EQUITAS SMALL FINANCE BANK LIMITED vs M/S NANDHINI DIARY FARM on 2 September 2026

: - FINAL ORDER- :

1. This Original Application is filed on 27.01.2021 by the applicant bank under Section 19 of Recovery of Debts and Bankruptcy Act, 1993 (formerly Recovery of Debts Due to Banks and Financial Institutions Act, 1993) against the defendants 1 and 2, jointly and severally for recovery of a total sum of Rs.50,94,586/- (Rupees Fifty Lakhs Ninety Four Thousand Five Hundred and Eighty Six only) due in respect of Overdraft Facility (A/c No.200000969314) repayable together with further interest @12.50% p.a. with monthly rests from the date of Application till the date of realization in full, for sale of movable assets morefully detailed in schedule to the OA and for costs of this OA.

2. Originally, this Application was filed before DRT-II, Chennai, assigned OA No. 88 of 2021, and thereafter in pursuance to the notification from Ministry of Finance, DFS dated 04.10.2022, OA No. 88 of 2021 stood transferred to this Tribunal and renumbered as TA No. 1242 of 2023. Brief Facts of the case:

3. The Applicant submits that the application is filed within the period of limitation as prescribed under Section 24 of the Recovery of Debts and Bankruptcy Act, 1993, and the subject recovery claim falls within the jurisdiction of this Hon’ble Tribunal.

4. It is the case of the applicant bank that on 27.12.2018, the first defendant approached the applicant bank for the purpose of availing Overdraft facility for developing and extending the business. Thereafter, the first defendant brought the second defendant as his guarantor to guarantee the due repayment of the Overdraft facility to be granted to the first defendant by the applicant and the second defendant agreed for the same. Thereafter, the first defendant submitted the loan application form dated 27.12.2018 to the applicant.

5. It is submitted by the applicant bank that on scrutinizing the documents submitted by the first defendant with regard to their financial capacity and also on considering the guarantee given by the second defendant for the due repayment of the overdraft facility, the applicant bank sanctioned the Commercial Equipment Retail Loan of Rs.40,00,000/- to the defendants.

6. The applicant submits that on 27.12.2018, the applicant had executed the Facility Agreement cum Hypothecation Agreement to and in favour of 1st and 2nd defendant vide Sanction Letter dated 27.12.2018 bearing reference no. ESFB/CBE/2018/32 and bearing Over draft A/c No. 200000969314. The Overdraft facility was agreed to be repaid in 12 Equated Monthly Instalments commencing from 27.01.2019. The defendants agreed to pay interest at the rate of 12.50% p.a. and the late payment charges 2% per month on failure to pay the instalments regularly as per the schedule of the Sanction Letter dated 27.12.2018. The 1st and 2nd defendants agreed to hypothecate the whole of the defendant’s present and future assets.

7. It is submitted by the applicant bank that the movables assets morefully detailed in the OA were hypothecated in favour of the applicant bank thereby creating a charge over them in favour of the applicant for repayment of amount due under the said Overdraft facility. The applicant submits that as per the clause in the Facility Agreement dated 27.12.2018, in the event of the default, the applicant bank will be entitled to claim all the loan amount and due payable by the defendants with accrued interest.

8. The applicant submits that apart from the said agreement the defendants 1 and 2 executed Hypothecation Agreement for a sum of Rs.40,00,000/- in which the defendants 1 and 2 agreed to repay on demand to the applicant the said amount together with interest at the rate of 12.50% p.a.

9. It is submitted by the applicant bank that as per the Overdraft facility dated 27.12.2018, the applicant bank disbursed a sum of Rs.40,00,000/- after deducting an agreeable amount towards processing charge and service charges. Thereafter the first defendant used the disbursed amount for developing the business.

10. The applicant submits that to its shock and surprise, they found that the defendants were doing good business and had been seeing handsome earning from the sale of milk and other dairy product. However, contrary to the undertaking, the defendant had not routed all the transactions through the applicant, since the availing of the Overdraft facility, there has been only a few number of credits under this loan account compared to the volume of the business carried on the defendants, with a view to avoid payment of amount due to the applicant, the defendant is transacting cash sales.

