HDFC BANK vs VGS Management Facilities P Ltd on 31 January 2019

ORDER

1. This application is filed by the applicant bank under Section 19 of Recovery of Debts and Bankruptcy Act (formerly Recovery of Debts Due to Banks and Financial Institutions Act, 1993) against the defendants for recovery of a sum of Rs. 16,67,683.49p (Rupees Sixteen Lakhs Sixty Seven Thousand Six Hundred Eighty Three and Paisa Forty Nine only) as on 16.10.2017 along with further interest @ 15.49% p.a. from the date of filing of the OA till the date of realization in full along with costs of this application.

2. Brief facts of Application are as follows:

2.1. According to the applicant bank, The Defendants M/s. VGS Management Facilities, represented by its Managing Director & V. Gunasekaran along with R. Venkatachalam approached the Applicant bank seeking for a Business Loan and submitted the requisite documents. The said R. Venkatachalam had demised after execution of the loan agreement dated 20.02.2015 and disbursal of the loan amount, this fact was known to the applicant bank only after the legal notice dated 17.10.2017 returned with an endorsement “Deceased”. The said R. Venkatachalam is the father of the second defendant herein and hence the deceased person R.Venkatachalam name is not included as a defendant to this original application.

2.2. The loan application form dated 22.01.2015 was submitted by the defendants towards the loan account 31650326 and in pursuance of the above, the Applicant granted a Loan for a sum of Rs.30,00,000/- (Rupees Thirty Lakhs only) towards the loan account 31650326 to the defendants herein and R.Venkatachalam, under the terms and conditions of the loan agreement dated 20.02.2015 which was expressly executed by the defendants herein and the R.Venkatachalam, who stood as a Co-borrower to the said loan account. Further the defendants herein and Mr. R. Venkatachalam executed a demand promissory note, Post Dated Cheque Acknowledgment Letter & Customer SI Debit Authorization form in this regard.

2.3. The applicant bank further stated that as mentioned earlier the 2nd Defendant is one of the legal heir of the deceased R.Venkatachalam. The said loan amount was disbursed to the defendants for the purpose of their business obligations. As per the stipulated terms and conditions of the said Loan agreement, the Defendants are bound to repay the aforementioned loan amount along with interest thereupon @15.49% p.a., in 48 equal monthly installments (EMI) of Rs.84,239/- each. It is pertinent to note here that the EMI due commences from 04.03.2015 and ends at 04.02.2019.

2.4. The applicant bank further stated that the Defendants failed/avoided to adhere to the terms and conditions of the payment as contemplated in the loan agreement and in fact defaulted in paying the installments on the scheduled dates. It is further stated that many of the monthly installments were dishonored on the scheduled dates.

2.5. Hence, the applicant bank filed the present OA and prays for an order, also for costs of the application and to render justice.

3. Brief of Defendants 1 & 2 is as follows:

3.1. In the reply filed by the defendants, it is alleged that the OA claim is not at all maintainable either in law or on facts and the same is liable to be dismissed. It is stated that the 1st defendant is engaged in providing man power facilities to the corporate companies and also provides security persons to the corporate companies and received service charges from them. The applicant bank sanctioned a loan of Rs.30 lakhs and entered into the loan agreement on 20.2.2015. The 1st installment commenced on 4.3.2015 and ends on 4.2.2019. The defendants were regular in payment of monthly installments and due to demonetization the clients of the defendants stopped their payments due to the defendant’s, hence there was some delay in repayment of installments. So far the defendants have paid 19 EMIs and totally repaid a sum of Rs.16,00,541/- , but the applicant bank failed to give proper credit to the said loan account. The applicant bank vide letter dt. 12.7.2017 addressed to the 1st defendant stated that there is a sum of Rs.17,26,846.38p due and payable. Subsequently the applicant bank issued a legal notice dt. 17.10.2017 wherein the balance amount was shown as Rs.16,67,683.40p.

3.2. It is further stated that the defendants approached the applicant bank and requested to give some time to regularize the loan account. But the applicant failed to consider the request. Even after filing the OA the defendants paid a sum of Rs.30,000/- towards the loan account. The claim made is not only illegal but also exorbitant and liable to be rejected.

3.3. Thus contending the defendants prays for dismissal of the OA.

4. In the light of the aforesaid contentions, the points that arise for consideration are :

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?

5. Perused the records, written statement filed by the defendants.

6. Point 1: “Whether the applicant bank has established its claim against the defendants, if so, for what amount ?

6.1. According to the ld. Counsel for the applicant bank, proof affidavit of AW-1, besides Exhibits A-1 to A-10 firmly establishes the case of the applicant bank, as such the applicant bank is entitled for a recovery certificate. Ld. Counsel also drawn the attention of the Tribunal to the reply statement filed by the defendant and stated that the same contains categorical admission of availing of credit facilities by the defendants besides the default committed in repayment of the same. Ld. Counsel further stated that the plea of the defendants that the EMIs paid were not properly accounted for is false and baseless as what ever EMIs were paid were duly reflected in the statement of account. Thus contending, ld. Counsel prayed the Tribunal to allow the OA.

