STATE BANK OF INDIA vs M/s V.P.S. Traders on 30 August 2022

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.40,26,770.32p comprising a sum of Rs.l33,34,753.94p with further interest at the rate of 15% per annum with monthly rests being the amount due under Working Capital CCOL and sum of Rs.6,92,106.38p with further interest at the rate of 11% per annum with monthly rests plus 2% penal interest from 10.12.2016 till the date of realization in full along with costs of this application and for sale of schedule properties.

2. The subject matter of the case is the various credit facilities availed by the defendants from the erstwhile State Bank of Travancore which got merged with the applicant pursuant to the notification of Reserve Bank of India.

3. It is the case of the applicant that the 1st defendant, a proprietorship firm, represented by the 2nd defendant as its Proprietor approached the erstwhile State Bank of Travancore on 29.4.2014 for grant credit facility to meet its Working Capital requirements and the erstwhile State Bank of Travancore considering the said request sanctioned Working Capital CCOL Limit of Rs.25,00,000/- on 30.04.2014 and the same was communicated to the defendants vide sanction intimation letter dated 2.5.2014 subject to terms and condition.

4. It is also the case of the applicant that at the request of the 2nd defendant in his individual capacity the erstwhile State Bank of Travancore sanctioned FSL

Vehicle of Rs.7,15,000/- to the 2nd defendant vide sanction intimation letter dated on 14.10.2014 subject to terms and conditions.

5. It is the further case of the applicant that the defendants to secure the said limits executed various loan and security documents viz., Hypothecation cum Working Capital agreement executed by 1st defendant dated 2.5.2014, undertaking letter regarding “not to sell / entrust the vehicle” dated 14.10.2014 executed by the 2nd defendant. It is stated that the vehicle bearing Registration No.TM-13 A-8663 is duly hypothecated with the bank vide Form of Certificate of Registration dated 7.11.2014 issued by RTO, Ambattur.

6. It is the case of the applicant that the 2nd defendant mortgaged his property more fully described in Schedule „A‟ to the OA as security towards the loans availed by defendants 1 and 2 by depositing the title deeds of the property on 29.4.2014 and confirmed the same by executing Memorandum of Deposit of Title deeds dated 30.4.2014 registered as Doc. No.1274/2014, SRO, Karanthattankudi.

7. It is the case of the applicant that the defendants having availed the credit facility defaulted in repayments and failed to regularize the loan account despite repeated demands and also failed to comply with the terms and conditions of sanction and therefore the bank sent a letter dated 18.1.2015 advising them to regularize the account, but the defendants did not take any steps to regularize the loan account, however, the defendants executed revival letter on 18.10.2016. It is also the case of the applicant that as the defendants did not come forward to clear the dues, the applicant issued a legal notice on 28.11.2016 and no remittance was forthcoming the applicant classified the loan account as NPA on 10.12.2016 and issued the demand notice under Section 13(2) of the SARFAESI Act on 22.12.2016.

8. It is the case of the applicant that after availing the loan, the defendants were irregular in remitting the loan amount. The efforts of the applicant bank to make the defendants settle the loan did not yield any result, and hence the applicant approached this Tribunal seeking issuance of a Recovery Certificate allowing recovery of the amount due in the account.

9. Summons were taken out to the defendants and the summons sent to the 1st defendant at the first and second address returned with endorsement “Left” and “No such person” respectively. Summons to the 2nd defendant returned with endorsement at the three addresses returned with endorsement “Left”, “Left” and “Refused” and hence the service on 2nd defendant was held sufficient. Further, as the 2nd defendant is the proprietor of the 1st defendant, the service on 1st defendant was also held sufficient. As there was no representation on behalf of the defendants on 27.7.2021 the defendants were called absent and set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 18 documents, which were marked as Ex. A-1 to A-18 on 28.06.2022, however Exhibit A-6, A-9 and A- 15 were marked subject to proof and relevancy. The Ld. Counsel for Applicant Bank made his submissions on 3.8.2022 and thereafter the matter stood till this date for passing final orders.

10. The following issues arise for consideration in the matter: - (a) Whether the applicant had succeeded in proving the liability of the defendants?

(b) What order as to cost of the proceedings need be passed?

These issues are considered together.

