PUNJAB NATIONAL BANK vs M/s Sansun Pharmaceuticals Proprietor Mr. B. Santhosh Kumar 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’seeking issuance of a Recovery Certificate for recovery of an aggregate sum of Rs.1,19,09,848/- comprising of a sum of Rs.41,55,741/- together with further interest at the rate of 14.50% per annum with monthly rests being the amount due under Cash Credit Account and a sum of Rs.77,54,107/- together with further interest at the rate of 14.50% per annum with monthly rests being the amount due under Term Loan Account plus 2% penal interest from the date of filing of this application till the date of realisation along with costs of the application and for sale of schedule properties.

2. It is the case of the applicant that the defendants approached the applicant bank for grant of credit facilities for setting up a new project for manufacture of pharmaceutical formulations and the applicant bank considering the said request granted Cash Credit facility of Rs.25,00,000/- and Term Loan facility of Rs.60,00,000/- to the defendants vide its sanction letter dated 25.6.2012. It is also the case of the applicant that to secure the said limits the 1st defendant represented by the 2nd defendant executed various loan and security documents on 28.06.2012 viz., Sole Proprietorship letter, Term Loan Agreement, Common Agreement, Agreement of Hypothecation of Assets. It is the further case of the applicant that the 3rd defendant executed guarantee agreement on 25.6.2012 thereby guaranteeing due repayment of the credit facility availed by the 1st defendant.

3. It is also the case of the applicant that the 1st defendant deposited the title deeds of their property more fully described in schedule to the OA with an intention to create equitable mortgage over the same in favour of the applicant on 3.7.2012 and confirmed the same by executing Memorandum of Deposit of Title deeds dated 3.7.2012 registered as Doc. No.3481 of 2012 and confirmed the creation of equitable mortgage by letter dated 10.08.2012.

4. It is the further case of the applicant that the 1st defendant executed confirmation of balance and security, thereby acknowledging and admitting the correctness of the amount due to the bank as on 31.5.2014, 31.7.2014, 3.1.2017 and the third defendant also executed the confirmation of balance and security on 31.5.2014.

5. It is also the case of the applicant that after availing the credit facilities, the 1st defendant was highly irregular and committed default resulting in the classification of the account as NPA on 30.09.2013and also invoked the provisions of the SARFAESI Act and issued the demand notice under Section 13(2) of the SARFAESI Act on 4.3.2014. It is stated that the efforts of the applicant to get the account regularized by the defendants were in vain and therefore the applicant issued a legal notice dated 27.4.2017 calling upon the defendants to clear the outstanding dues, however, the defendants did not come forward to clear the outstanding dues and hence the applicant is constrained to file this OA.

6. The 1st defendant filed reply statement contending therein that the application is not maintainable either under law and also barred by limitation and hence is liable to be dismissed in limini. It is stated that the applicant bank initiated action under SARFAESI Act in the year 2010 and declared the account as NPA on 8.10.2015 and having invoked the provisions of SARFAESI Act the applicant cannot file the present OA.

7. It is contended by the defendants that the application is not maintainable either on facts or in law and is liable to be dismissed. It is contended that the application has not been signed, verified nor instituted by a person duly authorised and component of the application and there are no documents or letter of authority filed or produced along with the application empowering him or authorizing him to sign, verify or institute the present application and therefore the application is liable to be dismissed on this ground alone.

8. It is also contended that the application is based on false, fabricated and manufactured documents and further that no cause of action is disclosed by the documents. It is stated that the statement of account filed along with application is also wrong and mere perusal of the same would go to show that the same has been prepared for the purpose of this case. It is stated that the statement of accounts relied upon by the applicant is not proper and the same has not been certified under the Bankers’ Book Evidence Act and Information Technology Act, 2000. It is also stated that the amount claimed by the applicant is exorbitant and the interest charged is exorbitant. It is stated that the breakup of the alleged balances are not correct and the applicant bank is put to strict proof of the same.

9. It is the further contention of the defendants that the applicant has neither been properly valued for the purpose of application fees nor has be affixed with proper fees. It is stated that the amount claimed by the applicant is not correct. It is also stated that the default had occurred due to reasons beyond their control and the defendants have identified certain investors / purchasers who have evinced interest in the business of 1st defendant and the said process is likely to take some time. It is also stated that on materialization of the efforts of the defendants the entire liability will be cleared. It is stated that the documents relied upon for the purpose of this application are created and the same does not prove the claim of the applicant. Thus submitting the defendants prayed for dismissing the application.

