INDIAN OVERSEAS BANK vs M/S DASHA SALON AND SPA 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.20,50,179/- comprising a sum of Rs.4,43,663/- with further interest at the rate of 11.95% per annum with monthly rests being the amount due under Term Loan-I and sum of Rs.16,06,516/- with further interest at the rate of 12.35% per annum with monthly rests plus from the date of filing of the

OA 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 Term Loan facility availed by the defendants from the applicant bank.

3. It is the case of the applicant that the 1st defendant, a proprietorship firm, represented by the 2nd defendant as its Proprietrix approached the applicant for credit facility on 25.10.2016 for establishing a beauty parlour in the name and style of M/s Dasha Salon and Spa, the applicant considering the said request sanctioned Term Loan of Rs.6,00,000/-to the 1st defendant for purchase of machines, equipment, furniture and fixtures for running the beauty parlour. It is also the case of the applicant that having availed the Term Loan, to secure the same the 1st defendant represented by the 2nd defendant executed various loan documents on 25.10.2016 viz., Demand Promissory Note for a sum of Rs.6 lakhs, Letter of undertaking regarding repayment of the loan amount thereby agreeing to repay the said sum in 57 equated monthly installments of Rs.13,488/- each commencing from 25.1.2017, Deed of Hypothecation thereby hypothecating the schedule mentioned property and Term Loan Agreement.

4. It is also the case of the applicant that the 1st defendant represented by the 2nd defendant again approached the applicant for sanction of further facility to purchase equipment for improving the Beauty Parlor and considering the said request the applicant on 19.12.2017 sanctioned a sum of Rs.15 lakhs to the 1st defendant, the 1st defendant to secure the same executed various loan documents on 19.12.2017 viz., Demand Promissory Note for a sum of Rs.15 lakhs, Letter of undertaking agreeing to repay the laon amount in 84 equated monthly installments of Rs.24,902/- each commencing from 19.6.2018 and Term Loan Agreement.

5. 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 hence the applicant classified the loan account as NPA on 30.04.2019 and issued the legal notice dated 02.08.2019 calling upon the defendants to clear the outstanding dues.

6. 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.

7. Summons were taken out to the defendants and the same were served. As there was no representation on behalf of the defendants on 25.02.2022 the defendants were called absent and set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 13 documents, which were marked as Ex. A-1 to A-13 on 01.07.2022. The Ld. Counsel for Applicant Bank made his submissions on 8.8.2022 and thereafter the matter stood till this date for passing final orders.

8. 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.

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

10. 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 Credit Sanction Advice dated 25.10.2016 issued by the applicant and acknowledged by the defendants. Exhibit A-2 is the Demand Promissory Note dated 25.10.2016 for a sum of Rs.6 lakhs executed by the 1st defendant represented by the 2nd defendant. Exhibit A-3 is the Letter of undertaking dated 25.10.2016 regarding repayment executed by the 1st defendant represented by the 2nd defendant. Exhibit A-4 is the Letter of Hypothecation dated 25.10.2016 executed by the 1st defendant represented by the 2nd defendant along Consent cum Authorization Letter. Exhibit A-5 is the Term Loan Agreement dated 25.10.2016 by the 1st defendant represented by the 2nd defendant. Exhibit A-6 is the Credit Sanction Advice of the applicant dated 19.12.2017 sanctioning Term Loan of Rs.15 lakhs acknowledged by the 1st defendant represented by the 2nd defendant. Exhibit A- 7 is the Demand Promissory Note dated 19.12.2017 for a sum of Rs.15 lakhs executed by the 1st defendant represented by the 2nd defendant. Exhibit A-8 is the Letter of undertaking dated 19.12.2017 executed by the 1st defendant represented by the 2nd defendant. Exhibit A-9 is the Term Loan Agreement dated 19.12.2017 executed by the 1st defendant represented by the 2nd defendant. Exhibit A-10 is the Revival Letter dated 22.07.2019 executed by the 1st defendant represented by the 2nd defendant. Exhibit A-11 is the Legal notice dated 2.8.2019 issued by the applicant. Exhibit A-12 and A-13 are the statement of accounts in respect of the loan accounts along with certificates under Bankers’ Book Evidence Act.

11. Exhibits A-1 to A-5 evidences that at the request of the 1st defendant represented by the 2nd defendant the applicant sanctioned a Term Loan of Rs.6 lakhs to the 1st defendant for the purpose of purchasing beauty parlor equipments vide credit sanction dated 25.10.2016 and the 1st defendant represented by the 2nd defendant availed the said facility and executed various loan and security documents in favour of the applicant on 25.10.2016. Exhibit A-6 to A-9 evidences that the 1st defendant again approached the applicant for sanction of further credit facilities on 19.12.2017 and considering the said request the applicant vide its sanction dated 19.12.2017 sanctioned second Term Loan of Rs.15 lakhs to the 1st defendant and the 1st defendant represented by 2nd defendant having availed the said credit facility and executed the loan and security documents in favour of 19.12.2017. Exhibit A-10 evidences that the defendants executed revival letter dated 22.07.2019. Exhibit A-11 evidences that the defendants defaulted in repayment and the loan account was classified as

NPA on 30.04.2019 as per the extant guidelines of RBI and the applicant issued legal notice on 2.8.2019 calling upon the defendants to clear the outstanding dues, but the defendants did not come forward to clear the outstanding dues. Exhibit A-12 and A-13, 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.

12. 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.

13. 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.

14. 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.25 of 2020 stands allowed.

(b) Applicant is permitted to realize a sum of Rs.20,50,179/- with further interest at the rate of 11% 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.

15. 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