11. The applicant further submits that subsequent to availing of loan, the defendants were irregular in making payment towards the said loan account and had paid only few monthly instalments out of 12 equated monthly instalments. Since the defendants failed and neglected to pay any amount to the applicant under the loan account inspite of repeated demands made by the applicant, the applicant caused notice dated 30.11.2019 calling upon the defendants to repay the entire sum of Rs.40,74,228/- which includes principal, interest and other charges. The applicant submits that the said legal notices were duly served on the defendants. The applicant further states that on account of default by the 1st and 2nd defendants, the applicant approached the Hon’ble Madras High Court under section 9 of the Arbitration and conciliation Act, 1996 for interim relief for attachment of the movables in the defendant premises and the same was numbered as A. No. 9856 of 2019 and the application was ordered by Hon’ble Madras High Court in 30.12.2019 and appointed the Advocate Commissioner, who had accordingly seized the movables in the defendant’s premises and handover the same to the applicant and the A. No. 9856 of 2019 was closed on 13.02.2020.

12. The applicant further submits that as the seized movables are perishable, the applicant was constrained file an application under Section 17 of the Arbitration and Conciliation Act, 1996 and application before the sole-arbitrator to sell the seized dairy products and the same was ordered on 02.03.2020 in IA No. 01 of 2020. As per the order of the Hon’ble Arbitral Tribunal, the seized product was sold to sum of Rs.1,50,000/- and it was credited to the account of the 1st and 2nd defendants. As per the Arbitration Clause in the facility agreement, the applicant had

13. The applicant bank further submits that as per the recent judgment of the Hon’ble Supreme court in “Vidya Drolia and others – vs. – Durga Trading Corporation” in Civil Appeal No.2402 of 2019 dated 14.12.2020, wherein it is categorically held that disputes which are to be adjudicated by DRT Act are not arbitrable. Hence, the applicant bank had withdrawn the Arbitration Proceedings before the Sole Arbitrator on 22.01.2021.

14. The applicant submitted that the monthly interest has been charged at such rate and capitalised at such periodical rests, as are permitted by and do not run counter to the directives of the Reserve Bank of India and the decisions of Hon’ble Supreme Court of India. The interest is charged in the accounts only in terms of the contract and periodical directives and the penal interest is not capitalised. The applicant is also entitled to claim and recover the penal interest on account of the default in payment of the dues. Despite repeated requests and demands, as defendants did not come forward to repay the dues, the present Original Application (OA) has been filed by the applicant bank for recovery of its dues from the defendants.

15. After the filing of the OA, summons were sent to the Defendants 1 and 2 through Registered Post with Acknowledgment Due, which was reported to be delivered as evidenced from the postal tracking report, however the acknowledgement card has not been produced by the applicant bank. Hence the Applicant Bank was directed to cause paper publication of the notice, which was accordingly done by the applicant bank and filed proof thereof. When OA was taken up on 06.06.2022 even after giving sufficient time, there was no appearance or representation from the defendants. Hence, Defendants 1 and 2 were placed ex-parte on 06.06.2022. Heard the submissions of Applicant Bank and perused the records.

16. To prove the case of the Applicant Bank, Sh. S.Ramesh Kumar, Legal - Manager of the Applicant Bank, has filed his Affidavit by way of evidence and same was considered as evidence of AW-1 and list of documents came to be marked as Ex A-1 to A-7.

17. A careful examination of the pleadings in the Proof Affidavit and documents Exhibits A-1 to A-7 evidence that the borrowal of credit facilities and execution of loan and security documents are true, in terms of averments made in Original Application as well as Proof Affidavit filed by applicant bank establishing its claim. Applicant bank filed Statement of Accounts duly certified under Bankers’ Book Evidence Act, evidencing the amount claimed against defendants.