6.2. The defendants in their reply statement while categorically admitting availing of credit facilities and repayment of some EMIs, contended that substantial payment made by them were not duly reflected in the statement of account as such the applicant is not entitled for the OA claim. Thus contending, ld. Counsel for the defendants prayed for dismissal of the OA with costs.

6.3. In the light of the contest aforesaid, the Tribunal has carefully perused the reply statement, counter proof affidavit besides additional counter proof affidavit filed by the defendants. While there is no dispute that the defendants have admitted availing of credit facilities from the applicant bank, later committed default, the defendants would contend that substantial payments made by them were not duly reflected in the statement of account as such the applicant is not entitled for the OA claim. This plea of the defendants however is denied by the applicant bank, by placing reliance on the statement of account, which is filed alongwith the OA as well as proof affidavit ( Exh. A10 ). Therefore, when the applicant had denied the plea that it had not duly accounted certain payments purportedly made by the defendants and in support of the said plea filed the statement of account, it is for the defendants to state what are the amounts paid, how the said payments were effected, and what payments are not reflected in the statement of account. In the reply statement, except stating that certain amounts were paid, the defendants have not placed any material substantiating the plea of alleged payments, and non reflection of the same in the statement of account. Therefore, in the absence of any material as to the proof of payment of the amounts as averred in the reply statement, the plea that the amounts paid were not properly reflected in the statement of account cannot be accepted. That apart, the defendants have not denied Exh. A-10, the statement of account filed by the applicant bank. Therefore, the Tribunal is not inclined to accept the plea that the applicant bank has not properly accounted certain payments made. Baring this plea, there is no other plea worth has been raised.

6.4. The Tribunal, therefore, having carefully perused the proof affidavit, Exhibits A-1 to A-10, coupled with the admissions made in the reply statement by the defendants, is satisfied that the applicant bank has established its claim against the defendants, as such is entitled for a recovery certificate. Point is answered accordingly.

7. Point 2. Whether the applicant bank is entitled for pendent lite and future interest, if so, at what rate?

7.1. While the applicant bank contends that it is entitled for contractual rate of interest till the amount due is fully discharged by the defendants, however, ld. Counsel for the defendants would contend that in so far as pendente lite and future interest is concerned, the applicant bank is not entitled for contractual rate of interest. The Tribunal in terms of Sec. 19(20) of RDB Act is empowered to intervene in the contractual rate of interest in so far as it relates to pendente lite and future interest. Hon’ble Supreme Court, in its judgement (reported in II 2009 BC pg. 696) in the matter of State Bank of India – vs – Sarathi Textiles, held that Sec. 19 (20) of the RDDB & FI Act has held that; “ Prima facie, Sub-Section (20) of Sec. 19 confers a discretion on the Tribunal to award interest on an application being filed as it thinks fit to meet the ends of justice. That being so, in the case in hand, we see no justification for interference by this Court under Article 136 of the Constitution of India, against the appellate order of the Tribunal. This petition accordingly stands dismissed. “

The applicant bank claimed interest at contractual rate of interest in the claim made in the OA, which has been allowed by the Tribunal. Therefore, in so far as pendente lite and future interest is concerned, the Tribunal is not inclined to award contractual rate of interest, hence interest at the rate of 12% p.a. simple is awarded from 17.10.2017 till the date of realization. The point is answered accordingly.

8. Therefore, the applicant bank is entitled for a recovery certificate against the defendants for recovery of a sum of Rs. 16,67,683.49p (Rupees Sixteen Lakhs Sixty Seven Thousand Six Hundred Eighty Three and Paisa Forty Nine only) along with further interest @ 12% p.a. simple from 17.10.2017 till the date of realization in full. The applicant bank is also entitled for costs.

9. In the result, application is allowed as under:

(a) The applicant bank is entitled for a recovery certificate against the defendants for recovery of a sum Rs. 16,67,683.49p (Rupees Sixteen Lakhs Sixty Seven Thousand Six Hundred Eighty Three and Paisa Forty Nine only) along with further interest @ 12 % p.a. from 17.10.2017 till date of realization in full.

(b) It is further ordered that in case of default of payment by the defendants, the 2nd defendant is personally liable for all such amounts due.

(c) It is further ordered that any amount remitted or realized, if any, during the course of the proceedings, shall be given due credit to the loan account of the defendants.

(d) The applicant bank is also entitled for costs from the defendants.

10. The applicant bank is directed to file costs memo within two weeks of the receipt of this order.

11. Issue recovery certificate in favour of the applicant bank in terms of this final order.

12. Communicate a copy of the order to the parties concerned in terms of Rule 16 read with Rule 2(c) of DRT (Procedure) Rules, 1993. (Dictated to PS, transcript, corrected, signed and pronounced by me in the Open Court, this 31st day of January , 2019)

Sd/- (N.V. BADARINATH) PRESIDING OFFICER DRT-I, CHENNAI