Union Bank of India vs J. 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 jointly and severally for recovery of an aggregate sum of Rs.3,97,29,625/- in the following manner from the date of filing of the OA till date of its realization along with costs of the application and sale of schedule properties: -

(i) A sum of Rs.30,60,870/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 1 and 18 being the amount due under loan account No.560931000022061) availed by the 1st defendant;

(ii) A sum of Rs.21,58,248/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 1 and 18 being the amount due under loan account No.560931000022673) availed by the 1st defendant;

(iii) A sum of Rs.21,58,248/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 2 and 18 being the amount due under loan account No.560931000022622) availed by the 2nd defendant;

(iv) A sum of Rs.21,58,248/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 3 and 18 being the amount due under loan account No.560931000022649) availed by the 3rd defendant;

(v) A sum of Rs.21,58,248/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 4 and 18 being the amount due under loan account No.560931000022657) availed by the 4th defendant;

(vi) A sum of Rs.21,58,248/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 5 and 18 being the amount due under loan account No.560931000022665) availed by the 5th defendant;

(vii) annum (inclusive of 2% overdue interest) with quarterly rests from defendants 6 and 18 being the amount due under loan account No.560931000022681) availed by the 6th defendant;

(viii) A sum of Rs.21,58,012/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 7 and 18 being the amount due under loan account No.560931000022691) availed by the 7th defendant;

(ix) A sum of Rs.21,58,248/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 8 and 18 being the amount due under loan account No.560931000022703) availed by the 8th defendant;

(x) A sum of Rs.21,58,012/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 9 and 18 being the amount due under loan account No.560931000022711) availed by the 9th defendant;

(xi) A sum of Rs.21,55,654/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 10 and 18 being the amount due under loan account No.560931000022721) availed by the 10th defendant;

(xii) A sum of Rs.21,55,654/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 11 and 18 being the amount due under loan account No.560931000022746) availed by the 11th defendant;

(xiii) A sum of Rs.21,55,654/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 12 and 18 being the amount due under loan account No.560931000022754) availed by the 12th defendant;

(xiv) A sum of Rs.21,55,654/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 14 and 18 being the amount due under loan account No.560931000022770) availed by the 14th defendant;

(xv) A sum of Rs.21,55,654/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 15 and 18 being the amount due under loan account No.560931000022789) availed by the 15th defendant;

(xvi) A sum of Rs.21,55,654/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 16 and 18 being the amount due under loan account No.560931000022797) availed by the 16th defendant;

(xvii) A sum of Rs.21,55,654/- together with interest at the rate of 13.25% per annum (inclusive of 2% overdue interest) with quarterly rests from defendants 17 and 18 being the amount due under loan account No.560931000022800) availed by the 17th defendant;

2. The subject matter of the case is the “Short Term Agricultural Loans” availed by the defendants 1 to 17 from the erstwhile applicant bank.

3. It is the case of the applicant that the defendants 1 to 17 availed Short Term Agricultural Term Loans for aforementioned amounts from the applicant bank and the said loans were provided for the purpose of financing harvesting and other related activities of sugarcane harvest work in the selected working areas through the 18th defendant. It is also the case of the applicant that the 18th defendant stood as Corporate Guarantor and requested the applicant bank to grant financial assistance to defendants 1 to 17 for the aforesaid purpose.

4. It is also the case of the applicant that the 18th defendant represented that the defendants 1 to 17 are sugarcane cutting labourers working in Thirumandankudi Zone and also functions as registered cane Harvest Gang Leaders in their Mill. It is the further case of the applicant that the 18th defendant requested the applicant to provide Short Term Loan to defendants 1 to 17 for the purpose of providing wages to the cane cutting labourers under them and also for other harvest related work. It is stated that the 18th defendant requested the applicant to sanction loan to the Team Leaders against their earnings accruing from such cane harvest payments which is recovered from cane cost from the individual ryots. It is also stated that the 18th defendant also undertook to repay the loan amount with interest from the amount retained / withheld from the agriculturists towards the sugarcane cutting charges. It is further stated 18th defendant gave an undertaking that the loan amount to be granted to the defendants 1 to 17 would be covered under the Corporate Guarantee on 03.03.2014 in favour of applicant. It is stated that the 18th defendant requested and recommended for grant of loan to the 1st defendant a sum of Rs.20,00,000/- and Rs.15,00,000/-; defendants 2 to 17 herein a sum of Rs.15,00,000/- each as Short Term Loan and the defendants herein executed various loan documents.

5. It is also the case of the applicant that the defendants 1 to 17 submitted their respective Loan Application requesting the applicant for grant of Short Term Loans and considering the said request the applicant vide sanction letter dated 11.02.2015, 27.07.2015 and 31.07.2015. It is stated that the defendants 1 to 17 executed common deed of hypothecation of movables / Assets / Debts on 11.02.2015, 27.07.2015 and on 31.07.2015. It is also stated that the Board of Directors of the 18th defendant company passed a resolution on 03.03.2014 resolving to issue a Corporate Guarantee for a sum of Rs.45,00,00,000/- in favour of applicant as security for the credit to be extended to cane harvesters and executed a Corporate Guarantee Agreement on 03.03.2014 in favour of the applicant.

6. It is the case of the applicant that the defendants failed to adhere to the repayment schedule and failed to make payment as agreed upon under the sanction letters or otherwise and despite repeated demands failed to regularize the loan account and hence the loan accounts were classified as NPA on 31.03.2018. However, in the interregnum the defendants 1 to 17 executed acknowledgement of debt on 31.01.2018. It is stated that the applicant thereafter issued legal notice dated 3.7.2018 to the 1st defendants and on 10.05.2018 to the defendants 1 to 18.

