INDIAN OVERSEAS BANK vs Anantha Paper Mills Pvt Ltd on 5 February 2019

ORDER

1. This Original Application has been filed by the applicant bank against the defendants 1 to 4 for recovery of a sum of Rs.15,99,70,431/- being the aggregate amount due together with interest thereon on Rs.11,33,09,804/- @16% p.a. with monthly rests in respect of Term Loan Account and a sum of Rs.4,66,60,627/- together with interest thereon @15.75% p.a. with monthly rests in respect of Cash Credit Account for sale of schedule mentioned properties, costs of the application and to pass such other or further orders as this Tribunal may deem fit and proper in the circumstances of the case.

2. This OA was taken up for hearing. Defendants 1 to 4 received summons and were initially represented by Ld. Counsel. Defendants were called in open court on 28.7.2014, they remained absent and hence were set ex-parte. Applicant Bank filed Proof Affidavit along with 93 documents which are marked as Ex. A-1 to A-93. Although it is found that the present procedure of conduct of the matters is after marking of documents, which are filed along with Proof Affidavit and Original Documents, this matter is considered differently as this matter was taken up earlier, at which point of time the procedure of marking documents through witness has not yet been implemented. Consequently documents are marked as exhibits as found in the Proof Affidavit and not through any witness as is the present practice in vogue. Thereafter the OA was finally heard and stood over till this day for passing final order.

3. The facts leading to filing of this OA may be tersely stated as follows: - (a) 1st defendant a Private Limited Company, represented by defendants 2 and 3 as its Directors are engaged in the business of manufacture, produce, process, import, export, buy, sell, distribute and act as Consultants, suppliers, dealers in all kinds of classes of papers, especially kraft papers, kraft liner paper, such other paper variety and all kinds of articles of manufacture in any form, paper, board or pulp is used and manufacture of paper of all kinds and articles made from the paper or pulp. The certificate of registration of 1st defendant company is marked as Ex. A-1.

(b) 1st defendant decided to take over the existing plant in the name of M/s Meridian Paper Mills Private Limited situated at No.178, 179, 180 and 181 of Erukkur Village, Sirkali Taluk, Nagapattinam District. 1st defendant approached the applicant bank for sanction of credit facilities by way of Term Loan for liquidating the liability outstanding by M/s Meridian Paper Mills Private Limited with Indian Bank, purchase of existing land and building, registration charges, purchase and installation of LG SV 160i H- 4U drive A/c sheets/Chimney etc., and Cash Credit Limit against hypothecation of paid stocks / book debts. Considering the said request, the Regional Office of Applicant Bank at Thanjavur vide its sanction letter dated 25.07.2012 (Ex.. A-2) sanctioned a Term Loan of Rs.10,00,00,000/- and Cash Credit Limit of Rs.4,00,00,000/- and the said sanction was communicated by the applicant to the 1st defendant vide its Credit Sanction Advice dated 27.07.2012 (Ex. A-3), which terms and conditions were acknowledged by the 1st defendant represented by defendants 2 and 3 as its Directors. The defendants 2 to 4 in their individual and person capacities stood as guarantors for the entire sanctioned limit of Rs.14,00,00,000/-

(c) The 1st defendant represented by defendants 2 and 3 as its Directors availed the Term Loan limit of Rs.10,00,00,000/- on and from 11.10.2012 and executed the following documents on 11.10.2012:-

(i) Demand Promissory Note for a sum of Rs.10,00,00,000/- promising to repay the said sum on demand either to the applicant or its order, together with interest thereon at the Base Rate of 10.50% plus 3.75% p.a. with a minimum of 14.25% p.a. from this date until payment in full with monthly rests or at such rates or rests as may be revised by the bank on its own or as per the instructions of RBI from time to time (Ex.A-4).

(ii) Letter of undertaking agreeing to repay the said amount with interest in 84 Equated Monthly Installments of Rs.11,90,500/- per month commencing from 30.11.2013 (Ex. A-5).

