STATE BANK OF INDIA vs M/s.YES EM Castings 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.40,02,057/- with further interest @12.60% per annum with monthly rests from 10.04.2018 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 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 defendants by their application dated 22.09.2012 approached the applicant bank for sanction of various credit facilities for their working capital requirement and for purchase of machineries and considering the said request, the applicant vide sanction dated 18.12.2012 sanctioned Cash Credit (Hypothecation of stocks and receivables) loan of Rs.5 lakhs and Term Loan facility of Rs.34 lakhs. It is contended that the facility was renewed and enhanced from time to time and now the defendants are enjoying Cash Credit Limit of Rs.10 lakhs, Term loan facility of Rs.20.27 lakhs and Term Loa facility of Rs.4 lakhs. It is also contended that the said limits are secured by hypothecation of stocks, receivables and machineries which were purchased out of the loans availed from the applicant.

4. It is also the case of the applicant that the Cash Credit Limit is granted for a period of 12 months and may be reviewed, renewed, encashed or cancelled subject to performance of the defendants unit; the Term Loan-I was agreed to be repaid in 60 equated monthly installments of Rs.57,000/- and the Term Loan-II was agreed to repaid in 60 equated monthly installments of Rs.9400/- each.

5. It is the further case of the applicant that the defendants again on 16.3.2016 approached the applicant for grant of credit facilities for development of their business and considering the said request the applicant vide its sanction dated 16.3.2016 sanctioned Cash Credit Limit of Rs.10 lakhs, Term Loan facility of Rs.20.27 lakhs and Term Loan Limit of Rs.4 lakhs, thus the defendants are enjoying a facility of Rs.34.27 lakhs.

6. It is contended that to secure the limits availed, the defendants executed various loan security documents in favour of the application viz., Agreement of loan cum hypothecation dated 21.12.2012, Consent Letter dated 21.12.2012, Supplemental agreement of Loan cum Hypothecation dated 3.4.2014, consent letter dated 3.4.2014 and Supplemental Agreement of Loan cum Hypothecation dated 17.3.2016.

7. It is the further case of the applicant that after availing the credit facilities the defendants defaulted in repayments and hence loan accounts were classified as NPA on 27.6.2017, 30.04.2018 and 20.8.2017. It is contended that as the defendants did not come forward to clear the outstanding dues the applicant issued a legal notice on 27.12.2017, which returned unserved.

8. 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.

9. 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 24.10.2018, they were set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 15 documents, which were marked as Ex. A-1 to A-15 on 8.10.2021. 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.

10. 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.

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

12. 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 Loan application for grant of credit facilities dated 22.09.2012 submitted by the defendants to the applicant. Exhibit A-2 is the sanction letter dated 18.12.2012 issued by the applicant sanctioning Cash Credit Limit of Rs.5 lakhs, Term Loan of Rs.34 lakhs. Exhibit A-3 is the Letter of Arrangement dated 21.12.2012

executed by the defendants. Exhibit A-4 is the Agreement of Loan cum Hypothecation dated 21.12.2012 executed by the defendants. Exhibit A-5 is the consent letter dated 21.12.2012 executed by the defendants consenting for submission of data to CIBIL. Exhibit A-6 is the sanction letter of the applicant renewing the credit facilities dated 22.3.2014 viz., enhancing the Cash Credit Limit to Rs.10 lakhs and the Term Loan to Rs.26.55 lakhs. Exhibit A-7 is the Letter of Arrangement dated 3.4.2014 executed by the defendants for the renewed limit. Exhibit A-8 is the Supplemental Agreement of Loan cum Hypothecation dated 3.4.2014. Exhibit A-9 is the consent letter dated 3.4.2014 executed by the defendants. Exhibit A-10 is the Appraisal Memorandum for sanction of addition Term Loan for the flood affected units in Chennai dated 16.03.2016 issued by the bank. Exhibit A-11 is the Letter of Arrangement for the credit limits viz., Cash Credit Limit of Rs.10 lakhs, Term Loan- I of Rs.20.27 lakhs and Term Loan-II of Rs.4 lakhs. Exhibit A-12 is the Supplemental Agreement of Loan cum Hypothecation dated 17.3.2016 executed by the defendants for the renewed limits. Exhibit A-13 is the legal notice dated 27.12.2017 issued by the applicant to the defendants and Exhibit A-14 is the returned enveloped. Exhibit A-15 is the statement of accounts in respect of the loan account.

13. Exhibit A-1 to A-5 evidences that the defendants by their application dated 22.9.2012 approached the applicant for sanction of various credit facilities and the applicant by its sanction letter dated 18.12.2012 sanctioned Cash Credit Limit of Rs.5 lakhs, Term Loan of Rs.34 lakhs to the defendants and the same is secured by the documents executed by the defendants. Exhibit A-6 to A-9

evidences that at the request of the defendants the applicant renewed the limits vide its sanction dated 22.3.2014 viz., enhancing the Cash Credit Limit to Rs.10 lakhs and the Term Loan to Rs.26.55 lakhs and the defendants executed various loan and security documents to secure the said limit. Exhibit A-10 to A-12 evidences that at the request of the defendants the applicant again reviewed the facilities and by its sanction dated 16.3.2016 sanctioned Cash Credit Limit of Rs.10 lakhs, Term Loan- I of Rs.20.27 lakhs and Term Loan-II of Rs.4 lakhs and to secure the same the defendants executed loan and security documents. Exhibit A-13 and A-14 evidences that the defendants failed to comply with the terms and conditions of sanction and defaulted in repayment resulting in the applicant issuing legal notice dated 27.12.2017 to the defendants and the same returned unserved. 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.

14. 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.

15. In view of the fact that the subject loan is a business loan the Tribunal is not inclined to interfere with the interest rate claimed by the applicant.

16. 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.398 of 2018 stands allowed.

(b) Applicant is permitted to realize an amount of Rs.40,02,057/- with interest @12.60% p.a., with monthly rests from defendants jointly and severally, from 10.04.2018 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.

17. 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