the pendency of OA, and also by selling the schedule properties and other assets of the defendants.

(c) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant Bank, the 1st defendant 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.

16. 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