Canara Bank vs M/s Savi Furnitures 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.27,66,257/- with further interest at the rate of 17.35% per annum with monthly rests from the date of filing of the application till the date of realisation along with costs of the application.

2. It is the case of the applicant that the 1st defendant represented by the 2nd defendant as its Proprietrix, approached the applicant for grant of credit facility towards Working Capital requirement vide application dated 22.06.2017 and the applicant considering the said request vide sanction dated 04.07.2017 sanctioned Secured Overdraft Limit of Rs.25,00,000/-. It is also the case of the applicant that the defendants executed necessary loan and security documents on 4.7.2017. 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 27.12.2018. It is also stated that since the defendants have been evading discharging their liability the applicant sent a recall notice dated 13.12.2018 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 legal notice dated 3.5.2019 requesting them to clear the outstanding dues. It is further 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.

3. The defendants filed their reply statement contending therein that the OA is liable to be dismissed. It is stated that the defendants had approached the applicant bank vide loan application dated 22.6.2017 for sanctioning a sum of Rs.50,00,000/-, however, the applicant sanctioned only a sum of Rs.25,00,000/-

leaving defendants in a very bad financial position and hence could not revive the business and suffered huge loss. It is also stated that the applicant classified the loan account as NPA without intimating them and also proceeded to take legal action. It is further stated that the requests of the defendants for restructuring the loan was not considered by the applicant. It is stated that the applicant also neglected the request of the defendants for grant of moratorium period. It is contended that the applicant instead of extending helping hand had rushed to this Tribunal with this application. The defendants thus submitting prayed for dismissal of the application.

4. The applicant bank filed its proof affidavit along with 8 documents, which are marked as Exhibits A-1 to A-8, the details of which are as under: - S. No. Date Description of Documents Exhibit Nos.

1. 22.06.2017 Loan Application submitted by 1st defendant for grant of loan of Rs.50,00,000/- A-1

2. 04.07.2017 Sanction letter of the applicant bank for a sum of Rs.25,00,000/- A-2

3. 04.07.2017 Composite Hypothecation Agreement executed by the 1st defendant represented by 2nd defendant A-3

4. 04.07.2017 Demand Promissory Note for a sum of Rs.25,00,000/- executed by the 1st defendant represented by 2nd defendant. A-4

5. 04.07.2017 Agreement to open overdraft facility of Rs.25,00,000/- executed by the 1st defendant represented by 2nd defendant A-5

6. 13.12.2018 Recall notice issued by the applicant. A-6

7. 03.05.2019 Legal notice sent to the defendants along with AD cards and returned cover A-7

8. Statement of Accounts A-8

5. The defendants 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 04.09.2023.

6. 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.

7. 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?

8. The applicant bank in its endeavor to establish its claim against the defendants examined its official as AW1 and got marked exhibits Ex.A-1 to A-8. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-8 strenuously contended that the claim of the applicant stands established, as such, the applicant is entitled for a recovery certificate.

9. 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.

10. 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.

11. 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-8 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?

12. 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.

13. 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 TA. 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 business 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.

14. In view of the afore mentioned discussions, the OA is disposed off in the following manner: - (a) TA No.482 of 2023 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.27,66,257/- 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.

(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 the order.

(e) The Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of this final order.

15. 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