CANARA BANK vs DURGAPPA on 27 February 2026

::FINAL ORDER::

1. This OA is filed under S.19 of the RDB Act., as then it was seeking recovery of Rs.59,47,029/-, which the applicant claims as debt due in produce loan account No.1711844011618 and further interest at 12.85% p.a. and also for the realization of the amount by sale of moveable and immovable assets of the defendants.

2. The case of the applicant bank that, the defendant No.1 as the borrower had availed the loan. The 2nd defendant is the company registered under the Companies Act and engaged in providing facility for trading commodities and facilitating financial and physical settlement for such trades. The 2nd defendant also provides an electronic system for maintaining the details of commodities stored in warehouse accredited to it, which is commonly known as Commodity Management System. The said system has a facility of noting of pledge of commodities intended to be trading on the 2nd defendant platform and facilitates pledge financed against the same.

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3. It is also stated that, the 3rd defendant is providing warehouse services in certain places which according to the applicant, were accredited by 2nd defendant. The applicant bank decided to avail the facility offered by the 2nd defendant for lending credit facility in connection with produce on pledge of the stock of paddy. It is the case of the applicant that, the 2nd defendant had agreed to provide the security to the bank by allowing access to the commodity management system (COMLIVE) for noting the pledge in favour of the applicant bank and commodities deposited by the 1st defendant for the purpose of trading. It is also the case of the applicant that, the 3rd defendant had agreed to store the commodities to ensure the quantity and quality as reflected in the COMLIVE and the 2nd and 3rd defendants have agreed to facilitates noting the pledge in favour of the applicant bank.

4. It is also the case of the applicant bank that, the 3rd defendant undertakes to keep indemnify the defendant No.2 and the bank for any losses, damages and penalties including costs etc. incurred by and any claim/s if any made against the 2nd defendant or the bank due to any difference in quality and quantity alleged or found in pledged commodities. The 2nd defendant has agreed that in case of dispute between the bank, the 3rd defendant and 2nd defendant will make best efforts to intervene and resolve issues 4 TA/42/2019

between the bank and the 3rd defendant, include the forfeiture of the Bank Guarantee and also to undertake to instruct the 3rd defendant to arrange the stock of the same grade at different warehouse for and as compensation for the loss of goods or balance quantity after adjusting the claim of bank guarantee.

5. The 1st defendant being the participant of the 2nd defendant approached the applicant bank and availed produce loan of Rs.48.00 lakh against the pledge of stock of paddy, which was sanctioned by the applicant’s bank. In consideration of the said loan the 1st defendant had offered security of 5140 bags of paddy valued at Rs.69,33,860/- stored at Nagaraju Gudi S/o. SOUSAPP leased godowns under the tie-up with the 3rd defendant. The 1st defendant had also executed all the requisite loan documents for the above facility.

6. It is the further case of the applicant that, despite the availment of the facility and verification of the stock at the time of disbursement, the applicant came to know that some of the stocks were disappeared as during the regular inspection of the produce loans on March 2018, it is found that the paddy pledged with the applicant bank was not available as per the receipts issued by the 3rd defendant. It is further alleged that, the employees of the 3rd defendant did not co-operate with the bank officials to verify the 5 TA/42/2019

stock and also in making available the godown keys. In this regard, it is the case of the applicant that, though the 2nd defendant accepted the failure of the 3rd defendant and was legally obliged to look into the matter, no positive action was forth coming from the part of the 2nd defendant.

7. It is also contended that, since the amount remained to be paid and securities being non-available, the bank had issued a legal notice calling upon the 1st defendant to repay the dues. In respect of the 3rd defendant, it is the case of the applicant that, in view of the defaults/breach of terms of agreement committed by defendant No.3, they are liable to compensate the applicant for the loss caused in the above transaction. It is also alleged by the applicant that, as the 2nd defendant failed to conduct due diligence as to the integrity and performance of defendant No.3, and hence the 2nd defendant is also liable for the above amount.

8. In the above premises, the applicant filed this OA seeking issuance of recovery certificate for the amount as claimed in the OA.

