BANK OF BARODA vs M S SRI VAARI FORMS 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 defendants seeking issuance of a Recovery Certificate for an aggregate sum of Rs.16,40,046/- comprising of a sum of Rs.14,40,107.08p with further interest at the rate of 9.90% per annum with monthly rests being the amount due under Cash Credit facility and a sum of Rs.1,99,939.24p with further interest at the rate of 9.65% per annum with monthly rests being the amount due under Term Loan facility from the date of filing of the OA till the date of realisation along with costs of the application and for sale of schedule properties.

2. The subject matter of the case is the “Cash Credit Facility” and “Term Loan facility” availed by defendants from the applicant.

3. It is the case of the applicant that the 1st defendant is a Partnership firm represented by the defendants 2 to 4 as its Partners is engaged in the business of Printing and Supply of Stationery items. It is also the case of the applicant that the 1st defendant represented by defendants 2 to 4 was operating Cash Credit facility sanctioned by the applicant since 2007 and at the request of the 1st defendant represented by defendants 2 to 4 by loan application dated 30.01.2018 the applicant enhanced the limit to Rs.12 lakhs by its sanction dated 22.2.2018 and the defendants executed various loan and security documents on 22.2.2018 viz., Demand Promissory Note, Letter of continuing security, Composite Hypothecation Agreement, Letter undertaking in respect of book debts, Power of Attorney for book debts facility, declaration cum undertaking cum authority, Letter of acknowledgement of existing debt and other documents / undertaking as required by the applicant. It is stated that the defendants 2 to 4 executed Letter of Partnership and guarantee agreement dated 22.2.2018 to secure the credit facility availed by the 1st defendant.

4. It is also the case of the applicant that at the request of the 1st defendant represented by defendants 2 to 4 as its Partners, the applicant on 22.2.2018 sanctioned a Term Loan of Rs.3,00,000/- (sic Rs.2,00,000/-) to the 1st defendant under PMMY Scheme repayable in 60 Equated Monthly Installments i.e., 59 installments of Rs.3350/- and 60th installment of Rs.2350/- commencing from April 2018 for purchase of three wheeler for commercial use and the 1st defendant represented by defendants 2 to 4 executed various loan documents in favour of applicant on 22.2.2018 viz., Demand Promissory Note for Rs.2 lakhs, Letter of Installment with acceleration clause, Instrument of Hypothecation of vehicle, Irrevocable Power of Attorney.

5. It is the further case of the applicant that at the request of the 1st defendant represented by defendants 2 to 4, the applicant sanctioned Temporary Overdraft Facility of Rs.2 lakhs and the 1st defendant executed Demand Promissory Note dated 3.9.2018 agreeing to repay the said amount within 15 days.

6. It is also the case of the applicant that having availed the credit facility the defendant defaulted in repayments and also failed to regularize the loan account despite repeated demands and hence the loan account was classified as NPA on 31.03.2019.

7. It is the case of the applicant that despite repeated requests to the defendants, they did not come forward to clear the outstanding dues and the efforts of the applicant bank to make the defendants 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 defendants and the same returned with endorsement “Left” and therefore the service was effected by substituted service by way of paper publication. As there was no representation on behalf of the defendant on 07.10.2021, they were 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 23.05.2022. The Ld. Counsel for Applicant Bank made his submissions on 20.06.2022 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 defendants?

(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 Application of the 1st defendant dated 30.01.2018 requesting the applicant for sanction of credit facility. Exhibit A-2 is the sanction letter of the applicant dated 22.02.2018 sanctioning Cash Credit facility of Rs.12 lakhs to the 1st defendant. Exhibit A-3 is the Letter of Partnership dated 22.02.2018 of the 1st defendant. Exhibit A-4 is the Demand Promissory Note dated 22.2.2018 executed by 1st defendant represented by defendants 2 to 4 for a sum of Rs.12 lakhs. Exhibit A-5 is the Letter of Continuing security dated 22.2.2018 executed by 1st defendant represented by defendants 2 to 4. Exhibit A-6 is the Composite Hypothecation Agreement dated 22.2.2018 executed by the 1st defendant represented by defendants 2 to 4. Exhibit A-7 is the undertaking dated 22.2.2018 executed by the 1st defendant represented by defendants 2 to 4. Exhibit A-8 is the Letter of undertaking for book debts dated 22.2.2018 executed by 1st defendant represented by defendants 2 to 4. Exhibit A-9 is the Power Attorney for book debts dated 22.2.2018 executed by 1st defendant represented by defendants 2 to

