Edelweiss Asset Reconstruction Company Limited vs M/s Auromatrix Hotels Private Limited 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 a sum of Rs.5,18,58,114.63p together with further interest at the rate of 14.75% per annum with monthly rests 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. The subject matter of the case is the overdraft facility availed by the 1st defendant from erstwhile bank M/s AXIS Bank Limited.

3. It is the case of the applicant that the 1st defendant approached the erstwhile AXIS Bank Limited for grant of financial assistance for its business and the applicant considering the said request by its sanction letter dated 22.12.2012 sanctioned “Business MPower Overdraft Facility” of Rs.4,30,00,000/-. It is also the case of the applicant that having availed the credit facility the 1st defendant executed various loan and security documents on 27.12.2012 viz., Demand Promissory Note for Rs.4,30,00,000/-, Demand Promissory Note Delivery cum Waiver Letter, Loan Agreement, Letter of undertaking and deed of hypothecation of current assets (Stocks & Book Debts). It is the further case of the applicant that the defendants 2, 3, 4, 6 and 7 executed deed of guarantee on 27.12.2012 thereby guaranteeing due repayment of the credit facility availed by the 1st defendant.

4. It is also the case of the applicant that the defendants 6 and 7 mortgaged their properties more fully described in Schedule „B‟ to the OA and executed Memorandum of Deposit of Title deeds dated 29.1.2013 registered as Doc. No.576/2013 and also secured the facility by hypothecating the current assets more fully described in Schedule “A‟ to the OA.

5. It is the further case of the applicant that the said facility was extended / renewed on 31.12.2013, 26.03.2014 and 28.03.2015 respectively. It is also the case of the applicant that after availing the credit facilities, the defendants were highly irregular and committed default resulting in the classification of the account as NPA on 31.12.2015, however, the defendants acknowledged the liability by executing acknowledgement of debt on 25.5.2015. It is the case of the applicant that as the defendants did not come forward to clear the dues, the erstwhile applicant issued legal notice to the defendants on 7.12.2016 calling upon the defendants to clear the outstanding dues. It is stated that despite receipt of notice by defendants 1, 2, 3, 6 and 7 the defendants did not come forward to clear the outstanding dues. It is also stated that the efforts of the applicant 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.

6. Summons were taken out to the sole defendants 1, 2, 6 and 7 were served at the second address and the summons to D4 was awaited and the summons to D5 returned with endorsement “Left”. While so, the defendants 1, 2, 3, 4, 6 and 7 are represented by Ld. Counsel. As there was no representation on behalf of 5th defendant on 2.11.2017, he was set ex-parte on that day. Further, as defendants 1 to 4, 6 and 7 did not choose to file their written statement despite availing sufficient time, there were set ex-parte on 8.2.2018. Applicant Bank filed Proof Affidavit along with 41 documents, which were marked as Ex. A-1 to A-41 on 23.04.2019. Erstwhile applicant M/s Axis Bank Limited filed IA 260/2021 seeking substitution of applicant in place of M/s Axis Bank and the same was allowed on 24.2.2021 and the applicant filed amended OA vide Dy No.1552/2021 dated 4.3.2021. Though the defendants were set ex-parte the case was coming up for filing of Counter Proof Affidavit for few days and ultimately on that chance for filing CPA was closed 26.10.2021. The case was heard on 2.12.2021 and was posted to 31.12.2021 for orders. However, as IA No.713/2018 filed by the defendants to set aside the ex-parte order dated 8.2.2018 was pending the case was suo motto reopened for consideration of the said IA. However, as the defendants did not choose to prosecute the said application, the IA was dismissed on 3.6.2022 and thereafter the matter stood till this date for passing final orders.

7. 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.

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

9. The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-41 along with the proof affidavit. Exhibit A-1 is the Sanction Letter dated 22.12.2012 issued by the erstwhile applicant. Exhibit A-2 is the Board Resolution dated 24.12.2012 of the 1st defendant. Exhibit A-3 is the Demand Promissory Note dated 27.12.2012 executed by the 1st defendant. Exhibit A-4 is the Demand Promissory Note Delivery cum Waiver Letter dated 27.12.2012 executed by the 1st defendant in favour of the erstwhile applicant. Exhibit A-5 is the Loan Agreement dated 27.12.2012 executed by the 1st defendant. Exhibit A-6 is the Letter of undertaking dated 27.12.2012 executed by the 1st defendant. Exhibit A-7 is the deed of hypothecation of current assets (Stock and Book Debts) dated 27.12.2012. Exhibits A-8 to A- 12 are the deed of guarantee executed by defendants 2, 3, 4, 6 and 7. Exhibit

