CANARA BANK vs Mr. R. Damodharan 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.3,43,94,754/- comprising of a sum of Rs.2,97,01,201/- with further interst @12.95% per annum with monthly rests being the amount due under Secured Overdraft Loan A/c No.0416256002703; a sum of Rs.10,52,903/- with further interest @9.15% per annum with monthly rests being the amount due under Working Capital Term Loan Facility Account No.0416746000003 and a sum of Rs.36.40,650/- with further interest @9.15% per annum with monthly rests being the amount due under Funded Interest Term Loan Facility Account No.0416747000007 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 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 at the request of the 1st defendant the applicant vide its sanction dated 29.12.2014 sanctioned Secured Overdraft to the tune of Rs.250 lakhs under Loan Account No.0416256002703 for the purpose of working capital requirements and the defendants 2 to 4 executed guarantee agreement thereby guaranteeing due repayment of the credit facility availed by the 1st defendant. It is contended that the 1st defendant executed Demand Promissory Note for Rs.250 lakhs on 20.06.2015 and request for overdraft facilities dated 20.06.2015. It is also contended that the defendants executed individual guarantee agreements on 20.06.2015 and the 1st defendant also executed common hypothecation agreement for Rs.250 lakhs dated 20.06.2015.

4. It is also the case of the applicant that at the request of the 1st defendant, the applicant sanctioned Working Capital Term Loan facility of Rs.9 lakhs on 29.1.2016 under Loan Account No.0416746000003 for the purpose of extending over dues in Working Capital on account of natural calamity, a Term Loan of Rs.31 lakhs for the purpose of serving the interest of Working Capital limit for a period of one year. It is contended that having availed the facility the 1st defendant executed Letter of renewal dated 15.9.2016 for a sum of Rs.250 lakhs, Demand Promissory Note dated 15.9.2016 for a sum of Rs.250 lakhs, draft letter of undertaking rform borrower / co-obligant / guarantor for restructuring the loan dated 30.1.2016 by the defendants 1 to 3 in favour of the applicant, Debt

Restructuring agreement dated 30.1.2016 executed by defendants 1 to 3, debtor credit agreement dated 30.1.2016 executed by defendants 1 to 3 in favour of the bank, link letter from the borrower / guarantor whose limit is getting renewed on or after 1.4.2016 duly signed by defendants 1 to 4 in favour of the applicant. It is also contended that the 1st defendant executed acknowledgement of debt and security on 15.9.2016. It is further contended that the defendants 1 to 4 executed guarantee agreements on 15.9.2016 thereby guaranteeing due repayment of the credit facilities availed by the 1st defendant.

5. It is also the case of the applicant that the 1st defendant deposited the title deeds of his property more fully described in Item No.1 to the OA schedule with an intention to create equitable mortgage over the same in favour of applicant and confirmed the same by executing Memorandum of Deposit of Title deeds dated 18.06.2015 registered as Doc. No.1633 of 2015 on the file of SRO, Ashok Nagar, Chennai. Similarly, 2nd defendant deposited the title deeds of his property more fully described in Item No.2 to the OA schedule with an intention to create equitable mortgage over the same in favour of applicant and confirmed the same by executing Memorandum of Deposit of Title deeds dated 18.06.2015 registered as Doc. No.1632 of 2015 on the file of SRO, Ashok Nagar, Chennai. Further, the defendants 3 and 4 deposited the title deeds of their property more fully described in Item No.3 to the OA with an intention to create equitable mortgage over the same in favour of applicant and confirmed the same by executing Memorandum of Deposit of Title deeds dated 22.06.2015 registered as Doc. No.1674of 2015 on the file of SRO, Ashok Nagar, Chennai.

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 were served and though initially the defendants were represented by a Ld. Counsel they did not choose file reply statement. Further, as there was no representation on behalf of the defendants on 1.3.2019, they were set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 31 documents, which were marked as Ex. A-1 to A-31 on 22.10.2021. 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.

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-31 along with the proof affidavit. Exhibit A-1 is the Sanction Memorandum of the applicant dated 29.12.2014 sanctioned Secured Overdraft facility of Rs.250 lakhs. Exhibit A-2 is the Demand Promissory Note dated 20.6.2015 for a sum of Rs.250 lakhs executed by 1st defendant. Exhibit A-3 is the request for overdraft facility dated 20.06.2015 by 1st defendant. Exhibit A-4 to A-7 are the guarantee agreements dated 20.06.2015 executed by defendants 1 to 4. Exhibit A-8 is the Common Hypothecation Agreement dated 20.06.2015 executed by 1st defendant. Exhibit A-9 is the Sanction Memorandum dated 29.01.2016 issued by applicant sanctioning Rs.9 lakhs towards Working Capital Term Loan Facility and Rs.31 lakhs Funded Interest Term Loan. Exhibit A-10 is the letter of renewal dated 15.9.2016 executed by 1st defendant for Rs.250 lakhs. Exhibit A-11 is the Demand Promissory Note dated 15.9.2016 for a sum of Rs.250 lakhs by 1st defendant. Exhibit A-12 is the letter of undertaking dated 30.01.2016 from the borrower / co-obligant / guarantor for restricting of loan. Exhibit A-13 is the Debt Restructuring agreement dated 30.01.2016 executed by defendants 1 to 3 in favour of the applicant. Exhibit A-14 is the debtor creditor agreement dated 30.01.2016 executed by defendants 1 to 3. Exhibit A-15 is the link letter obtained from the borrower / guarantor whose limit is getting renewed on or after 1.4.2016 duly signed by the defendants. Exhibit A-16 is the acknowledgement of debt and security dated 15.9.2016 execute by the 1st defendant. Exhibit A-17 to A-20 are the guarantee agreements dated 15.9.2016 executed by defendants 1 to 4 individually. Exhibit A-21 is the Settlement deed

