INDIAN OVERSEAS BANK vs Mrs Hansa A Chandan on 29 July 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 defendant for recovery of a sum of Rs.99,61,716/-with further interest @10.90% per annum with monthly rests plus

2% penal interest from the date of the OA till the date of realization in full along with costs of this application.

2. The subject matter of the case is the “Cash Credit Facility” under CGTSFMSE Scheme availed by the defendant from the applicant bank.

3. It is the case of the applicant that the defendant is carrying on the business of manufacturing and supply of raw materials of gift articles under the name and style of M/s Aswin Agencies, a Sole Proprietorship firm. It is also the case of the applicant that the defendant approached the applicant during April 2016 for grant of credit facility and considering the said request the applicant vide its sanction letter dated 26.4.2018 sanctioned a „Cash Credit Facility‟ of Rs.75,00,000/- under CGTSFMSE Scheme. It is also the case of the applicant that the credit facility sanctioned is secured by the hypothecation of machinery, stock of raw materials, structures, equipment, fixture and fittings etc., belonging to the defendant as also the receivables.

4. It is also the case of the applicant that to secure the said credit facility the defendant on 28.4.2016 executed various loan documents in favour of the applicant viz., Demand Promissory Note for Rs.75 lakhs, Letter of continuing security, Letter of hypothecation of machineries and book debts and Letter of hypothecation.

5. It is the case of the applicant that the defendant having availed the credit facility defaulted in repayments and failed to regularize the loan account despite repeated demands and also failed to furnish the statement pertaining to the stocks in trade, receivables which are all hypothecated to the applicant and therefore the loan accounts were classified the case a NPA on 1.4.2018. It is also stated that as the defendant did not come forward to clear the outstanding dues despite repeated demands the applicant issued a legal notice dated 1.6.2018 calling upon the defendant to clear the outstanding dues, but the defendant failed to clear the outstanding dues.

6. It is the case of the applicant that after availing the loan, the defendant was irregular in remitting the loan amount. The efforts of the applicant bank to make the defendant to 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 defendant and the defendant was served. The defendant was represented by a Ld. Counsel, however, the defendant did not choose to file their reply statement and further as there was no representation for the defendant on 13.05.2019, the defendant was set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 06 documents, which were marked as Ex. A-1 to A-6 on 12.05.2022. The Ld. Counsel for Applicant Bank made his submissions on 21.06.2022 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 defendant?

(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-6 along with the proof affidavit. Exhibit A-1 is the sanction letter issued by the applicant dated 26.4.2016 sanctioning “Cash Credit Facility” to the defendant. Exhibit A-2 is the Demand Promissory Note dated 28.04.2016 for a sum of Rs.75,00,000/- executed by the defendant. Exhibit A-3 is the Letter of continuing security dated 28.4.2016 issued by the defendant. Exhibit A-4 is the letter of hypothecation of machineries and book debts dated 28.4.2016 executed by the defendant. Exhibit A-5 is the letter of hypothecation dated 28.4.2016 executed by the defendant. Exhibit A-6 is the statement of accounts in respect of the loan account accompanied by Certificates under Bankers‟ Book Evidence Act.

11. Exhibit A-1 evidences that at the request of the defendant the applicant had sanctioned Cash Credit Facility of Rs.75,00,000/- to the defendant by its sanction letter dated 26.04.2016. Exhibit A-2 to A-5 evidences that the defendant availed the said credit facility and to secure the same executed various loan documents on 28.4.2016 in favour of the applicant. Exhibit A-6, the statement of accounts in respect of 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 defendant. Point is answered accordingly.

13. As the instant loan is a Cash Credit facility availed by the defendant for development of its business the Tribunal is not inclined to interfere with the interest claimed by the applicant, however the claim of the applicant for grant of 2% penal interest is rejected.

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.353 of 2018stands allowed.

(b) Applicant is permitted to realize a sum of Rs.99,61,716/- with further interest at the rate of 10.90% per annum with monthly rests from the date of filing of the OA till date of realization from the defendant, after deducting all the amounts received by them during the pendency of OA, and also by selling the other assets of the defendant.

(c) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant Bank, the 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.

16. 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 29th day of July, 2022) Sd/- (T. RAJESH) PRESIDING OFFICER DRT-II, CHENNAI