CANARA BANK vs Mr. B. Srinivasan 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 a sum of Rs.1,13,55,128/- with further interest at the rate of 14.75% per annum with monthly rests plus 2% penal interest from the date of filing of the 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 1st defendant approached the applicant for grant of credit facilities for the purpose of his business and considering the said request the applicant vide its sanction dated 18.8.2016 sanctioned OCC facility of Rs.80,00,000/- for a period of one year i.e., up to 18.8.2017. It is also the case of the applicant that the 1st defendant having availed the facility executed various loan documents on 19.8.2016 viz., Promissory Note for Rs. 80 lakhs, Cash Credit Agreement, Agreement Re: Advances against book debt as prime security and letter of undertaking. It is the further case of the applicant that the 2nd defendant executed Guarantee covering letter cum guarantee agreement dated 19.8.2016 thereby guaranteeing due repayment of the credit facility availed by the 1st defendant.

3. It is also the case of the applicant that the 2nd defendant offered his immovable property as security to the credit facility availed by the 1st defendant and deposited the title deeds with the applicant with an intention to create equitable mortgage over the same on 17.8.2016 and confirmed the same by executing Memorandum of Deposit of Title deeds dated 18.8.2016 registered as Doc. No.3355/2016 on the file of SRO, Kodambakkam.

4. It is the further case of the applicant that after availing the credit facilities the defendants defaulted in repayments and also failed to regularize the loan account despite repeated requests and therefore the loan account was classified as NPA on 5.10.2017 and subsequently recalled the loan facility granted to the defendants. It is stated that the requests of the applicant to the defendants to clear the outstanding dues were in vain and hence the present application is filed for recovery of its dues.

5. The 1st defendant filed his written statement and the 2nd defendant was set ex- parte on 24.01.2019. It is contended by the 1st defendant that the OA is not maintainable either in law or on facts and the same is liable to be dismissed in limine. It is also contended that the claim of the applicant is barred by limitation and hence the OA is not sustainable before this Tribunal.

6. The 1st defendant denied availing of OCC facility and execution of documents in favour of the applicant. It is stated that no valid mortgage has been created over the schedule mentioned property. It is also contended that the applicant has charged usurious interest and has capitalized the penal interest and hence claim of the applicant is not proper. It is further contended that the applicant has not produced any evidence to show when and how the loan was disbursed and therefore as no consideration was passed on the date of alleged mortgage the said mortgage is invalid in law.

7. The 1st defendant further contended that the applicant had obtained the signatures of the defendants in blank unfilled documents and had subsequently filled the same to suit their claim and filed the present application. It is stated that though the applicant alleged that an amount of Rs.80 lakhs was sanctioned by they managed to get execute a Memorandum of Deposit of Title deeds on 18.8.2016 for a sum of Rs.100 lakhs and when the defendant questioned the applicant bank it was stated that it is usual procedure adopted by the bank at the time of granting and no such amount was disbursed to the defendants. Thus submitting the 1st defendant prayed for dismissing the OA.

8. The applicant bank filed its proof affidavit along with 15 documents, which are marked as Exhibits A-1 to A-10, the details of which are as under: - S. No. Date Description of Documents Exhibit Nos.

1. 18.08.2016 Sanction Memorandum issued by applicant A-1

2. 19.08.2016 Request for overdraft facilities by 1st defendant A-2

3. 19.08.2016 Promissory Note for Rs.80 lakhs executed by 1st defendant A-3

4. 19.08.2016 Cash Credit Agreement executed by 1st defendant. A-4

5. 19.08.2016 Agreement Re: Advances against book debts as prime security executed by 1st defendant A-5

6. 19.08.2016 Letter of undertaking by 1st defendant A-6

7. 19.08.2016 Guarantee covering letter cum guarantee agreement by 2nd defendant A-7

8. 18.08.2016 Memorandum of Deposit of Title deeds executed by 2nd defendant (Doc. No.3355/2016) A-8

9. 20.05.1981 Sale deed executed in favour of 2nd defendant (Doc. No.2713/1981) A-9

10. Statement of Accounts in respect of A/c No.0908261000908. A-10

9. The defendant did not choose to file their Counter Proof Affidavit despite availing sufficient opportunities and therefore the chance of filing Counter Proof Affidavit by the defendant was closed on 22.06.2022.

