CANARA BANK vs M/s. Aravind Lakshmi Ceramics 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 for recovery of an aggregate sum of Rs.6,14,40,915/- comprising a sum of Rs.5,63,78,675/- together with interest at the rate of 11.95% per annum with monthly rests being the amount due under Open Cash Credit Account; a sum of Rs.9,36,258/- together with interest at the rate of 11.65% per annum with monthly rests being the amount due under Term Loan Account-I; and a sum of Rs.41,25,982/- being the amount due under Term Loan Account-II from 20.05.2019 till the date of realization in full along with costs of this application and for schedule of properties..

2. The above Original Application is filed before DRT-I Chennai and stood transferred to this Tribunal and renumbered as above.

3. The case of the applicant can be encapsulated as follows: - The 1st defendant carrying on business under the name and style as M/s Aravind Lakshmi Ceramics as its Proprietor, engaged in the business of wholesale distributors of titles, sanitary wares, syntax door, white cement etc., approached the applicant with loan application dated 29.11.2007 seeking credit facilities for its business. Considering the said request the applicant vide sanction letter dated 18.12.2007 sanctioned Open Cash Credit Limit of Rs.25 lakhs and Term Loan of Rs.25 lakhs. The said limit was secured by personal guarantee of the 3rd defendant herein and also by way of equitable mortgage of immovable property belonging to the 1st defendant.

At the request of the 1st defendant vide loan application dated 15.09.2008 requested for grant of additional Term Loan and the applicant vide sanction dated 19.9.2007 enhanced the term loan limit by Rs.10 lakhs and thereby the total limits was enhanced from Rs.50 lakhs to Rs.60 lakhs.

At the request of the 1st defendant the Cash Credit Limit was again enhanced to Rs.70 lakhs on 11.9.2009 and then to Rs.75 lakhs on 4.6.2010 thereby enhancing the total limits to Rs.110 lakhs.

The 1st defendant vide loan application dated 18.4.2011 the cash credit limit was enhanced from Rs.115 lakhs to Rs.150 lakhs. It is stated that the said limits are secured by the equitable mortgage of the immovable property belonging to defendants 1 to 3.

The 1st defendant vide loan application dated 14.11.2011 seeking enhancement of cash credit facility from 1st defendant and the applicant enhanced the Open Cash Credit Limit from Rs.175 lakhs to Rs.210 lakhs vide letter dated 6.1.2012. The said limit was further enhanced to Rs.250 lakhs vide sanction dated 4.2.2013, thereby enhancing the total limit to Rs.285 lakhs.

Further at the request of the 1st defendant dated 7.11.2013, 11.11.2013 and 16.12.2013 for enhancement of Cash Credit Limit and sanction of Fresh Term Loan for repairs and renovation of the show room. The applicant vide sanction letter dated 8.1.2014 enhanced the Open Cash Credit Limit of Rs.300 lakhs up to 23.12.2014 and Fresh Term Loan of Rs.45 lakhs was also sanctioned and disbursed. Again at the request of the 1st defendant, the applicant vide sanction letter dated 10.3.2014 enhanced the Open Cash Credit Limit up to Rs.400 lakhs.

Again at the request of the 1st defendant vide loan application dated 7.1.2016 seeking enhancement of the Cash Credit Limit, the applicant vide sanction dated 15.2.2016 enhanced the open cash credit limit to Rs.430 lakhs and Fresh Term Loan of Rs.45 lakhs was also sanctioned and disbursed.

It is stated that the above credit facilities are secured by the continuing guarantee executed by defendants 2 and 3 and the equitable mortgage over the Schedule ‘B’, ‘C’ and ‘D’ immovable properties created by defendants 1 to 3 and also by the Schedule ‘A’ property. The defendants also executed necessary loan and security documents on 18.12.2007, 19.09.2008, 11.09.2009, 04.06.2020, 18.04.2011, 12.01.2012, 06.02.2013, 22.01.2014, 11.03.2015, 17.02.2016 and 19.11.2018.

