KARUR VYSYA BANK vs M/s.Vasmo Agro Nutri Product Pvt. Ltd. on 31 December 2021

FINAL ORDER

1. This application is filed by the applicant bank under Section 19(1) of Recovery of Debts and Bankruptcy Act, 1993 (formerly Recovery of Debts Due to Banks and Financial Institutions Act, 1993) against the defendants for recovery of an aggregate sum of Rs.43,83,99,031.50p comprising of a sum of Rs.42,15,21,999.50p with further interest @17.15% per annum with monthly rests being the amount due under OCC Facility Account No.1153223000001090; a sum of Rs.1,26,47,648/- with further interest @17.15% per annum with monthly rests being the amount due under Term Loan for Machinery Account No.1153730000000800 and a sum of Rs.42,29,384/- with further interest @17.15% per annum with monthly rests being the amount due under Term Loan for building Account No.1153716000000090 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 are the various credit facilities availed by the defendants from the applicant bank. The facts of the case as stated in the OA, in brief, are as follows.

3. It is the case of the applicant that the 1st defendant is a Private Limited Company, doing business of trading, processing and marketing of agro products, is the borrower and the defendants 2 to 4 guaranteed the repayment of dues to the applicant for and on behalf of the 1st defendant.

4. It is also the case of the applicant that the 1st defendant approached the applicant bank for development of business for developing its business and considering the said request the applicant vide sanction dated 14.9.2013 sanctioned a sum of Rs.32.05 crores viz., OCC facility of Rs.25 crores (take over from Standard Chartered Bank with enhancement), FLC / buyer’s credit (Sub Limit) (Takeover from Standard Chartered Bank) of Rs.10 crores, HPMA (fresh limit) of Rs.4.80 crores, Term Loan-Building (Fresh Limit) of Rs.1 crore and Forward CEL (Notional Principal) of Rs.1.25 crores. The defendants having availed the credit facilities executed various documents on 19.12.2013. It is contended that defendants 2 to 4 executed agreement of guarantee dated 19.12.2013 thereby guaranteeing due repayment of credit facility availed by 1st defendant.

5. It is the further case of the applicant that the 2nd defendant deposed affidavit dated 23.1.2014 confirming that he has given the schedule properties as collateral security and defendants 2 and 3 deposed affidavit dated 23.1.2014 confirming that they have given the schedule properties as collateral security and not created any charges, costs and expenses and further declared that the guarantee shall be a continuing guarantee, for the total credit limit of a sum of Rs.32.05 Crore. The defendants on 16.2.2015 executed acknowledgement of debt dated 16.2.2015 for a sum of Rs.25,47,90,867.78p.

6. It is the case of the applicant that at the request of the 1st defendant the applicant vide sanction letter dated 10.2.2015 enhanced the OCC credit facilities to Rs.34 crores. It is contended that the 1st defendant will be allowed to draw amounts up to Rs.29.45 crores and on offering additional security to the tune of Rs.3.18

crores, the 1st defendant will be permitted to utilize the entire sanctioned limit of Rs.34 crores. It is contended that to secure the enhanced limit the 1st defendant executed various loan documents on 11.2.2015 and defendants 2 to 4 executed guarantee agreement on the same day. It is also contended that the 3rd defendant deposed an affidavit dated 13.02.2015 and 1st and 2nd defendant executed affidavit cum undertaking dated 16.2.2015 confirming that properties are given as Collateral Security for the First Defendant’s Facilities.

7. It is also the case of the applicant that at the request of 1st defendant, the applicant vide its sanction letter dated 17.8.2016 enhanced the OCC Limit to Rs.40 crores. It is contended that having availed the enhance limit the 1st defendant executed various loan and security documents on 29.8.2016 and defendants 2 to 4 executed guarantee agreement on the same day. It is also contended that the 2nd defendant executed Declaratory Affidavit on 29.08.2016, with respect to confirmation of the credit facilities availed by the 1st defendant from the Applicant Bank and creation of charges over the assets and Schedule of Properties. It is further contended that the 1st defendant executed Omnibus Deed of Indemnity dated 29.08.2016 in favour of applicant and the 1st defendant irrevocably and unconditionally undertakes to reimburse the entire amount of buyer’s credit paid to the foreign lender bank by the applicant, along with accrued interest thereon at applicable interest and other charges & costs etc. It is also contended that the defendants executed acknowledgement of debt dated 29.8.2016 for a sum of Rs.34,15,23,584/- due as on 28.8.2016. It is also

contended that the defendants executed Acknowledgement of Debt dated 30.04.2018 for a sum of Rs.42,84,91,052.60p outstanding due as on 30.04.2018.