dated 6.9.2002, Doc. No.1947 of 2002. Exhibit A-22 is the Memorandum of Depo0sit of Title deeds dated 18.6.2015 executed by 1st defendant, Doc. No.1633 of 2015. Exhibit A-23 is the sale deed document No.178 of 2003. Exhibit A-24 is the Memorandum of Deposit of Title deeds executed by 2nd defendant in favour of applicant, Doc. No.1632 of 2015. Exhibit A-25 Settlement deed dated 12.12.1997 registered as Doc. No.1832 of 1997. Exhibit A-26 is the Memorandum of Deposit of Title deeds dated 18.06.2015 executed by defendants 3 and 4 in favour of applicant and registered as Doc. No.1634 of 2015. Exhibit A-27 is the Memorandum of Deposit of Title deeds dated 22.06.2015 executed by defendants 3 and 4 in favour of applicant registered as Doc. No.1674 of 2015. Exhibit A-28 is the legal notice dated 29.05.2018 issued by the applicant bank to the defendants. Exhibit A-29 to A-31 are the statement of accounts in respect of three loan accounts.

11. Exhibits A-1 to A-8 evidences that the 1st defendant approached the applicant for sanction of credit facilities and considering the said request the applicant had on 29.12.2014 sanctioned a Secured Overdraft Facility of Rs.250 lakhs. It also evidences that the 1st defendant executed necessary loan and security documents on 20.06.2015 and the defendants 1 to 4 executed guarantee agreements thereby guaranteeing due repayment of the credit facilities availed. Exhibit A-9 evidences that at the request of the 1st defendant the applicant vide sanction dated 29.1.2015 sanctioned Rs.9 lakhs towards Working Capital Term Loan and Rs.31 lakhs towards Funded interest Term Loan. Exhibit A-10 evidences that the 1st defendant executed letter of renewal dated 15.9.2016 for

renewal of the credit facility of Rs.250 lakhs. Exhibit A-11 evidences that the Demand Promissory Note dated 15.9.2016 executed by the 1st defendant for Rs.250 lakhs. Exhibit A-12 to A-15 evidences that at the request of the 1st defendant for restructuring of loan, the applicant restructured the loan and the defendants 1 to 3 executed necessary documents in favour of applicant bank. Exhibit A-16 evidences that the 1st defendant acknowledged the debt cum security by executing acknowledgement of debt cum security dated 15.9.2016. Exhibit A-17 to A-20 evidences that the defendants 1 to 4 executed guarantee agreements on 15.9.2016 thereby guaranteeing the restructured limit of Rs.250 lakhs. Exhibit A-21 and A-22 evidences that the Item No.1 of OA schedule property is owned by 1st defendant and the first defendant deposited the title deeds with the applicant with an intention to create equitable mortgage over the same in favour of the applicant and confirmed the same by executing Memorandum of Deposit of Title deeds on 18.06.2015. Exhibit A-23 and A-24 evidences that the Item No.2 of OA schedule property is owned by 2nd defendant and the 2nd defendant deposited the title deeds with the applicant with an intention to create equitable mortgage over the same in favour of the applicant and confirmed the same by executing Memorandum of Deposit of Title deeds on 18.06.2015. Exhibit A-25 to A-27 evidences that the Item No.3 of OA schedule property is owned by defendants 3 and 4 and they deposited the title deeds with the applicant with an intention to create equitable mortgage over the same in favour of the applicant and confirmed the same by executing Memorandum of Deposit of Title deeds on 18.06.2015 and 22.06.2015. Exhibit A-28 evidences

that the defendants defaulted in repayment and hence the applicant had issued legal notice dated 29.5.2018 calling upon the defendants to clear the outstanding dues. Exhibit A-29 to A-31, 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 accounts. It is also clear from the statement of accounts that penal interest is not capitalized.

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 rate 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.345 of 2018 stands allowed.

(b) Applicant is permitted to realize an aggregate sum of Rs.3,43,94,754/- comprising of a sum of Rs.2,97,01,201/- with further interest @12.95% per annum with monthly rests being the amount due under Secured Overdraft

Loan A/c No.0416256002703; a sum of Rs.10,52,903/- with further interest @9.15% per annum with monthly rests being the amount due under Working Capital Term Loan Facility Account No.0416746000003 and a sum of Rs.36.40,650/- with further interest @9.15% per annum with monthly rests being the amount due under Funded Interest Term Loan Facility Account No.0416747000007 from defendants jointly and severally, from the date of filing 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 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.

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