4. Exhibit A-10 is the Declaration cum undertaking cum authority dated 22.2.2018 executed by the 1st defendant represented by defendants 2 to 4. Exhibit A-11 is the General form of guarantee dated 22.2.2018 executed by defendants 2 to 4. Exhibit A-12 is the Letter of acknowledgement of debt dated 22.2.2018 in respect of Cash Credit facility. Exhibit A-13 is the Demand Promissory Note dated 15.3.2018 for a sum of Rs.2 lakhs executed by the 1st defendant represented by defendants 2 to 4. Exhibit A-14 is the Letter of installment with acceleration clause dated 15.3.2018 executed by the 1st defendant represented by defendants 2 to 4. Exhibit A-15 is the Instrument of Hypothecation of vehicle dated 15.3.2018 executed by the 1st defendant represented by defendants 2 to 4. Exhibit A-16 is the irrevocable power of attorney dated 15.3.2018 executed by the 1st defendant represented by defendants 2 to 4. Exhibit A-17 is the Letter of Partnership dated 15.3.2018 by defendants 2 to 4. Exhibit A-18 is the Copy of Registration Certificate for Vehicle No.TN-09/CM-4295. Exhibit A-19 is the Demand Promissory Note dated 3.9.2018 for a sum of Rs.2 lakhs. Exhibit A-20 is the letter dated 3.9.2018 recording temporary overdraft limit and acknowledged by the 1st defendant. Exhibit A-21 to A-23 are the statement of accounts in respect of the loan accounts along with certificates under Bankers’ Book Evidence Act.

12. Exhibits A-1 to A-10 evidences that the 1st defendant represented by the defendants 2 to 4 approached the applicant by application dated 30.01.2018 for enhancement of the existing Cash Credit facility and the applicant considering the said request enhanced the Cash Credit Facility to Rs.12 lakhs by its sanction letter dated 22.2.2018. It also evidences that the 1st defendant represented by defendants 2 to 4 executed various loan and security documents in favour of the applicant bank on 22.2.2018. Exhibit A-11 evidences that the defendants 2 to 4 executed agreement of guarantee dated 22.2.2018 thereby guaranteeing due repayment of the credit facility availed by the 1st defendant in their personal capacity. Exhibit A-12 evidences that the 1st defendant represented by defendants 2 to 4 acknowledged the liability under Cash Credit facility on 22.2.2018. Exhibit A-13 to A-16 evidences that at the request of the 1st defendant represented by defendants 2 to 4 the applicant on 15.3.2018 sanctioned Term Loan facility of Rs.2 lakhs to the 1st defendant and the 1st defendant represented by defendants 2 to 4 executed various loan documents on 15.3.2018. Exhibit A-17 evidences that the 1st defendant is a Partnership firm represented by defendants 2 to 4 as its Partners. Exhibit A-18 evidences that the 1st defendant purchased the vehicle bearing registration No. TN-09 CM4295 from and out of the funds availed from the applicant. Exhibit A-19 and A-20 evidences that at the request of the 1st defendant represented by defendants 2 to 4 the applicant sanctioned temporary overdraft facility of Rs.2 lakhs on 3.9.2018 and the 1st defendant represented by defendants 2 to 4 executed the loan documents on 3.9.2018. Exhibit A-20 evidences that the 1st defendant represented by defendants 2 to 4 acknowledged the liability under temporary overdraft facility on 3.9.2018. Exhibit A-21, Exhibit A-22 and A-23, the statement of accounts produced and certified under the Banker’s Book Evidence Act, clearly indicates that the amount claimed by the applicant is due from the defendants. 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. The instant loan being a loan availed for business purpose the Tribunal is not inclined to interfere with interest rate claimed by the applicant, however proceed to disallow the penal interest claimed by the applicant.

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.872 of 2019 stands allowed.

(b) Applicant is permitted to realize an aggregate sum of Rs.16,40,046/- comprising of a sum of Rs.14,40,107.08p with further interest at the rate of 9.90% per annum with monthly rests being the amount due under Cash Credit facility and a sum of Rs.1,99,939.24p with further interest at the rate of 9.65% per annum with monthly rests being the amount due under Term Loan facility 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 hypotheca 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 2 to 4 are personally liable for all such amounts due under the Loan Accounts.

(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