10. The applicant bank filed its proof affidavit along with 17 documents, which are marked as Exhibits A-1 to A-17, the details of which are as under: - Sl. No. Date Description of Documents Exhibits

1. 25.06.2012 Sanction Letter of the Applicant Bank in respect of Cash Credit and Term Loan Facilities to the 1st Defendant A 1

2. 28.06.2012 Sole Proprietor Ship Letter executed by the 1st Defendant A 2

3. 28.06.2012 Agreement of Term Loan executed by the 1st Defendant A 3

4. 28.06.2012 Common Agreement executed by the 1st Defendant A 4

5. 28.06.2012 Agreement of Hypothecation of Assets executed by the 1st Defendant A 5

6. 28.06.2012 Agreement of Guarantee executed by the 3rd Defendant A 6

7. 03.07.2012 Memorandum of Deposit of Title Deeds executed by the 2nd Defendant – Document No.3481 of 2012 A 7

8. 10.08.2012 Letter confirming the creation of Mortgage executed by the 2nd Defendant A 8

9. 27.06.2006 Sale Deed executed by Dr.B Jawaharlal in favour of Mr. B Santhosh Kumar – Document No.1138 of 2006

A 9

Sl. No. Date Description of Documents Exhibits

10. 24.06.2004 Balance and Security Confirmation executed by the 1st Defendant – as on 31.05.2014 A 10

11. 24.06.2014 Balance and Security Confirmation from Guarantor / s executed by the 3rd Defendant – as on 31.05.2014 A 11

12. 07.08.2015 Balance and Security Confirmation executed by the 1st Defendant - as on 31.07.2015 A 12

13. 04.01.2017 Balance and Security Confirmation executed by the 1st Defendant – as on 03.01.2017 A 13

14. 27.04.2017 Legal Notice issued by the Counsel of the Applicant Bank A 14

15. 04.03.2014 Notice Issued by the Applicant Bank under SARFAESI ACT A 15

16. Statement of Account with interest calculation for Cash Credit Account No.09284015000693 A 16

17. Statement of Account with interest calculation for Term Loan Account No.09287011000606 A 17

11. Despite availing sufficient opportunities the defendants did not choose to file their Counter Proof Affidavit and hence the chance for filing CPA was closed on 6.7.2018.

12. Heard the Ld. Counsel for the Applicant Bank. As the defendants did not choose to advance their arguments, the chance was closed on 4.8.2022. Perused the records.

13. 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?

14. The applicant bank in its endeavor to establish its claim against the defendant examined its official as AW1 and got marked exhibits Ex.A-1 to A-17. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-17 strenuously contended that the claim of the applicant stands established, as such, the applicant is entitled for a recovery certificate.

11. Ld. Counsel for Applicant Bank would contend that even as per the Reply Statement filed, the defendants have not denied availing of credit facility, execution of loan and security documents and creation of mortgage in favour of the applicant and as such the said admission is sufficient enough to allow the claim of the applicant. Ld. Counsel further contended that the contention of the defendant that the applicant has charged usurious interest and has not filed any documents in support of the interest rate claimed are all false. Ld. Counsel would also contend that the statement of accounts filed is proper and supported by appropriate certificate under Bankers’ Book Evidence Act and Information Technology Act and hence the contention of the defendants regarding improper statement of accounts and the amount claimed cannot be countenanced. It is further contended that the defendant though filed the reply statement, did not choose to file any CPA despite sufficient opportunity and therefore the claim of the applicant stand unrebutted.

12. As rightly contended by the Ld. Counsel for Applicant, barring filing of reply statement, the defendant did not choose to file Counter Proof Affidavit substantiating the pleas taken in reply statement. 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 any Counter Proof Affidavit, as rightly contended by the Ld. Counsel for Applicant, the defense put forth by the defendant remain unsubstantiated hence cannot be considered, thus the claim of the applicant stands unrebutted.

13. Further, the applicant bank has filed the statement of accounts accompanied by certificates under Bankers’ Book Evidence Act and therefore the claim of the defendants that the applicant has charged usurious interest and the amount claimed is not proper and supported by documents fails.

14. In so far as the contention of the defendants that the person who has filed the application is not empowered or entitled to institute and defend the claim on behalf of the applicant also fails for the reason that the applicant has enclosed the power of attorney issued by the applicant at Page 142 of the proof affidavit and documents filed by the applicant.

15. 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 defendant. Further, the Tribunal on careful perusal of the unrebutted Proof Affidavit of AW-1 besides Exhibits A-1 to A-17 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?

16. 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.

16. 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 OA. 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 subject loan being 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 @ 10% p.a. simple on the OA claim amount from the date of filing till the date of realization. Point No.2 is answered accordingly.

17. In view of the afore mentioned discussions, the OA is disposed off in the following manner: - (a) OA No.313 of 2017 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.1,19,09,848/- with further interest @10% per annum (simple) from the date of filing of the application till the date of realization in full, 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 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 defendants are 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.

18. 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