8. It is the further case of the applicant that the 2nd defendant executed Memorandum of Deposit of Title Deeds dated 23.01.2014, 13.02.2015, 26.08.2016 in favour of the Applicant Bank registered as Doc. No. 375 of 2014, 1093 of 2015, 6059 of 2016 respectively on the file SRO Thiruvottiyur. It is contended that the 3rd defendant executed Memorandum of Deposit of Title Deeds dated 23.01.2014, 16.02.2015 and 26.8.2016 in favour of the Applicant Bank and the same was registered as Doc. No. 149 of 2014, 150 of 2014, 502 of 2015, 503 of 2015, 3179 of 2016 and 3180 of 2016, SRO Royapuram, with respect to the part of immovable properties mentioned in the Schedule of Properties.

9. It is the case of the applicant that after availing the credit facilities the 1st defendant defaulted in repayments and failed and neglected to clear the outstanding dues and also failed to comply with the terms and conditions of sanction. It is also the case of the applicant that in view of the default committed by the defendants the applicant classified the loan account as NPA on 04.11.2018 in accordance with the directions/guidelines issued by the Reserve Bank of India. It is also contended as the defendants did not come forward to clear the outstanding dues the applicant invoked the provisions of SARFAESI Act and issued the demand notice under Section 13(2) of the Act on 5.11.2018 demanding a total sum of Rs.43,82,16,073.50p.

10. It is also 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 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.

11. Summons were taken out and the defendants were served. As there was no representation on behalf of the defendants on 08.02.2019, they were set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 79 documents, which were marked as Ex. A-1 to A-79 on 21.05.2019. The Ld. Counsel for Applicant Bank made his submissions on 13.12.2021 and thereafter the matter stood till this date for passing final orders.

12. 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.

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

14. The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-79 along with the proof affidavit. Exhibit A-1 is the Sanction

Letter for a sum of Rs. 32.05 crore dated 14.09.2013. Exhibit A-2 is the Board Resolution of the first defendant dated 19.12.2013. Exhibit A-3 is the Agreement for Takeover of the Liabilities from another Bank dated 19.12.2013. Exhibit A-4 is the Deed of Hypothecation of Current Assets dated 19.12.2013. Exhibit A-5 is the Facility Agreement dated 19.12.2013. Exhibit A-6 is the Hypothecation Agreement for Cash Credit/Over draft dated 19.12.2013. Exhibit A-7 is the Agreement for Hypothecation of Goods received under LC dated 19.12.2013. Exhibit A-8 is the Supplemental Agreement to be taken whenever Sub Limits are granted within the overall limits 19.12.2013. Exhibit A-9 is the Machinery Loan Agreement 19.12.2013. Exhibit A-10 is the Loan Against Fixed Assets 19.12.2013. Exhibit A-11 is the Forward Contracts Agreement 19.12.2013. Exhibit A-12 is the Supplemental Agreement – Primary Security for one Facility to be the Collateral Security for another facility 19.12.2013. Exhibit A-13 is the Omnibus Deed of Indemnity 19.12.2013. Exhibit A-14 is the Letter of Undertaking 19.12.2013. Exhibit A-15 is the Insurance Letter 19.12.2013. Exhibit A-16 is the Letter of Continuity 19.12.2013. Exhibit A-17 is the Certificate of Execution of Documents 19.12.2013. Exhibit A-18 is the Insurance Letter 19.12.2013. Exhibit A-19 is the Declaration 19.12.2013. Exhibit A-20 is the Agreement of Guarantee executed by the second, third and fourth defendants 19.12.2013. Exhibit A-21 is the Affidavit dated 23.01.2014. Exhibit A-22 is the Affidavit for no other mortgage dated 23.01.2014. Exhibit A-23 is the Memorandum of Deposit of Title Deeds Doc.No.149 of 2014 dated 23.01.2014. Exhibit A-24 is the Memorandum of Deposit of Title Deeds Doc.No.150 of 2014 dated 23.01.2014. Exhibit A-25 is the

