UNION BANK OF INDIA vs K . Arumugam on 29 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.21,39,939/- with further interest at the rate of 13.25% per annum with quarterly rests from the date of filing of this application till the date of realisation along with costs of the application.

2. The subject matter of the case is the short term Agricultural loan availed by the 1st defendant from the erstwhile Corporation Bank.

3. It is the case of the applicant that the 1st defendant had availed a short Term Agricultural Loan of Rs.15,00,000/- from the erstwhile Corporation Bank and the same was sanctioned for the purpose of financing harvesting and other related activities of sugarcane harvest work in the selected working areas through the 2nd defendant and the 2nd defendant stood as Corporate Guarantor and requested the applicant bank to grant financial assistance to the 1st defendant for the aforesaid purpose. It is stated that the 2nd defendant also produced the Certificate of Incorporation, Memorandum of Association and Articles of Association of the company.

4. It is also stated that the 2nd defendant represented that the 1st defendant is a Sugarcane cutting labourer working in Thirumandankudi Zone and also functions as a registered cane Harvest Gang Leader in the Mill and his registration number is 114187. It is further stated that the 2nd defendant requested the erstwhile applicant bank to provide a Short Term Loan of Rs.15,00,000/- for the purpose of providing wages to the cane cutting labourers under him and also for other harvest related work. It is stated that the 2nd defendant also gave an undertaking that the loan amount to be granted to the 1st defendant would be covered under Corporate Guarantee given by the 2nd defendant dated 03.03.2014. It is also stated that the 2nd defendant as guarantor requested and recommended grant of loan of Rs.15,00,000/- to the Gang Leader and 1st defendant executed an Authorisation Letter authorizing the applicant bank to transfer / repay the advance / loans availed by 1st defendant to the 2nd defendant’s bank account and further authorized that his loan credit be transferred to his saving bank accounts maintained with other banks.

5. It is also the case of the applicant that the 1st defendant by loan application dated 06.06.2015 request the erstwhile Corporation Bank to grant a Short Term Loan of Rs.15,00,000/- and considering the said request the erstwhile Corporation Bank vide sanction letter dated 06.06.2015 sanctioned the same. It is stated that to secure the said loan the 1st defendant executed various loan and security documents on 06.06.2015. It is also stated that the 2nd defendant through letter dated 23.06.2015 furnished the list of harvesting Gang Leaders who are coming under Corporate Guarantee dated 03.03.2014 executed by the 2nd defendant in favour of the applicant. It is further stated that the Board of Directors of the 2nd defendant passed a resolution on 03.03.2014 resolving to issue Corporate Guarantee for a sum of Rs.45,00,00,000/- and the 2nd defendant executed Corporate Guarantee Agreement on 03.03.2014.

6. It is also the case of the applicant that the 1st defendant committed default in repayments and failed to regularize the loan accounts despite repeated request and hence the loan account was classified as NPA in accordance with the guidelines of the Reserve Bank of India. It is stated that the 2nd defendant by letters dated 06.03.2018 and 23.03.2018 sought time till April 2018 for payment of entire over dues arising out of Corporate Guarantee given by them in favour of applicant bank, however, failed to do so.

7. It is the case of the applicant that after availing the loan, the 1st defendant was 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.

8. Summons were taken out to the defendants and the same was served on both the defendants. As there was no representation on behalf of defendants on 23.10.2019, the defendants were called absent and set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 23 documents, which were marked as Ex. A-1 to A-23, however, Exhibits A-1, A-2 to A-6, A-15 to A-19 were marked subject to proof. The Ld. Counsel for Applicant Bank made his submissions on 16.08.2023 and thereafter the matter stood till this date for passing final orders.

9. 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.

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

11. The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-23 along with the proof affidavit. The documents produced in evidence are all found admissible. The proof affidavit of the applicant bank remained unchallenged and rebutted. 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.

12. During the pendency of the OA the applicant had filed a memo stating therein that an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was filed by State Bank of India against the Corporate Debtor M/s Thiru Arooran Sugars Ltd., the 2nd defendant herein and the NCLT-II, Chennai by order dated 08.04.2021 has passed an order of liquidation against the 2nd defendant and appointed a Liquidator to carry out the liquidation proceedings in respect of Corporate Debtor. It is also stated that the NCLT-II Chennai by order dated 02.05.2022 in IBA 243 of 2019 approved the scheme of compromise arrangement submitted by one M/s KALS Distilleries Private Limited for takeover of assets and properties of M/ Thiru Arooran Ltd., and sanctioned the Insolvency Resolution Proposal submitted by the said KALS

Distilleries Pvt. Ltd., It is further stated that the applicant is an unsecured financial creditor and the total admitted claim of the applicant in respect of various loans granted to sugar cane harvesters at the instance and recommendation of the 2nd defendant comes to Rs.7455.90 lakhs and out of which an amount of Rs.37.28% (0.5%) is provided towards full and final settlement of the entire dues and the same was also paid to the applicant in installments. It was prayed that the memo be taken on record and the order passed by NCLT-II Chennai as against 2nd defendant be taken on record and permit the applicant to proceed with the OA against the Principal borrower, the 1st defendant herein.

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 loan facility availed by the defendants is a business loan and the applicant has claimed interest at contractual rate till the date of filing of the OA, this Tribunal is of the view that the pendente lite interest can be awarded at reduced rates.

15. In view of the afore mentioned discussions, the only conclusion this Tribunal can draw is that the applicant had clearly proved the disbursement of the loan, which the applicant is entitled to realize. Hence, OA is disposed off in the following manner: - (a) TA No.410 of 2022 stands allowed.

(b) Applicant is permitted to realize a sum of Rs.21,39,939/- together with interest at the rate of 12% per annum (simple) from the 1st defendant jointly and severally, from the date of filing of the OA till date of realization after deducting all the amounts received by them during the pendency of OA, and also by selling the other assets of the defendant.

(c) It is made clear that the 2nd 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 29th day of September, 2023) Sd/- (T. RAJESH) PRESIDING OFFICER DRT-II, CHENNAI