A-13 is the Memorandum of deposit of Title deeds dated 29.1.2013 executed by the 1st defendant. Exhibit A-14 is the Partition deed dated 23.8.1966 executed Mrs. Savithri Rajan. Exhibit A-15 is the sale deed dated 4.12.1972 executed by Mr. Kumar Subramnian in favour of V.G.P. Housing Private Limited. Exhibit A-16 is the proceedings of the Commissioner of St. Thomas Mount, Panchayat Union dated 25.11.1974 granted approval of layout of house sites. Exhibit A-17 is the sale deed Doc. No.4955 dated 31.12.1992 executed by M/s VGP Housing Private Limited in favour of Mrs. Bala Ramana Rao. Exhibit A-18 is the sale deed Doc. No.1264 dated 29.3.1993 executed by M/s VGP Housing Private Limited in favour of Mrs. Bala Ramana Rao. Exhibit A-19 is the sale deed Doc. No.1255 dated 29.3.1993 executed by M/s VGP Housing Private Limited in favour of Mrs. Bala Ramana Rao. Exhibit A- 20 is the patta dated 26.10.2005 issued by Tahsildar, Tambaram. Exhibit A- 21 is the Power of Attorney 16.11.2004 by Mrs. Meena Thiagarajan in favour of her husband Mr. S. Rajasekaran. Exhibit A-22 is the Sale deed dated 14.11.2005 executed by Smt. Bala Ramana Rao Ponangipalli in favour of Mr. S. Rajasekaran registered as Doc. No.6459/2005. Exhibit A-23 plan of the approved lay out. Exhibit A-24 is the planning permit issued by St. Thomas Mount Panchayat Union. Exhibit A-25 is the proceedings of St. Thomas Mount Panchayat Union grant approval for building plan. Exhibit A-26 and A- 27 are the house tax receipts issued by Injambakkam Panchayat. Exhibit A- 28 is the encumbrance certificate in respect of the schedule property. Exhibit A-29 is the Record of Mortgage by deposit of title deeds dated 30.1.2013 by defendants 6 and 7. Exhibit A-30 is the declaration cum confirmation deed dated 30.1.2013 executed by defendants 6 and 7. Exhibit A-31 to A-33 are the letter of assignor bank dated 31.12.2013, 26.3.2014 and 29.3.2015 reviewing the credit facilities. Exhibit A-34 is the letter of acknowledgement of debt dated 25.5.2015 executed by the defendants. Exhibit A-35 is the legal notice dated 7.12.2016 issued by the lawyer of the assignor bank along with proof of delivery and returned covers. Exhibit A-37 to A-40 are the statement of accounts and other certificates under Bankers‟ Book Evidence Act and Interest rate circular. Exhibit A-41 is the power of attorney executed by assignor bank in favour of its Deputy Manager for instituting and defending the claim on behalf of assignor bank.

10. Exhibit A-1 evidences that at the request of the 1st defendant for grant of credit facility for their business and considering the said request the applicant vide its sanction letter dated 22.12.2012 sanctioned “Business MPower Overdraft Facility” to the 1st defendant. Exhibit A-2 evidences that by the Board Resolution of the 1st defendant, the defendants 2 and 3 are authorized to execute the documents for and on behalf of the 1st defendant. Exhibit A-3 to A-7 evidences that the 1st defendant to secure the credit facility executed various loan and security documents on 27.12.2012. Exhibit A-8 to A-12 evidences that the defendants 2, 3, 4, 6 and 7 executed deed of guarantee dated 27.12.2012 thereby guaranteeing due repayment of the credit facility availed by the 1st defendant. Exhibit A-13 to A-28 evidences that the schedule property belonged to the 2nd defendant and is empowered to create equitable mortgage over the same. It also evidences that the 2nd defendant deposited the title deeds of the property with the applicant on 29.1.2013 with an intention to create equitable mortgage over the same and confirmed the same by executing Memorandum of Deposit of Title deeds dated 29.1.2013

registered as Doc. No.576/2013 dated 30.1.2013. Exhibit A-29 evidences that the mortgage created by 2nd defendant is entered in the records. Exhibit A-30 evidences that the defendants confirmed the creation of equitable mortgage by executing declaration cum confirmation deed dated 30.1.2013. Exhibit A- 31 to A-33 evidences that the applicant bank had renewed the credit facility by its sanction letter dated 31.12.2013, 26.03.2014 and 28.03.2015. Exhibit A-34 evidences that the defendants acknowledged the debt by executing acknowledgement of debt on 25.5.2015. Exhibit A-35 evidences that the defendants defaulted in repayment and failed to clear the outstanding dues despite repeated requests and demands and hence the applicant issued a lawyer‟s notice on 7.12.2016 calling upon the defendants to clear the outstanding dues. Exhibits A-36 to A-40, the statement of accounts in respect of loan account produced and certified under the Banker‟s Book Evidence Act, clearly indicates that the amount claimed by the applicant is due from the defendants. It is clear from the statement of accounts that penal interest is not capitalized. Exhibit A-41 evidences that the Deputy Manager of assignor Axis Bank was authorized to institute and defend the case on behalf of the bank.

11. 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.

12. In view of the fact that the loan availed by the defendants being business loan, this Tribunal is not inclined to interfere with the interest rate claimed by the applicant, however proceeds to reject the prayer for award of penal interest.

13. 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.144 of 2017 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.5,18,58,114.63p with further interest @14.75% per annum with monthly rests 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 2 to 7 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.

14. 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