Memorandum of Deposit of Title Deeds Doc.No.375 of 2014 dated 23.01.2014. Exhibit A-26 is the Memorandum of Deposit of Title Deeds Doc.No.1093 of 2015 dated 13.02.2015. Exhibit A-27 is the Sanction Letter for Rs. 34 Crore OCC dated 10.02.2015. Exhibit A-28 is the Board Resolution of first defendant dated 11.02.2015. Exhibit A-29 is the Acknowledgement of Debt from the Borrower dated 16.02.2015. Exhibit A-30 is the Acknowledgement of Debt from the Guarantor dated 16.02.2015. Exhibit A-31 is the Demand Promissory Note Rs. 9 crore dated 16.02.2015. Exhibit A-32 is the Letter of Continuity dated 16.02.2015. Exhibit A-33 is the General Credit Facility Agreement dated 16.02.2015. Exhibit A-34 is the Facility Agreement dated 16.02.2015. Exhibit A-35 is the Supplemental Agreement taken on Enhancement dated 16.02.2015. Exhibit A-36 is the Omnibus Deed of Indemnity dated 16.02.2015. Exhibit A-37 is the Agreement of Guarantee dated 16.02.2015. Exhibit A-38 is the Link Document dated 16.02.2015. Exhibit A-39 is the Letter of Waiver dated 16.02.2015. Exhibit A-40 is the Certificate of execution of Document dated 16.02.2015. Exhibit A-41 is the Insurance Letter dated 16.02.2015. Exhibit A-42 is the Letter of Set-off dated 16.02.2015. Exhibit A-43 is the Undertaking Letter dated 16.02.2015. Exhibit A-44 is the Letter confirming Directors of the first defendant dated 16.02.2015. Exhibit A-45 is the Affidavit of the third defendant dated 16.02.2015. Exhibit A-46 is the Affidavit cum Indemnity of the first and second defendants dated 16.02.2015. Exhibit A-47 is the Memorandum of Deposit of Title Deeds Doc.No.502 of 2015 dated 16.02.2015. Exhibit A-48 is the Memorandum of Deposit of Title Deeds Doc.No.503 of 2015 dated 16.02.2015. Exhibit A-49 is the

Board Resolution of the first defendant for enhancement of Credit Facilities to a sum of Rs. 40 crore dated 18.08.2016. Exhibit A-50 is the Memorandum of Deposit of Title Deeds Doc.No.6059 of 2016 dated 26.08.2016. Exhibit A-51 is the Memorandum of Deposit of Title Deeds Doc.No.3179 of 2016 dated 26.08.2016. Exhibit A-52 is the Memorandum of Deposit of Title Deeds Doc.No.3180 of 2016 dated 26.08.2016. Exhibit A-53 is the General Credit Facility Agreement dated 29.08.2016. Exhibit A-54 is the Supplemental Agreement to be taken whenever there is an Enhancement dated 29.08.2016. Exhibit A-55 is the Facility Agreement dated 29.08.2016. Exhibit A-56 is the Agreement of Guarantee of second, third and fourth defendants dated 29.08.2016. Exhibit A-57 is the Link Document dated 29.08.2016. Exhibit A-58 is the Demand Promissory Note for Rs.6 ccore dated 29.08.2016. Exhibit A-59 is the Demand Promissory Note for Rs.6 crore dated 29.08.2016. Exhibit A-60 is the Declaration – Name Change of the Company dated 29.08.2016. Exhibit A-61 is the Letter of Continuity dated 29.08.2016. Exhibit A-62 is the Letter confirming Director of the first defendant dated 29.08.2016. Exhibit A-63 is the Insurance Letter dated 29.08.2016. Exhibit A-64 is the Certificate of Execution of Documents dated 29.08.2016. Exhibit A-65 is the Letter of Waiver dated 29.08.2016. Exhibit A-66 is the Letter of Undertaking for renewal of credit facilities dated 29.08.2016. Exhibit A-67 is the Undertaking Letter dated 29.08.2016. Exhibit A-68 is the Declaration Affidavit dated 29.08.2016. Exhibit A- 69 is the Omnibus Deed of Indemnity dated 29.08.2016. Exhibit A-70 is the Acknowledgement of Debt from the first defendant dated 29.08.2016. Exhibit