(iii) Term Loan Agreement duly hypothecating the machinery of M/s Meridian Paper Mills (P) Ltd., at Erukkur Village, Sirkali Taluk (S. Nos. 178, 179, 181 and 182 (Ex. A-6)

(iv) Letter of hypothecation (Ex. A-7)

(d) 1st defendant represented by defendants 2 and 3 as its Directors availed the Cash Credit Limit of Rs.4,00,00,000/- on and from 8.5.2013 and executed the following documents:-

(i) Demand Promissory Note for a sum of Rs.4,00,00,000/- promising to repay the said sum on demand either to the applicant or its order, together with interest thereon at the Base Rate of 10.25% plus 3.50% p.a. from this date until payment in full with monthly rests or at such rates or rests as may be revised by the bank on its own or as per the instructions of RBI from time to time (Ex.A-8).

(ii) Letter of continuity (Ex. A-9)

(iii) Letter of hypothecation (Ex. A-10) thereby hypothecating the stocks of waste boxes, chemicals such as alum, rosin, fire woods etc.

(iv) Hypothecation of book debts (Ex. A-11)

(v) Letter of hypothecation for a total sum of Rs.14,00,00,000/- duly hypothecating the stocks and machineries at Erukkur Village, Sirkali Taluk (Ex. A-12).

(vi) Letter of guarantee for the entire limit of Rs.14,00,00,000/- executed by defendants 2 to 4 (Ex. A-13).

(e) Besides these documents 1st defendant represented by defendants 2 and 3 executed balance confirmation letter in favour of applicant bank on 8.5.2013 duly admitting the correctness of statement of accounts and the amounts outstanding towards Term Loan Account as on 31.03.2013 (Ex. A-14).

(f) 1st defendant represented by defendants 2 and 3 deposited the title deeds in respect of the property more fully described in Schedule ‘B’ to the OA on 22.04.2013 with an intention to create equitable mortgage in favour of applicant bank and executed Memorandum of Deposit of Title deeds dated 23.4.2013 (Ex. A-15) registered as Doc. No.489 of 2013 on the file of SRO, Kollidam. The title deeds and other connected documents are marked as Ex. A-16 to A-43.

(g) Defendants 2 and 3 deposited the title deeds in respect of the property more fully described in Schedule ‘C’ to the OA belonging to them on 22.04.2013 with an intention to create equitable mortgage in favour of applicant bank and executed Memorandum of Deposit of Title deeds dated 23.4.2013 (Ex. A-44) registered as Doc. No.488 of 2013 on the file of SRO, Kollidam. The title deeds and other connected documents are marked as Ex. A-45 to A-72.

(h) 3rd defendant deposited the title deeds in respect of the property more fully described in Schedule ‘D’ to the OA belonging to her on 11.10.2012 with an intention to create equitable mortgage in favour of applicant bank and executed Memorandum of Deposit of Title deeds dated 26.4.2013 (Ex. A-73) registered as Doc. No.5008 of 2013 on the file of SRO,Ambattur, Chennai. The title deeds and other connected documents are marked as Ex. A-74 to A-83.

(i) After availing the credit facilities the defendants defaulted in repayments and failed to regularize the loan accounts despite repeated demands. The account was therefore classified as NPA on 30.10.2013 and applicant bank issued recall notice dated 11.02.2014 (Ex. A-84) and the same was acknowledged by the defendants (Ex. A-85 to A-88). Defendants sent a reply notice on 4.3.2014 admitting their liabilities and undertook to regularize the account within 60 days (Ex. A-89), to which applicant bank sent a rejoinder notice dated 12.3.2014 (Ex. A-90) calling upon the defendants to settle the entire outstanding. The defendants failed to settle the outstanding as undertaken.

(i) Thus the defendants are due and liable to pay the applicant bank a sum of Rs.11,33,09,804/- under the Term Loan Account and a sum of Rs.4,66,60,627/- under the Cash Credit Limit as evidenced by the statement of accounts marked as Ex. A-91 and A-92 respectively. The interest circular of the applicant bank is marked as Ex. A-93.