18. The defendants were set ex-parte on 06.06.2022, but till this day they 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 present application is filed well within limitation and this Tribunal possesses necessary and proper jurisdiction to entertain and adjudicate the claim. No oral or documentary evidence on the side of defendants are produced or filed to dispute the claim of applicant bank. Hence, it can be concluded that applicant bank has proved its claim

against defendants.

19. With regard to the amount advanced, the interest applied, the conduct and operations in the account and the default committed, this Tribunal comes to the conclusion that the applicant bank is entitled for a final order on the following terms:

: O R D E R :

20. The OA is allowed with costs,

(a) The applicant bank is allowed to recover from the Defendants 1 and 2 jointly and severally, a total sum of Rs.50,94,586/- (Rupees Fifty Lakhs Ninety Four Thousand Five Hundred and Eighty Six only) due in respect of Overdraft Facility (A/c No.200000969314) repayable together with further interest @12.50% p.a. with monthly rests from the date of Application till the date of realization in full along with costs of this application.

(b) In the event of failure of the Defendants to pay the aforesaid amount, the bank is at liberty to recover the amount by sale of the schedule mentioned hypothecated assets morefully detailed in the OA.

(c) OA Schedule shall be appended to this final order.

(d) If the sale proceeds of the hypothecated assets are not sufficient to satisfy the dues as ordered above, the applicant bank is at liberty to sell the personal assets of the Defendants (both movable and immovable) to recover the balance dues as required under law for which the Defendants to disclose to the Tribunal particulars of other properties or assets owned by the Defendants.

(e) The applicant bank shall file the latest memo of calculation of OA amount together with interest, costs etc., to be paid by the Defendants duly considering the amounts, if any, paid by the Defendant and/or amount realized by sale of assets etc., during the intervening period after the filing of the OA, enabling the Registry to prepare Recovery Certificate for the amount to be paid by Defendants to the applicant bank.

(f) The applicant bank shall file memo of costs within ten days from the date of receipt of this final order.

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

21. A copy of this order be communicated to the parties concerned.

Sd/-

(S.V. GOWRAMMA)

PRESIDING OFFICER, DRT-III, CHENNAI

(Dictated to Roshnee, transcribed by her, corrected, signed and pronounced by me on this the 02nd day of September, 2026) ANNEXURES WITNESSES EXAMINED FOR THE APPLICANT BANK: AW-1: Sh. Ramesh Kumar, Manager - Legal of the Applicant Bank.

Exhibits on the part of the Applicant:

Sl. No. Date Description of Documents Exhibit No.

1. 27.12.2018 Sanction letter A-1

2. 27.12.2018 Facility agreement A-2

3. 29.12.2018 Hypothecation agreement A-3

4. 02.09.2019 Incorporation certificate A-4

5. 30.06.2016 Registration certificate A-5

6. 30.11.2019 Loan recall notice issued by the applicant bank A-6

7. 20.01.2021 Statement of accounts A-7

Witness Examined for the Defendants: -Nil- List of Documents Exhibited for the Defendants: -Nil –

:-SCHEDULE-: i) Book-debts, receivables, outstanding monies, claims, demands, bills, contracts, engagement and securities belonging or held by the borrower and which are now due and owing or accruing and which may at time hereafter during the continuance of the security may become due and owing to the borrower. ii) Stocks of raw materials, finished and semi finished goods, goods in process/production and consumable stores which are now lying or stored in or which may hereafter from time to time during the continuance of the security be lying or stored or brought into or be in or about the factories and godowns of the borrower or warehouses whatever situated. iii) Movable plant, machinery, equipment, appliances, furniture, products, machinery, spares, stores, tools accessories whether or not installment and iv) Related movables in the course of transit or delivery whether now belonging or which may hereafter belong to the borrower or which may be held by any person at any place within or outside India to the order or disposition of the borrower and all documents of title including bill of insurance and other instruments and document relating to such movables together with benefits of all rights thereto. Located in No.164/2, Vellinkedu, Periya Thottipalayam T Vellodu (Po), Perundurai (Tk), Erode - 638 112.

Sd/- (S.V. GOWRAMMA)

PRESIDING OFFICER, DRT-III, CHENNAI