INDIAN OVERSEAS BANK vs M/s.Lily Beauty Parlour 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 a sum of

Rs.22,45,079/- with interest @11.25% per annum with monthly rests plus 2% penal interest 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 property.

2. The subject matter of the case is the Term Loan 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, a Proprietorship concern represented by the 2nd defendant running a ‘Beauty Parlour’ had approached the applicant bank by loan application dated 10.05.2016 for grant of credit facilities and the applicant considering the said request sanctioned Term Loan (Hypothecation) of Rs.20,00,000/- by its sanction dated 25.5.2016 repayable in 84 monthly installments of Rs.32,894/- per month.

4. It is also the case of the applicant that the 2nd defendant having availed the credit facility executed various loan and security documents on 25.5.2016 viz., Agreement of Term Loan and Hypothecation of Assets / Goods with consent cum authorization letter, Letter agreeing to the terms and conditions of sanction and Demand Promissory Note for a sum of Rs.20 lakhs thereby agreeing to repay the said sum together with interest @12.10% per annum with monthly rests.

5. It is the further case of the applicant that after availing the credit facility the defendants defaulted in repayments and also failed to regularize the loan account despite repeated demands. Therefore, the loan account was classified as NPA on 30.09.2017.

6. 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.

7. Summons were taken out to the defendants and the same were served. The defendants were represented by a Ld. Counsel, however, as the defendants failed to file their written statement, they were set ex-parte on 24.09.2018. Applicant Bank filed Proof Affidavit along with 10 documents, which were marked as Ex. A-1 to A-10 on 1.12.2021. The Ld. Counsel for Applicant Bank made his submissions on 21.12.2021 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-10 along with the proof affidavit. Exhibit A-1 is the Loan application dated 10.05.2016 submitted by the defendants. Exhibit A-2 is the Sanction letter of the applicant dated 24.05.2016 sanctioning Term Loan of Rs.20 lakhs to the defendants. Exhibit A-3 is the Credit Sanction Advice dated 25.5.2016 issued by the applicant. Exhibit A-4 is the Agreement of Term Loan and hypothecation of goods for Rs.20 lakhs dated 25.5.2016. Exhibit A-5 is the letter dated 25.5.2016 of the 2nd defendant thereby agreeing to the terms and conditions of sanction. Exhibit A-6 is the Demand Promissory Note dated 25.5.2016 for a sum of Rs.20 lakhs executed by the 2nd defendant. Exhibit A-7 is the statement of accounts in respect of the loan account. Exhibit A-8 is the certificate under Bankers’ Book Evidence Act dated 3.5.2019. Exhibit A-9 is the affidavit of the Senior Manager of the applicant regarding charging of interest as per RBI guidelines and Exhibit A-10 is the General Power of Attorney dated 16.11.2010 issued by applicant in favour of Smt. Suchitra Dalai for taking legal action etc., including filing of Recovery Suit / OA.

11. Exhibit A-1 to A-3 evidences that the 2nd defendant approached the applicant by her loan application dated 10.05.2016 for sanction of credit facilities for her business and considering the said request the applicant vide its Credit Sanction Advice dated 25.05.2016 sanctioned Term Loan (Hypothecation) of Rs.20 lakhs. Exhibit A-4 to A-6 evidences that the defendants had executed loan and security documents on 25.5.2016 in favour of the applicant. Exhibit A-7 to A-9, 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 the loan account. It is also clear from the statement of accounts that penal interest is not capitalized. Exhibit A-10 evidences that Mrs. Suchitra Dalai, Senior Manager of the applicant is authorized to institute and defend the claim on behalf of the applicant.

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 subject loan is a business loan the Tribunal is not inclined to interfere with the interest 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.142 of 2018 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.22,45,079/- with interest @11.25% p.a., with monthly rests 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 schedule property 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 2nd defendant is 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.

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

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