INDIAN OVERSEAS BANK vs M/S Royal Impex 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 a sum of Rs.48,54,845.36p with further interest at the rate of 13.25% per annum with monthly rests 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 mentioned properties.

2. The subject matter of the case is the “Cash Credit facility – Easy Trade Finance” availed by the defendants from the applicant.

3. It is the case of the applicant that the 1st defendant is a Proprietorship concern represented by the 2nd defendant as its Proprietor and the 3rd defendant is a guarantor / mortgagor to the loan availed by the 1st defendant. It is also the case of the applicant that the 1st defendant approached the applicant bank with an application for MSEs dated 27.12.2014 for grant of credit facilities for the purpose of its business and the applicant considering the said request by its Credit Sanction Advice dated 24.2.2014 sanctioned Cash Credit facility of Rs.33,00,000/- to the 1st defendant. It is the further case of the applicant that the defendants having availed the credit facility to secure the same executed various loan and security documents on 5.4.2014 viz., Demand Promissory Note for

Rs.33,00,000/-, Letter of continuity and confirmation of Demand Promissory Note, Hypothecation of book debts and Letter of Hypothecation thereby hypothecating the stocks available at No.62, Sheikh Maistry Street, Royapuram, Chennai – 600 013 more fully described in Schedule „A‟ to the OA. It is also the case of the applicant that the defendants 2 and 3 executed guarantee agreement on 5.4.2014 thereby guaranteeing due repayment of the credit facility availed by the 1st defendant. It is stated that the 3rd defendant also executed guarantor‟s statement on 27.12.2013.

4. It is also the case of the applicant that the 3rd defendant deposited the title deeds of her property more fully described in schedule „B‟ to the OA and created equitable mortgage over the same in favour of the applicant and confirmed the same by executing Memorandum of Deposit of Title deeds dated 25.4.2014 registered as Doc. No.1268/2014, SRO, Royapuram. It is stated that the 1st defendant also executed revival letter dated 8.9.2016.

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 therefore the loan account was classified the case a NPA on 31.12.2014. It is stated that as the defendants did not come forward to clear the outstanding dues, the applicant issued a lawyer‟s notice dated 12.2.2018 calling upon the defendants to clear the outstanding dues and despite the said notice the defendants did not come forward 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 on the defendants. The defendants were initially represented by Ld. Counsel. As the defendants did not choose to file the written statement, the chance for filing written statement was closed on 25.11.2021. Applicant Bank filed Proof Affidavit along with 23 documents, which were marked as Ex. A-1 to A-23, on 29.6.2022. As there was no representation on behalf of the defendants continuously and on 29.6.2022 the defendants were set ex-parte on that day. The Ld. Counsel for Applicant Bank made his submissions on 5.8.2022 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 record placed before the Tribunal.

10. The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-23 along with the proof affidavit. Exhibit A-1 is the application submitted by the 1st defendant dated 27.12.2013. Exhibit A-2 is the Credit Sanction Advice issued by the applicant dated 24.2.2014. Exhibit A-3 is the Demand Promissory Note for Rs.33,00,000/- dated 5.4.2014 executed by the 1st defendant. Exhibit A-4 is the Letter of continuity and confirmation of Demand Promissory Note dated 5.4.2014 executed by 1st defendant. Exhibit A-5 is the hypothecation of book debts dated 5.4.2014 executed by the 1st defendant. Exhibit A-6 is the Letter of hypothecation dated 5.4.2014 executed by the 1st defendant. Exhibit A-7 is the guarantee agreement dated 5.4.2014 executed by third defendant. Exhibit A-8 is the guarantee agreement dated 5.4.2014 executed by the 2nd defendant. Exhibit A-9 is the guarantor‟s statement dated 27.12.2013 executed by the 2nd defendant. Exhibit A-10 is the Memorandum of Deposit of Title deeds dated 25.4.2014 executed by the third defendant registered as Doc. No.1268/2014, SRO, Royapuram. Exhibit A-11 is the Settlement deed dated 21.10.2011 registered as Doc. No.36112/2011 executed by Mrs. Mumtaz Amirudeen in favour of Mrs. Ishrath Begum. Exhibit A-12 is the sale deed dated 03.08.2011 registered as Doc. No.2705/2011 executed by Mr. T. Mohamed Kamaluddin represented by Power Agent Mr. r. Md. Ziaudeen in favour of Mrs. Mumtaz Begum. Exhibit A-13 is the Builder‟s agreement dated 7.2.2011 executed between Mr. T. Mohamed Kamaluddin represented by Power Agent Mr. R. Md. Ziaudeen and Mr. Shaik Amirudeen. Exhibit A-14 is the affidavit dated 16.12.2013 by Mr. Shaik Amirudeen. Exhibit A-15 is the revival letter dated 8.9.2016 executed by 1st defendant. Exhibit A-16 is the lawyer‟s notice dated 12.2.2018 issued by applicant bank. Exhibit A-17 is the acknowledgement card dated 13.2.2018 from 1st defendant at his first address. Exhibit A-18 is the acknowledgement card dated 13.2.2018 from the 1st defendant at his second address. Exhibit A-19 is the acknowledgement card of the 2nd defendant at 1st address dated 13.2.2018. Exhibit A-20 is the returned cover of the 2nd defendant at the second address. Exhibit A-21 is the acknowledgement card of the 3rd defendant dated 13.2.2018 at the 1st address. Exhibit A-22 is the acknowledgement card from 3rd defendant at his 2nd address. Exhibit A-23 is the statement of accounts in respect of the loan account along with certificates under Bankers‟ Book Evidence Act.

11. Exhibit A-1 to A-6 evidences that the 1st defendant by application dated 27.12.2013 approached the applicant bank for grant of credit facilities for its business and considering the said request the applicant vide sanction dated 24.2.2014 sanctioned credit limit of Rs.33 lakhs to the 1st defendant and the 1st defendant executed various loan and security documents on 5.4.2014. Exhibit A- 7 to A-9 evidences that the defendants 2 and 3 executed guarantee agreements on 5.4.2014 thereby guaranteeing due repayment of the credit facility availed by the 1st defendant and the third defendant executed guarantor‟s statement on 27.12.2013. Exhibit A-10 to A-14 evidences that the schedule property belonged to the 3rd defendant and is empowered to create equitable mortgage over the same. It also evidences that the 3rd defendant deposited the title deeds with the applicant in favour of the applicant and created equitable mortgage over the same on 25.4.2014 by executing Memorandum of Deposit of Title deeds registered as Doc. No.1268/2014 on the file of SRO, Royapuram. Exhibit A-15 evidences that the 1st defendant executed revival letter on 8.9.2016. Exhibit A-16 to A-22 evidences that the applicant issued the legal notice calling upon the defendants to clear the outstanding dues and the same is served at the 1st address of all the three defendants and returned from the 2nd address. Exhibit A- 23, the statement of accounts in respect of the 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 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 instant loan is a Cash Credit Loan availed by the defendants for their business, this Tribunal is not inclined to interfere with the interest rate claimed by the applicant.

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.995 of 2018 stands allowed.

(b) Applicant is permitted to realize a sum of Rs.48,54,845.36p with further interest at the rate of 13.25% per annum with monthly rests 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 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 under the Loan Account.

(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