11. Heard the Ld. Counsel for the applicant, perused the OA averments and the records placed before the Tribunal.

12. The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-18 along with the proof affidavit. Exhibit A-1 is the sanction letter dated 2.5.2014 issued by the erstwhile State Bank of Travancore, which was duly acknowledged by the 1st defendant. Exhibit A-2 is the Hypothecation cum working capital agreement dated 2.5.2014 executed by the 1st defendant. Exhibit A-3 is the application form dated 11.10.2014 submitted by the 2nd defendant for vehicle loan. Exhibit A-4 is the bio data form submitted by the 2nd defendant on 13.10.2014. Exhibit A-5 is the sanction letter dated 14.10.2014 issued by the erstwhile State Bank of Travancore, which was duly acknowledged by the 2nd defendant. Exhibit A-6 is the undertaking letter dated 14.10.2014 executed by the 2nd defendant. Exhibit A-7 is the General Indemnity dated 14.10.2014 executed by the 2nd defendant. Exhibit A-8 is the Agreement for Medium Term Loan dated 14.10.2014 for hypothecation of personal vehicles executed by the 2nd defendant. Exhibit A-9 is the intimation letter dated 18.1.2015 sent by the applicant to the 2nd defendant informing about the overdues in the vehicle loan account. Exhibit A-10 and A-11 are the revival letter executed by the 2nd defendant in respect of both the loan accounts dated 18.10.2016. Exhibit A-12 is the intimation letter sent by the applicant to the 1st and 2nd defendants Exhibit A- 13 is the legal notice dated 28.11.2016 calling upon the defendants to clear the outstanding dues. Exhibit A-14 is the Memorandum of Agreement relating to deposit of title deeds dated 30.04.2014 executed by the 2nd defendant registered as Doc. No.1274 of 2014 on the file of SRO, Karanthattankudi. Exhibit A-15 is the certificate of registration bearing registration No. A 4633440 issued by RTO, Ambattur, Chennai in respect of vehicle bearing registration number TN-13/A- 8663. Exhibit A-16 is the release deed dated 21.03.2013 executed in favour of the 2nd defendant along with its English Translation. Exhibit A-17 and A-18 are the statement of accounts in respect of the Vehicle Loan and Working Capital Loan respectively along with certificates under Bankers‟ Book Evidence Act.

13. Exhibit A-1 and A-2 evidences that at the request of the 1st defendant represented by the 2nd defendant as its Proprietor, the erstwhile State Bank of Travancore by its sanction dated 2.5.2014 sanctioned Working Capital CCOL Loan of Rs.25 lakhs to the 1st defendant and the 1st defendant executed Hypothecation cum working capital agreement on the same day. Exhibit A-3 to A-8 evidences that at the request of the 2nd defendant vide loan application dated 11.10.2014, the erstwhile State Bank of Travancore sanctioned vehicle loan of 7,15,000/- to the 2nd defendant and the 2nd defendant executed necessary loan and security documents on 14.10.2014. Exhibit A-9 evidences that the vehicle loan had become irregular and therefore the applicant sent a intimation letter dated 18.1.2015 to the 2nd defendant informing that the loan account is irregular. Exhibit A-10 and A-11 are the Revival letters dated 18.10.201 executed by the 1st defendant in respect of both the loan accounts. Exhibit A-12 evidences that the applicant sent a letter to the defendants on 7.11.2016 informing them about the outstanding in the loan accounts. Exhibit A-13 evidences that as the defendants did not take any steps to regularize the loan account despite repeated requests the applicant bank issued a legal notice on 28.11.2015 calling upon the defendants to clear the outstanding dues. Exhibit A-14 to A-16 evidences that the Schedule „A‟ property is owned by the 2nd defendant and he had created equitable mortgage over the same in favour of the applicant by depositing the title deeds of the property with the applicant and confirmed the same by executing Memorandum of Deposit of Title deeds dated 30.04.2014 registered as Doc. No.1274 of 2014 on the file of SRO, Karanthattankudi. Exhibit A-15 evidences that the vehicle bearing registration No.TN-13/A-8663 was purchased by the 2nd defendant out of the loan facility availed from the erstwhile State Bank of Travancore and is entitled to create hypothecation over the same. Exhibit A- 17 and A-18, the statement of accounts in respect of both the loan accounts produced and certified under the Banker‟s Book Evidence Act, clearly indicates that the amount claimed by the applicant is due from the defendant. It is clear from the statement of accounts that penal interest is not capitalized.

14. The proof affidavit of the applicant bank remained unchallenged and unrebutted. Therefore, on careful consideration of proof affidavit along with Exhibits filed on behalf of the applicant bank, besides the material placed before the Tribunal, the Tribunal is satisfied that the applicant bank has successfully proved the OA claim against the defendants. Point is answered accordingly.

15. In view of the fact that the loan availed by the defendants being business loan and the interest rates have come down the Tribunal is of the view that pendent lite interest can be awarded at reduced rate and also proceeds to reject the prayer for grant of penal interest.

16. 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, OA is disposed off in the following manner: - (a) OA No.731 of 2019 stands allowed.

(b) Applicant is permitted to realize a sum of Rs.40,26,770.32p with further interest at the rate of 15% per annum (simple) from the date of filing of the OA till date of realization from the defendants jointly and severally, 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 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.

17. 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 30th day of August, 2022) Sd/- (T. RAJESH) PRESIDING OFFICER DRT-II, CHENNAI