A-71 is the Acknowledgement of Debt from the second, third and fourth defendant dated 29.08.2016. Exhibit A-72 is the Acknowledgement of Debt from the first defendant dated 30.04.2018. Exhibit A-73 is the Acknowledgement of Debt from the second, third and fourth defendant dated 30.04.2018. Exhibit A-74 is the Recall/Demand notice by the Applicant Bank to the defendants dated 05.11.2018. Exhibit A-75 is the Sale deed vide Document no. 3278/1974 dated 28.10.1974. Exhibit A-76 is the Sale deed vide Document no. 3645/2008 dated 03.05.1979. Exhibit A-77 is the Sale deed vide Document no. 643/1979 dated 15.12.2008. Exhibit A-78 is the Statement of Accounts dated 19.11.2018. Exhibit A-79 is the Certificate under the Bankers Book Evidence Act dated 19.11.2018.

15. Exhibit A-1 evidences that the 1st defendant approached the applicant bank for sanction of credit facilities for its business and considering the said request the applicant vide sanction letter dated 14.9.2013 sanctioned various credit facilities aggregating to Rs.32.05 crores. Exhibit A-2 to A-19 evidences that the 1st defendant executed various loan and security documents on 19.12.2013 to secure the credit facility sanctioned. Exhibit A-20 evidences that the defendants 2 to 4 executed agreement of guarantee on19.12.2013 thereby guaranteeing due repayment of the credit facilities availed by the 1st defendant. Exhibit A-21 and A-22 evidences that the defendants 2 and 3 executed affidavit on 23.1.2014 confirming that they have given the schedule properties as collateral security and have not created any charges over the schedule properties in favour of any others. Exhibit A-23 and A-24 evidences that the third defendant executed Memorandum of Deposit of Title deeds dated 23.1.2014 registered as Doc.

No.149 of 2014 and 150 of 2014 on the file of SRO, Royapuram and created equitable mortgage over the same in favour of the applicant. Exhibit A-25 AND A-26 evidences that the 2nd defendant deposited the title deeds of her property with the applicant and created equitable mortgage over the same by executing Memorandum of Deposit of Title deeds dated 23.1.2014 registered as Doc. No.375 of 2014 on the file of SRO, Thiruvottiyur and also executed Memorandum of Deposit of Title deeds dated 13.2.2015 registered as Doc. No.1093 of 2015 on the file of SRO, Thiruvottiyur. Exhibit A-27 evidences that the applicant bank had enhanced the OCC Limit to Rs.34 crores vide in sanction letter dated 10.2.2015. Exhibit A-28 evidences that the 1st defendant’s Board passed Resolution dated 11.2.2015 to avail enhanced credit facilities from the applicant and authorized the 4th defendant to execute all necessary documents in favour of the applicant. Exhibit A-29 evidences that the 1st defendant acknowledged debt as on 15.2.2015 by executing Acknowledge of Debt on 16.2.2015. Exhibit A-30 evidences that the defendants 2 to 4 also executed acknowledgement of debt on 16.2.2015 thereby acknowledging the debt as on 15.2.2015. Exhibit A-31 to A- 44 executed various loan and security documents on 16.2.2015 to secure the enhanced credit facility. Exhibit A-45 and A-46 evidences that the defendants 1 to 3 executed an affidavit dated 13.2.2015 and 16.2.2015 confirming that the properties are given as collateral security to secure the facilities availed by the 1st defendant. Exhibit A-47 and A-48 evidences that the 3rd defendant deposited title deeds of his properties and created equitable mortgage over the same in favour of the applicant by executing Memorandum of Deposit of Title deeds