10. Heard the Ld. Counsels appearing on behalf of the both sides. Perused the records.

11. 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?

12. 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-10. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-10 strenuously contended that the claim of the applicant stands established, as such, the applicant is entitled for a recovery certificate.

13. Ld. Counsel for Applicant Bank would further submit that even as per the Reply Statement filed, the defendants have not denied availing of credit facility, execution of document and as such the said admission is sufficient enough to allow the claim of the applicant. Ld. Counsel would also submit that the amount claimed by the applicant is proper and the applicant has charged interest only at contractual rates and the applicant bank has also produced the statement of accounts duly certified under Bankers’ Book Evidence Act to substantiate the amount claimed by the applicant. Ld. Counsel also contended that the contention of the 1st defendant that the defendants were made to sign the blank unfilled documents at the time of availing the loan and the same were later on filled for the purpose of filing this application is false and the further contention of the 1st defendant that the claim is barred by limitation is also false. Ld. Counsel would also contend that the defendants though filed their reply statement they did not choose to file the Counter Proof Affidavit and as such the claim of the applicant stands unrebutted and is sufficient enough to allow the claim of the applicant.

14. 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 Counter Proof Affidavit, the claim of the applicant stands unrebutted. Further, the applicant bank has filed the statement of accounts accompanied by certificates under Bankers’ Book Evidence Act and therefore the claim of the applicants remains unrebutted.

15. In so far as the contention of the defendants that they were made to sign in blank documents, the contents of which were not made known to them is concerned it is to be stated it is a usual claim made by every defaulting borrower and the defendants being illiterates after signing the document cannot now turn around and say the contents of the documents are not made known to them. Further, in view of the judgment of the The Hon’ble DRAT, Mumbai in the matter of Sangli Bank Ltd. Vs. Prabha K.Maheshwari and others reported in MANU/DM/0025/2005 held in paragraph 8 that; “8. The grant of loan as alleged by the Bank and defendant Nos.6 to 10 having signed a guarantee agreement is an admitted position. Their contention is that on 30th July, 1992, defendant Nos. 1 to 5 had sent blank letter of lien, demand note for grant of Rs.30 lacs to the Bank, which indeed, appears to be correct. However, it has to be pointed out that settled legal position is that the person who signs blank standard documents takes responsibility for the same and the plea of non est factum is not available to him”

Hence on the basis of above discussion it is to be held that the said contention of the defendants also fails.

16. As regards the contention of the 1st defendant that the claim is barred by limitation is concerned it is to be stated that the documents were executed by the defendants on 19.8.2016 and the OA has been filed on 30.05.2018 and hence the claim of the applicant is well within the period of limitation.

17. 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 defendants. Further, the Tribunal on a careful perusal of the unrebutted Proof Affidavit of AW-1 besides Exhibits A-1 to A-10 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?

18. 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.

19. 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 instant loan is 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 @ 9% p.a. simple on the OA claim amount from the date of filing till the date of realization. Point No.2 is answered accordingly.

20. During the pendency of the OA the applicant had filed a memo in Sr. No.,2825/2022 dated 12.04.2022 stating therein that the schedule mentioned property was sold in public action and realized a sum of Rs.79,24,000/- and the has been credit to the loan account of the defendants. This Tribunal vide its proceedings dated 23.5.2022 had recorded part satisfaction of the OA claim

21. In view of the afore mentioned discussions, the OA is disposed off in the following manner: - (a) OA No.403 of 2018 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.1,13,55,128/- with further interest @9% per annum (simple) from the defendants jointly and severally from the date of filing of OA till realization in full, after deducting all the amounts received by them during the pendency of OA, and also by selling the other assets of the defendants. It is made clear that the sum of Rs.79,24,000/- realized by the applicant by sale of Schedule property be given credit to the loan account on its respective date.

(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.

22. 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