At the request of the 1st defendant the applicant vide sanction dated 18.7.2016 sanctioned an adhoc limit of Rs.20 lakhs and further adhoc limit of Rs.40 lakhs and the 1st defendant executed loan documents on 19.07.2016 and 08.12.2016 respectively.

4. It is further stated that even though the defendant had obliged to repay the amount promptly and regularly, but failed to do so resulting in default in repayment and hence the account was classified as NPA on 02.05.2018.

5. It is contended by the applicant that the applicant’s officials had on many occasions viz., 25.04.2017, 03.08.2018, 07.08.2018 and 21.08.2018 approached the defendants requesting them to regularize the account and despite the same no effort was made by the defendants to get the account regularized or to pay back the amount. Therefore applicant issued recall notice on 31.8.2018; demand notice under Section 13(2) of the SARFAESI Act on 17.09.2018 followed by possession notice dated 19.11.2018 and 09.01.2019. The applicant issued fresh possession notices on 29.04.2019 as the boundaries were not properly mentioned in the earlier possession notices. The 1st defendant executed acknowledge of debt and security on 4.6.2010, 18.4.2011, 12.1.2012, 6.2.2013, 21.1.2014, 11.3.2015, 17.2.2016 and 19.11.2018 in respect of cash credit facility and on 17.2.2016 and 19.11.2018 in respect of Term Loan account

6. It is also the case of the applicant that despite repeated reminders and requests the defendant failed to make the repayment forcing the applicant to file this OA seeking recovery of the amount due in the account with further interest and costs.

7. It is the further case of the applicant that the defendants were initially represented by Ld. Counsel, they did not choose file reply statement and hence the chance for filing reply statement was closed on 9.9.2019. Further as there was no representation on behalf of defendants, they were called absent and set ex-parte on 20.10.2023.

8. The applicant had let in evidence through AW-1, who had sworn to a Proof Affidavit in terms of the pleading in the OA and also produced Exhibits A-1 to A-162 and got the same marked in evidence.

9. 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.

10. The following issues arise for consideration in this matter: -

(i) Whether the applicant had succeeded in proving the OA claim as against the defendants?

(ii) What orders are to be passed?

Both these issues are gone into and decided together.

11. 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.

12. In the present OA, the applicant bank filed IA No. 694 of 2019 seeking to appoint an Advocate Commissioner to take inventory and possession of the machineries and other movables as mentioned in the schedule to the petition, sell the same and credit the sale proceeds thereof to the credit of loan account after defraying the expenses and this Tribunal vide its order dated 1.7.2019 appointed an Advocate Commissioner for accomplishing the said task. The Advocate Commissioner filed his interim report stating that the said premises had only scrap items, damaged tiles and ceramic items and hence inventory and possession of the said scheduled property was not done and hence the warrant issued stood executed.

13. During the pendency of the OA, the applicant filed a part satisfaction memo in SR No.12547/2019 dated 02.12.2019 stating therein that the applicant had brought the Schedule ‘C’ and ‘D’ properties to the sale on 19.9.2019 and realized a sum of Rs.51,51,000/- and the same was credited to the loan account.

14. In view of the fact that the subject loan is a loan facility availed by the defendants for its business purpose and the applicant has charged interest at contractual rates till the date of filing and further as the interest rates have come down the Tribunal is inclined to reject the interest with monthly rests and award simple interest 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, TA is disposed off in the following manner: - (a) TA No.836 of 2023 stands allowed.

(b) Applicant is permitted to realize an aggregate amount of Rs.6,14,40,915/- with future and pendentelite interest @11% p.a., simple from the defendants jointly and severally, from the date of filing of the OA till realization, after deducting all the amounts received by them during the pendency of OA, and also by selling the schedule mentioned 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 defendants are personally liable for all such amounts due under the Loan Accounts.

(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.

14. 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