dated 16.02.2015 registered as Doc. No.502/2015 and 503/2015 on the file of SRO, Royapuram. Exhibit A-49 evidences that the applicant had enhanced the credit facilities to Rs.40 crores and the 1st defendants Board passed Resolution dated 18.8.2015 to avail the enhanced facilities and the 2nd defendant is authorized to execute all necessary documents in favour of the applicant. Exhibit A-50 and A-53 evidences that the 2nd and 3rd defendants deposited the title deeds of their properties with the applicant and created equitable mortgage over the same by executing Memorandum of Deposit of Title deeds dated 26.8.2016 registered as Doc. Nos. 6059 of 2016, 3179 of 2016 and 3180 of 2016 respectively on the file of SRO, Royapuram. Exhibit A-53 evidences that the 1st defendant executed General Facility Agreement dated 29.8.2016 undertaking to utilize the credit facility to meet the Working Capital requirement. Exhibit A-54 evidences that the1st defendant acknowledged the enhanced facility by executing supplemental Agreement dated 29.8.2016. Exhibit A-55 evidences that the 1st defendant had received Rs.40 lakhs and the same will be utilized to meet the Working Capital requirements. Exhibit A-56 evidences that the defendants 2 to 4 guaranteed repayment of the credit facility availed by 1st defendant by executing agreement of guarantee dated 29.8.2016. Exhibit A-57 to A-69 evidences that the 1st defendant had executed necessary loan documents in favour of the applicant on 29.8.2016. Exhibit A-70 and A-71 evidences that the 1st defendant and defendants 2 to 4 separately acknowledged the debt of Rs.34,15,23,584/- as on 28.8.2016 by executing acknowledgement of debt dated 29.8.2016. Exhibit A-72 and A-73 evidences that the 1st defendant

individual and defendants 2 to 4 jointly acknowledged the debt of Rs.42,84,91,052.60p due as on 30.04.2018 by executing acknowledgement of debt dated 30.04.2018. Exhibit A-74 evidences that the defendants defaulted in repayment and hence the loan accounts were classified as NPA on 4.11.2018 and the applicant invoked the provisions of SARFAESI Act and issued the demand notice under Section 13(2) of the SARFAESI Act dated 05.11.2018 demanding a sum of Rs.43,82,16,073.40p. Exhibits A-75 to A-77 evidences that the schedule property stand in the name of the defendants 1 to 3. Exhibit A-78 and A-79, 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 under both the loan accounts. It is also clear from the statement of accounts that penal interest is not capitalized. .

16. 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.

17. In view of the fact that the subject credit facilities were sanctioned for the business of 1st defendant, the Tribunal is not inclined to interfere the interest claimed by the applicant.

18. During the pendency of the OA, the applicant filed a part satisfaction memo dated 27.04.2021 filed vide SR No.3098/2021 stating therein that the Item No.3

property to OA schedule situated at Royapuram has been sold under SARFAESI Act and a sum of Rs.69,30,000/- has realized and the said sum is adjusted to the loan account on 12.4.2021 and this Tribunal vide proceedings dated 15.07.2021 had recorded the same and order that Exhibit A-51 and A-76 be released to the applicant under proper acknowledgement and consequently the said documents were released to the applicant.

19. Further, during the pendency of the OA, the applicant had filed a memo dated 23.5.2019 along with the order of the NCLT, Chennai stating that Hon’ble NCLT Chennai had initiated Corporate Insolvency Resolution Process against 1st defendant herein and has declared moratorium from 15.3.2019 vide its order dated 15.3.2019 in CP/1263/IB/2018 and prayed that further proceedings may be deferred. Further, the Ld. Counsel appearing on behalf of the applicant on 13.12.2021 has submitted that as against the 1st defendant the NCLT, Chennai has passed an order of liquidation and had appointed a Liquidator and hence the applicant is intending to proceed against the other defendants.

20. 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.917 of 2018 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.43,83,99,031.50p with interest @17.15% p.a., with monthly from defendants jointly and severally,

from the date of the OA till the date of its realization after deducting all the amounts received by them during the pendency of OA, and also by selling the Item No.1 and 2 of the OA schedule properties, the hypotheca and other assets of the defendants. However it is made clear that the liability of the 1st defendant for payment would be subject to the result of outcome of proceedings before Ld. NCLT.

(c) It is made clear that the amount of Rs.69,30,000/- realized by the applicant bank by sale of Item No.3 property of the OA schedule be given credit to the loan account on the respective date.

(d) 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.

(e) Applicant is permitted to realize cost of the proceedings and shall file cost memo within 7 days from the date of the order.

(f) 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 Virtual Court, through Video Conference on this the 31st day of December, 2021)

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