TAMILNAD MERCANTILE BANK LIMITED vs M/s.Charu Homes, Rep. by its Proprietor Mr.V.Harish Uvarajan 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.89,47,324.50p with interest @12% per annum with monthly rests plus 2%

penal interest from 20.03.2019 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 is the overdraft facility 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 defendants approached the applicant bank for sanction of credit facility to meet its Working Capital requirement for construction of building and considering the said request the applicant by its sanction letter dated 22.3.2016 sanctioned credit facility of Rs.60 lakhs under TMB MSME OD Scheme. It is contended that the defendants having availed the said credit facility executed various loan and security documents on 22.3.2016 viz., Demand Promissory Note for Rs.60 lakhs, Letter of continuation cum take delivery note, consent letter by 2nd defendant offering his immovable property as security, letter of undertaking for payment loan in installments, Proprietary declaration letter, undertaking letter to keep the pronote dated 22.3.2016 as continuing security, letter of hypothecation of book debt loans, agreement for demand cash credit on the hypothecation of movables, letter of authorization to debit the installment from their current account and declaration letter regarding the stock kept in the godown. It is also contended that the 2nd defendant deposited the title deeds of his property, more fully described in the schedule to the OA with the applicant bank with an intention to create equitable mortgage over the same in favour of the applicant and confirmed the same by

Memorandum of Deposit of Title deeds, which however could not be registered due to non co-operation by the 2nd defendant.

4. It is the case of the applicant that after availing the credit facility the defendants defaulted in repayment and failed to clear the outstanding dues despite repeated demands / requests did not come forward to clear the outstanding dues and hence the loan account was classified as NPA on 31.8.2016. It is contended that as no payment was forthcoming the applicant invoked the provisions of SARFAESI Act and issued the demand notice on 3.10.2016 under Section 13(2) of the Act, however, the defendants did not come forward to clear the outstanding dues.

5. 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.

6. Summons were taken out to the defendants and the same returned with endorsement “Left” and hence were served with notice by substituted service by way of paper publication. As there was no representation on behalf of the defendants on 07.07.2021, they were set ex-parte. Applicant Bank filed Proof Affidavit along with 15 documents, which were marked as Ex. A-1 to A-15 on 26.10.2021. The Ld. Counsel for Applicant Bank made his submissions on 17.12.2021 and thereafter the matter stood till this date for passing final orders.

7. 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.

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

9. The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-15 along with the proof affidavit. Exhibit A-1 is the sanction letter of the applicant dated 22.3.2015 sanctioning credit facility to the tune of Rs.60 lakhs to the 1st defendant. Exhibit A-2 is the Demand Promissory Note dated 22.3.2016 for a sum of Rs.60 lakhs executed by the defendants. Exhibit A-3 is the letter of continuation cum take delivery note dated 22.3.2016 executed by the 2nd defendant as Proprietor of the 1st defendant. Exhibit A-4 is the Consent Letter dated 22.3.2016 executed by the 2nd defendant offering his immovable property as security. Exhibit A-5 is the letter of undertaking dated 22.3.2016 executed by 2nd defendant as Proprietor of the 1st defendant for payment of the loan in installments. Exhibit A-6 is the proprietary declaration letter dated 22.3.2016 executed by the 2nd defendant as Proprietor of the 1st defendant.. Exhibit A-7 is the undertaking letter dated 22.3.2016 executed by the 2nd defendant as Proprietor of the 1st defendant.. Exhibit A-8 is the letter of

hypothecation of book debt loans executed by the 2nd defendant as Proprietor of the 1st defendant. Exhibit A-9 is the agreement for demand cash credit on the hypothecation of movable properties dated 22.3.2016 executed by the 2nd defendant as Proprietor of the 1st defendant. Exhibit A-10 is the Letter of Authorisation dated 22.03.2016 to debit the installments from the current account. Exhibit A-11 is the declaration regarding stock kept in the godown executed by the 2nd defendant as Proprietor of the 1st defendant. Exhibit A-12 is the Power of Attorney dated 27.06.2015 executed by the 2nd defendant. Exhibit A-13 is the Memorandum of Deposit of Title deeds dated 21.3.2016. Exhibit A- 14 is the Sale deed dated 17.3.2016 executed by Mr. V. Mohanraj in favour of the 2nd defendant registered as Doc. No.2995/2016. Exhibit A-15 is the statement of accounts in respect of the loan account.

10. Exhibit A-1 evidences that at the request of the 1st defendant represented by the 2nd defendant the applicant had sanctioned credit facility of Rs.60 lakhs to the defendants to meet out the working capital requirements by sanction letter dated 22.03.2016. Exhibit A-2 to A-12 evidences that the 2nd defendant as Proprietor of the 1st defendant executed various loan and security documents in favour of the applicant. It also evidences that the defendants hypothecated the stocks available at their godown. Exhibit A-13 and A-14 evidences that the schedule property belonged to the 2nd defendant and the 2nd defendant deposited the title deeds of the schedule property with the applicant bank with an intention to create equitable mortgage over the same in favour of the applicant. Exhibit A-15, 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. .

11. 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.

12. In view of the fact that the subject loan is a overdraft Facility granted for the purpose of business of 1st defendant, this Tribunal is not inclined to interfere with the interest claimed by the applicant and reject the penal interest claimed.

13. 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.406 of 2019 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.89,47,324.50p with interest @12% 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 properties 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 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.

14. 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