CANARA BANK vs Mrs D Swathi 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 an aggregate sum of Rs.10,66,161.76p comprising a sum of Rs.3,57,761.76p with further interest at the rate of 11.60% per annum with monthly rests plus 2% penal interest being the amount due under Overdraft Facility and a sum of Rs.7,08,399.34p with further interest at the rate of 11.90% per annum with monthly rests plus 2% penal interest being the amount due under Term Loan facility from the date of filing 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 “Overdraft facility” and “Term Loan” availed by the defendant from the applicant.

3. It is the case of the applicant that the sole defendant is the Proprietrix of M/s Swathi Cars engaged in the business of buying and selling old and used cars. It is also the case of the applicant that the defendant approached the applicant for grant of credit facilities for improving her business vide her application dated 19.3.2014 and considering the said request the applicant sanctioned Overdraft Facility of Rs.3,00,000/- under CGTMSE Scheme. It is stated that to secure the said limit the defendant executed various loan documents on 9.4.2014 viz., Request for overdraft facilities, Promissory Note for Rs.3,00,000/- and Cash Credit Agreement.

4. It is also the case of the applicant that the defendant by application dated 7.4.2014 approached the applicant for sanction of Term Loan for the purpose of building a parking shed for her cards and the applicant considering the said request sanctioned Term Loan of Rs.6,99,000/- and the defendant executed various loan documents on 29.4.2014 viz., Pro-note for Rs.6,99,000/-, Agreement cum deed of hypothecation, Letter of undertaking re: Loans / Advances, Particulars of vehicles / Machinery / Equipment / Livestock etc. It is stated that the defendant had agreed to repay the said loan in 60 Equated

Monthly Installments of Rs.15,887/- together with interest at the rate of 12.95% per annum compounded with monthly rests.

5. It is the further case of the applicant that at the request of the defendant the overdraft facility was renewed for a further period of one year from 9.5.2015 vide its sanction dated 9.5.2015 and the defendant having availed the said limit executed Promissory Note for Rs.3 lakhs and Letter of Renewal in favour of the applicant as security. It is stated that again at the request of the applicant by application dated 1.7.2016, the facility was renewed for a further period of one year till 11.07.2017vide its sanction dated 11.7.2016 and the defendant executed the Letter of renewal on 11.07.2016.

6. 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 comply with the terms and conditions of sanction and therefore the loan account was classified the case a NPA on 30.09.2016, however the defendant acknowledged the debt by executing acknowledgement of debt and security on 4.3.2017. It is also stated that when the applicant called upon the defendant to clear the outstanding, the defendant gave a letter seeking time till 15.3.2018. It is also stated that as the defendant did not come forward to clear the outstanding dues despite repeated demands issued a letter dated 21.2.2018 calling upon the defendant to clear the outstanding dues.

7. 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.

8. Summons were taken out to the defendant and the summons sent to the sole defendant returned with endorsement “Left” and hence was served with the notice by way of substituted service by causing paper publication. As there was no representation on behalf of the defendant on 22.11.2018 the defendant was set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 23 documents, which were marked as Ex. A-1 to A-23 on 20.05.2022. The Ld. Counsel for Applicant Bank made his submissions on 07.07.2022 and thereafter the matter stood till this date for passing final orders.

9. 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.