4. A careful examination of the pleadings in the Proof Affidavit and the documents viz., Exhibits A-1 to A-93 evidence that the borrowal of the credit facilities and execution of the loan and security documents are true, in terms of the averments made in the Original Application as well as the PA filed by the Applicant establishing its claim. The applicant filed Statement of accounts duly certified under the Bankers’ Book Evidence Act, evidencing the amount claimed against the defendant. The defendants were set ex-parte on 28.07.2014, but till this day did not take any action to set aside the ex-parte order and did not choose to contest the claim. Further, a careful scrutiny of records makes it clear that the present application is filed well within the limitation and this Tribunal possess necessary and proper jurisdiction to entertain and adjudicate the claim. No oral or documentary evidence on the side of the defendants is produced or filed to dispute the claim of the bank. The defendants neither confronted nor rebutted the documents produced and relied upon by the applicant. Hence it can be concluded that the applicant has proved its claim against the defendants.

5. On perusal of the papers it is observed that the levy of interest from time to time in the Term Loan Account as well as the Cash Credit Limit was not serviced during the moratorium period which is one of the sanction terms, owing to which the account came to be classified as a NPA even before the conclusion of the moratorium period in terms of the memo dated 20.9.2017. Learned Counsel for Applicant Bank therefore submits that the bank is rightful in declaring

the account as NPA, which is only owing to the result of the default by the borrowers which is still continuing even to date. Applicant Bank had also furnished statement of accounts evidencing that subsequent to the date of NPA no interest has been capitalised in accordance to the RBI guidelines.

6. In view of what has been discussed above, it is observed that the applicant has proved its OA claim against the defendants and the applicant is entitled to a Recovery Certificate in the OA in terms of the direction given below.

7. In the result, it is declared that: -

(a) The applicant is entitled for a Recovery Certificate as against the defendants for a sum of Rs.11,33,09,804/- (Rupees Eleven crores thirty three lakhs nine thousand eight hundred four only) under the Term Loan Account together with future interest @8% per annum simple on the amount as determined above and remained unpaid from the date of this OA till the date of its realization with costs.

(b) The applicant is entitled for a Recovery Certificate as against the defendants for a sum of Rs.4,66,60,627/- (Rupees Four crores sixty six lakhs sixty thousand six hundred twenty seven only) under the Cash Credit Limit together with future interest @ 8% per annum simple on the amount as determined above and remained unpaid from the date of this OA till the date of its realization with costs.

(c) It is further ordered that any amount remitted by the defendants or realised by the applicant bank during the pendency of this OA, shall be given due credit to the respective loan account of the defendant.

(d) It is ordered that in case of default by the defendants to pay the amount adjudged, applicant bank is entitled to bring all or that part of the schedule mentioned properties to sale to answer the claim of the Recovery Certificate and appropriate the sale proceeds towards the amount due.

(e) If the sale proceeds are not found sufficient after defraying the expenses of such sale for the payment of all such amounts, the defendants 2 and 3 are personally liable for the deficiency of the adjudged amount with interest and costs until realisation.

(f) The schedules to the OA shall form part of the order.

8. It is further ordered that 15 days time is granted to the applicant bank to file costs memo from the date of receipt of this order, to enable the Registry to prepare the recovery certificate as directed above. If in case, the cost memo is not filed within the above mentioned time, Recovery Certificate be prepared based on the available records and forwarded to the Recovery Officer for execution in accordance with law.

9. Recovery Certificate be prepared as per the directions given above of this final order and issued accordingly. A copy of the order be communicated to the parties concerned as per the extant guidelines. (Dictated to the Stenographer transcribed by him and after necessary corrections, signed and pronounced by me in the Open Court on this the 5th day of February, 2019)

Sd/- (GANAPATHI K.R.K) PRESIDING OFFICER