7. 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 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 as there was no representation on behalf of the defendants 1 to 18 they were called absent and set ex-parte on 18.11.2019. Applicant Bank filed Proof Affidavit along with 159 documents, which were marked as Exhibits A-1 to A-159 on 13.10.2023, however Exhibits A- 1 to A-6, A-152 to A-159 were marked subject to proof. The Ld. Counsel for Applicant Bank made his submissions on 08.12.2023 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-159 along with the proof affidavit and got the same marked in evidence.

12. Heard the Ld. Counsel for the Applicant and considered the contentions as taken in the OA in the light of documentary evidence and proof affidavit.

13. The case put forth by the applicant in the Application remains unrebutted as defendants remained ex-parte. The evidence tendered by the applicant remains uncontroverted and undisputed. The evidences put forth by the applicant were found admissible. From the statement of accounts as produced by the applicant, it is evident that the amount as claimed in the OA is outstanding in the account, which the applicant is entitled to get recovered from the defendants and their assets. The claim of the applicant is well within the period of limitation and there is no capitalization of penal interest.

14. In view of the fact that the subject loan is a loan provided for the purpose of financing harvesting and other related activities of sugarcane harvest work based on the recommendation and Corporate Guarantee of the 18th defendant this Tribunal is not inclined to interfere with the interest rate claimed by the applicant, however, proceeds to disallow the prayer for grant of 2% penal interest.

15. During the pendency of the application before this Tribunal, the applicant filed a memo stating therein that in an application filed by a financial creditor State Bank of India under Section 7 of the Insolvency and Bankruptcy Code, 2016, the NCLT Bench-II Chennai has initiated Corporate Insolvency Resolution process as against the Corporate Debtor, the 18th defendant herein and an order for liquation was passed on 8.4.2021 and appointed Official Liquidator to carry out Liquation proceedings in respect of the Corporate Debtor. It was also stated therein that the NCLT by its order dated 02.05.2022 approved the Scheme of Compromise or Arrangement submitted by one M/s KALS Distilleries Private Limited for take over of assets and properties of the 18th defendant and sanctioned the Insolvency Resolution Proposal submitted by the said KALS Distilleries Pvt. Ltd., It was further stated therein that the applicant is an unsecured financial creditor and the total admitted claim of the applicant in respect of various loans granted to sugarcane harvesters at the instance and recommendation of the 18th defendant comes to Rs.7455.90 lakhs and out of which an amount of Rs.37.28 lakhs (0.5%) is provided for as full and final settlement of the entire dues and the same was also paid to the applicant in installments. Thus submitting the applicant prayed fir recording the above orders passed by NCLT, Chennai against 18th defendant and prayed for permitting the applicant to proceeds with the OA as against the principal borrowers, defendants 1 to 17.

16. 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, TA is disposed off in the following manner: - (a) TA No.507 of 2022 stands allowed.

(b) Applicant is permitted to realize a sum of Rs.5,25,34,931.79p with further interest at the rate of 16.75% per annum with monthly rests from 18.10.2019 till date of realization from the defendants, after deducting all the amounts received by them during the pendency of OA, and also by selling the other assets of the respective defendants in the following manner:

(i) A sum of Rs.30,60,870/- from the 1st being the amount due under loan account No.560931000022061) availed by the 1st defendant;

(ii) A sum of Rs.21,58,248/- from defendants 1st being the amount due under loan account No.560931000022673) availed by the 1st defendant;

(iii) A sum of Rs.21,58,248/- from the 2nd defendant being the amount due under loan account No.560931000022622) availed by the 2nd defendant;

(iv) A sum of Rs.21,58,248/- from the 3rd defendant being the amount due under loan account No.560931000022649) availed by the 3rd defendant;

(v) A sum of Rs.21,58,248/- from the 4th defendant being the amount due under loan account No.560931000022657) availed by the 4th defendant;

(vi) A sum of Rs.21,58,248/- from the 5th defendant being the amount due under loan account No.560931000022665) availed by the 5th defendant;

(vii) A sum of Rs.21,58,012/- from the 6th defendant being the amount due under loan account No.560931000022681) availed by the 6th defendant;

(viii) A sum of Rs.21,58,012/- from 7th defendant being the amount due under loan account No.560931000022691) availed by the 7th defendant;

(ix) A sum of Rs.21,58,248/- from the 8th defendant being the amount due under loan account No.560931000022703) availed by the 8th defendant;

(x) A sum of Rs.21,58,012/- from the 9th defendant being the amount due under loan account No.560931000022711) availed by the 9th defendant;

(xi) A sum of Rs.21,55,654/- from the 10th defendant being the amount due under loan account No.560931000022721) availed by the 10th defendant;

(xii) A sum of Rs.21,55,654/- from the 11th defendant being the amount due under loan account No.560931000022746) availed by the 11th defendant;

(xiii) A sum of Rs.21,55,654/- from the 12th defendant being the amount due under loan account No.560931000022754) availed by the 12th defendant;

(xiv) A sum of Rs.21,55,654/- from the 13th defendant being the amount due under loan account No.560931000022762) availed by the 13th defendant;

(xv) A sum of Rs.21,55,654/- from the 14th defendant being the amount due under loan account No.560931000022770) availed by the 14th defendant;

(xvi) A sum of Rs.21,55,654/- from the 15th defendant being the amount due under loan account No.560931000022789) availed by the 15th defendant;

(xvii) A sum of Rs.21,55,654/- from the 16th defendant being the amount due under loan account No.560931000022797) availed by the 16th defendant;

(xviii) A sum of Rs.21,55,654/- from the 17th defendant being the amount due under loan account No.560931000022800) availed by the 17th defendant;

(c) It is made clear that the defendants 1 to 17 are personally liable for all such amounts due under the Loan Account.

(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.

18. 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