10. Heard the Ld. Counsel for the applicant, perused the OA averments and the record placed before the Tribunal.

11. 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 letter of the defendant dated 19.03.2014 requesting the applicant for grant of credit facility for improvement of her business. Exhibit A-2 is the Appraisal Memorandum of the applicant. Exhibit A-3 is the request of the defendant dated 9.4.2014 for grant of overdraft facility. Exhibit A-4 is the Pro Note dated 9.4.2014 for a sum of Rs.3,00,000/- executed by the defendant. Exhibit A-5 is the Cash Credit Agreement dated 9.4.2014 executed by the defendant. Exhibit A-6 is the Application of the defendant dated 7.4.2014 for grant of Term Loan. Exhibit A-7 is the Sanction Memorandum of the applicant dated April 2014 sanctioning Term Loan facility to the defendant. Exhibit A-8 is the Pro note dated 29.4.2014 for a sum of Rs.6,99,000/- executed by the defendant. Exhibit A-9 is the Agreement cum deed of hypothecation dated 29.4.2014 executed by the defendant. Exhibit A-10 is the letter of undertaking by defendant dated 29.4.2014. Exhibit A-11 is the particulars of vehicles / machinery / equipment dated 29.4.2014 executed by the defendant. Exhibit A-12 is the letter of the defendant dated 21.04.2015 requesting the applicant for renewing the overdraft facility for a period of one month. Exhibit A-13 is the sanction memorandum of the applicant dated 9.5.2015. Exhibit A-14 is the Pronote for Rs.3,00,000/- dated 9.5.2015 executed by the defendant. Exhibit A-15 is the Letter of the defendant dated 9.5.2015 requesting the applicant for renewal of overdraft facility for a period of one year. Exhibit A-16 is the application of the defendant dated 1.7.2016 for renewal of the overdraft facility. Exhibit A-17 is the sanction memorandum of the applicant dated 11.7.2016 renewing the overdraft facility. Exhibit A-18 is the Letter of renewal dated 11.7.2016 by the defendant.

Exhibit A-19 is the Acknowledgement of debt and security (Term Loan) dated 4.3.2017 executed by the defendant. Exhibit A-20 is the letter of the defendant dated 5.12.2017 assuring the applicant to close the account by 15.3.2018. Exhibit A-21 is the letter of the applicant dated 21.2.2018 calling upon the defendant to clear the outstanding dues. Exhibit A-22 and A-23 are the statement of accounts in respect of the Overdraft facility and the Term Loan account respectively along with certificates under Bankers’ Book Evidence Act.

12. Exhibits A-1 to A-5 evidences that at the request of the defendant dated 19.3.2014, the applicant sanctioned overdraft facility of Rs.3,00,000/- to the defendant and the defendant executed various loan documents on 9.4.2014 in favour of the applicant. Exhibits A-6 to A-11 evidences that at the request of the defendant dated 7.4.2014, the applicant sanctioned a Term Loan of Rs.6,99,000/- to the defendant and the defendant executed various loan documents on 29.4.2014 in favour of the applicant. Exhibit A-12 evidences that the defendant by letter dated 21.4.2015 requested the applicant for renewal of the overdraft facility for a period of one month. Exhibit A-13 & A-14 evidences that the applicant by sanction Memorandum dated 9.5.2015 renewed the overdraft facility for a period of one monthand the defendant executed the loan documents on the same day. Exhibit A-15 to A-18 evidences that at the request of the defendant dated 1.7.2016, the applicant by its sanction renewed the overdraft facility for a further period of one year till 11.07.2017. Exhibit A-19

evidences that the defendant acknowledged the debt and security on 4.3.2017. Exhibit A-20 evidences that when the applicant called upon the defendant to clear the outstanding dues the defendant had sent a letter dated 5.12.2017 requesting time till 15.3.2018 for clearing the dues. Exhibit A-21 evidences that the applicant by its letter dated 21.02.2018 called upon the defendant to clear the outstanding dues but in vain. Exhibit A-22 and A-23, 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.

13. 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.

14. In view of the fact that the loan availed by the defendant being business loan and the defendant failed to comply with the terms and conditions of sanction the Tribunal is not inclined to interfere in the interest rate claimed by the applicant, however proceed to disallow the prayer for grant of penal interest.

15. 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.328 of 2018 stands allowed.

(b) Applicant is permitted to realize a sum of an aggregate sum of Rs.10,66,161.10p comprising a sum of Rs.3,57,761.76p with further interest at the rate of 11.60% per annum with monthly rests being the amount due under Overdraft Facility and a sum of Rs.7,08,399.34p with further interest at the rate of 11.90% per annum with monthly rests being the amount due under Term Loan facility 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) It is made clear that 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.

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 29th day of July, 2022)

Sd/- (T. RAJESH) PRESIDING OFFICER DRT-II, CHENNAI