Karur Vysya Bank Ltd., vs Mr. S. Pandian on 29 December 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 a sum of Rs.1,87,13,292.47p with further interest at the rate of 20.20% per annum with monthly rests from the date of filing of the application till the date of realisation along with costs of the application and for sale of schedule properties.

2. It is the case of the applicant that the 1st defendant is carrying on the business of trading in food grains such as rice, dhal, pulses, grams etc. It is also the case of the applicant that 1st defendant approached the applicant during February 2016 for grant of warehouse loan / pledge loan against stocks to suit to his growing business needs. It is stated that the 1st defendant requested the applicant to extend warehouse loan for procuring stocks and ordered to create pledge over the stocks in favour of the applicant as security and promised to liquidate the loan amount along with interest within a period of six months from and out of the sale proceeds to be realized from the sale of stocks. It is also stated that the 2nd defendant offered to extend his personal guarantee to the applicant for guaranteeing the prompt and due repayment of the financial facility.

3. It is also the case of the applicant that the 1st defendant deposited the original receipts relating to the stocks kept by him in trust and under the custody of M/s Tamil Nadu Ware Housing Corporation, Pudukottai valued at Rs.1,60,19,000/- towards the pledge of the same. It is stated that the 1st defendant sent letter of lodgment dated 29.02.2016 to M/s Tamil Nadu Ware Housing Corporation and put them on specific notice and recorded the pledge created by the 1st defendant in their favour and the said letter was duly acknowledged by the custodian M/s Tamil Nadu Ware Housing Corporation, Pudukottai.

4. It is the further case of the applicant that considering the above submissions the applicant sanctioned Warehouse loan facility / loan against pledge of stocks facility of Rs.1,60,19,000/- and the 1st defendant executed necessary loan documents on 02.03.2016 and the 2nd defendant executed guarantee agreement on 02.03.2016. It is stated that the 1st defendant defaulted in repayment of principal amount and the interest accrued thereon on due date i.e., 2.8.2016. It is also stated that the 1st defendant requested further time to discharge the liability in question claiming that the price of the commodity has fallen well below the purchase cost.

5. It is the case of the applicant that the defendants 3, 4, 5 and 7 approached the applicant with a request to grant further time to the 1st defendant to discharge the liability in question by offering to create mortgage in and over the immovable property more fully describing in Schedule „A‟ to the OA and the defendants 3, 4, 5 and 7 also executed guarantee deed dated 30.3.2017. It is also stated that the 3rd defendant executed deed of simple mortgage dated 5.4.2017 in and over Schedule „A‟ property registered as Doc. No.501 of 2017 on the file of SRO, Pudukottai

6. It is also the case of the applicant that the 6th defendant approached the applicant with a request to grant further time to 1st defendant to discharge the liability by offering to create mortgage over immovable property more fully described in Schedule „B‟ to the OA and the 6th defendant also executed deed of personal guarantee dated 30.11.2017 in favour of applicant. The 6th defendant executed Memorandum of Deposit of title deeds dated 01.12.2017 registered as Doc. No.7280 of 2017, SRO, Velacherry.

7. It is the further case of the applicant that as the defendants failed and neglected to repay the outstanding dues despite repeated demands the applicant classified the loan account as NPA on 31.12.2017. It is stated that the 1st defendant liquidated the stocks remitted a sum of Rs.50,03,548/- to the credit of the warehouse loan facility dated 02.3.2016 on 23.02.2018 towards part remittance of his liability to the applicant. It is also stated that since the defendants have been evading discharge their liability the applicant sent a recall notices dated 14.12.2018 calling upon the defendants to discharge the liability. It is stated that as the defendants did not come forward to clear the dues the applicant issued demand notice dated 2.1.2019 under Section 13(2) of the SARFAESI Act. It is stated that the requests of the applicant to the defendants to clear the outstanding dues were in vain and hence the present application is filed for recovery of its dues.

8. The defendants filed their reply statement contending therein that the applicant relying on the photocopies of documents has filed this applicant and the same is therefore liable to be dismissed. It is stated that the claim of the applicant is false, vexatious and frivolous. It is also stated that the OA is filed by the applicant verified by its Senior Manager, Mr. S.S. Ramesh Prasad alleging to have valid power of attorney, however, no Power of Attorney has been annexed with the OA. It is further dated that the loan is secured by mortgage created by 3rd and 6th defendant and hence the loan account cannot be terms as clean loan. It is contended that the loan account was classified as NPA on 30.12.2017 in violation of RBI guidelines. It is also contended that the defendants 3 and 6 were deceived by applicant by procuring from them collateral security on 5.4.2017 and 01.12.2017 and declared the loans as NPA on 30.12.2017 itself. It is stated that this defendant denies that the stocks pledged with the bank was liquidated and sold in order to repay the loans upon realization of stocks. It is further contended that the applicant acted hastily in filing the applicant without providing sufficient time to the defendants to repay the said loans and the applicant has further failed to provide any rehabilitation facilities as stipulated by RBI. Thus contending the defendants prayed for dismissing the OA.

9. The applicant bank filed its proof affidavit along with 16 documents, which are marked as Exhibits A-1 to A-16, the details of which are as under: - S. No. Date Description of Documents Exhibit Nos.

1. 29.02.2016 Letter of Lodgment banker‟s lien by the applicant to the warehouse keeper A-1

2. 29.02.2016 Letter of assignment from the applicant to the warehouse keeper A-2

3. 02.03.2016 Sanction of the applicant to the 1st defendant. A-3

4. 02.03.2016 Demand Promissory Note for a sum of Rs.1,21,89,000/- by the 1st defendant. A-4

5. 02.03.2016 Letter of Lodgment of endorsed warehouse receipt by the 1st defendant A-5

6. 02.03.2016 Notice regarding banker‟s lien by the 1st defendant to the warehouse keeper A-6

7. 02.03.2016 Security delivery letter by 1st defendant to the applicant A-7

8. 02.03.2016 Comprehensive affidavit by the 1st defendant A-8

9. 02.03.2016 Agreement of guarantee by 2nd defendant A-9

10. 02.03.2016 Letter of Authority /Mandate letter by the defendants 1 and 2 in favour of the applicant A-10

11. 02.03.2016 Certificate regarding execution of documents by the defendants 1, 2 & 3 A-11

12. 30.03.2017 Agreement of guarantee by defendants 3, 4, 5 and 7 A-12

13. 05.04.2017 Deed of Simple mortgage registered as Doc. No.501 of 2017, SRO, Thirumayam by 3rd defendant. A-13

14. 30.03.2012 Deed of Settlement registered as Doc. No.1533 of 2012, SRO, Thirumayam by 4th defendant in favour of 3rd defendant A-14

15. 02.01.2019 Notice issued by the applicant under Section 13(2) of the Act A-15

16. 28.01.2019 Statement of Accounts along with certificates in support of the OA claim. A-16

10. The defendant did not choose to file their Counter Proof Affidavit despite availing sufficient opportunities and therefore the chance of filing Counter Proof Affidavit by the defendant was closed on 08.09.2023.

11. Heard the Ld. Counsel for the applicant. There was no representation on behalf of the defendants continuously and hence the Tribunal proceeded to pass order based on the averments in the reply statement. Perused the records.

12. 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?

13. 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-16. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-16 strenuously contended that the claim of the applicant stands established, as such, the applicant is entitled for a recovery certificate.

14. Ld. Counsel for Applicant Bank would further submit that even as per the Reply Statement filed, the defendants have not denied availing of credit facility, execution of documents and creation of mortgage and as such the said admission is sufficient enough to allow the claim of the applicant. Ld. Counsel would also submit that the amount claimed by the applicant is proper and the applicant has charged interest only at contractual rates and the applicant bank has also produced the statement of accounts duly certified under Bankers‟ Book

Evidence Act to substantiate the amount claimed by the applicant. Ld. Counsel would also contend that the defendants though filed their reply statement they did not choose to file the Counter Proof Affidavit and as such the claim of the applicant stands unrebutted and is sufficient enough to allow the claim of the applicant.

15. Here it is to be stated that as per the scheme of adjudication of a claim/counter under the RDB Act, parties shall file their respective affidavits/counter affidavits in support of their claim or counter claim as the case may be and the Tribunal shall on the basis of the affidavits filed, adjudicate and decide the claim/counter claim. Therefore, in the absence of Counter Proof Affidavit, the claim of the applicant stands unrebutted. Further, the applicant bank has filed the statement of accounts accompanied by certificates under Bankers‟ Book Evidence Act and therefore the claim of the applicants remains unrebutted.

16. 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 defendants. Further, the Tribunal on a careful perusal of the unrebutted Proof Affidavit of AW-1 besides Exhibits A-1 to A-16 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?

17. 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.

18. 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 instant loan is a warehouse loan and the lending rate had considerably come down, the Tribunal is of the view that the defendants are entitled for a reduced rate of interest. Therefore, under these circumstances, the Tribunal is inclined to grant pendente lite and future interest @ 14% p.a. simple on the OA claim amount from the date of filing till the date of realization. Point No.2 is answered accordingly.

20. In view of the afore mentioned discussions, the OA is disposed off in the following manner: - (a) TA No.206 of 2023 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.1,87,13,292.47p with further interest @14% per annum (simple) from the defendants jointly and severally from the date of filing of OA till realization in full, after deducting all the amounts received by them during the pendency of OA, and also by selling the other assets of the defendants as it is submitted by the applicant in the additional affidavit filed by it that the secured assets have been sold under SARFAESI Act.

(c) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant Bank, the defendants are 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 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 29th day of December, 2023)

Sd/- (T. RAJESH) PRESIDING OFFICER DRT-II, CHENNAI