9. Despite, the summons issued, only the 2nd defendant entered appearance and filed their written statement contending as follows:

There is no debt as defined under the Section 2(g) of the RDB

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Act and also that, if at all a dispute, the same has to be resolved through Arbitration. According to the 2nd defendant, the claim as made by the applicant bank is barred by limitation. the 2nd defendant also contends that, by virtue of clause17 of the agreement only the courts at Mumbai, Maharashtra have the exclusive jurisdiction over all matters arising out of or relating to the agreement including matters relating to the existence or validity of the said agreement. The 2nd defendant admits to have provided the commodity management system for facilitating delivery of commodities for the trade and also for noticing of e-pledge of commodities intended for trading.

10. This is also admitted that, the 3rd defendant accredited by the 2nd defendant for offering the warehousing services to participants who intend to trade on this defendant. In respect of the transactions in question, the 2nd defendant admits that, the 2nd defendant and the 3rd defendant had agreed to facilitate noting of pledge in favour of the applicant bank.

11. The 3rd defendant is provide the warehouse for the purpose of receiving and delivering the goods deposited for which the 3rd defendant is required to generate a credit against such deposit in favour of the depository client as and when the deposits are made. It is also admitted that, the applicant had entered into 7 TA/42/2019

an agreement with 2nd and 3rd defendant on 10.02.2016, which provides the 2nd defendant shall ensure with the 3rd defendant to provide with necessary online access to the system for generating the deposit receipts of the commodities at the accredited warehouse for the purpose of e-pledge request to the applicant. It is also agreed that, the defendant shall not release the pledge on the non- tradable lots of commodities until the applicant confirms release of pledge. According to the 2nd defendant they cannot be found liable for any dues as disputes arise if any is between the borrower and the 3rd defendant or the applicant and 3rd defendant in respect to the quantity and quality of commodities deposited and pledged in favour of the applicant bank, as, the 2nd defendant who was playing only the role of providing the facility for allocation for pledge and nothing else. According to 2nd defendant, they don’t have any control over the 3rd defendant and the commodities claimed to have pledged in favour of the applicant. The availment of the facility in question against the pledge is admitted by the 2nd defendant.

12. The applicant had let in evidence and got marked as Exhibit A3 to A16. Even though an opportunity was given to the defendant to adduce evidence, no evidence was adduced, despite an adjournment was granted. The Deputy Manager appeared in person on the date of hearing and seeks an adjournment for change 8 TA/42/2019

of the counsel. Thereafter, the case was adjourned to 11.09.2025 for hearing, there was no representation and no defense evidence is adduced. Hence, the defendant’s evidence closed.

13. The following issues arise for consideration: i) Whether the applicant had succeeded in proving the OA claim as against the defendants? ii) What order are to be passed?

Both these issues are gone into and decided together.

14. Though the summons has been duly taken out and service is complete, only 2nd defendant entered appearance and contested the matter. The applicant along with the OA, the applicant had produced the Tripartite Agreement executed between the defendants and the applicant.

15. The contention as to the applicant about the sanctioning, disbursement of the facility is not in dispute as even the 2nd defendant who is contesting the matter is have no dispute as to the same. The Exhibit A4 application, A5 sanction and A6 Warehouse receipts coupled with A7 to support as to pledge of paddy evidences the contention of the applicant as to the disbursement of the sanctioned amount against the pledge of the commodities is proved. The liability of the 1st defendant is also

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evidenced by A8 Demand Promissory Note. The fact put forth about loss of pledged commodities is also proved by the applicant by production A9, & A10. Having found that the applicant had succeeded in proving as to the disbursement of the facility and loss of pledged goods, there cannot be any dispute as to the entitlement of the applicant to recover the amount outstanding in the account, which is evidenced by the A14 statement of accounts, Ex. A14 also proves that there is no capitalization of any interest and also that, the claim is well within the limitation. Now, as to the issue as to the liability of defendant No.2 and 3, it is clear that, by virtue of Tripartite Agreement is clear that, the liability can be cast upon the 3rd defendant, who had agreed to indemnify the bank and the 2nd defendant and its officers for any losses, as Clause 6 of the Annexure A3 Tripartite Agreement provides for the same.

16. Going by the Annexure A3 Tripartite Agreement especially, Clause 6 (2) of the said agreement obligates the 2nd defendant to indemnify and keep indemnify the bank for any losses on account of breach of this agreement by indemnifying party namely the 3rd defendant Clause 6(2) of the said agreement reads as follows: 6.2 Subject to specific covenants as agreed upon between the Parties herein, NeML undertakes to indemnify and keep 10 TA/42/2019

indemnified the Bank (“Indemnified Party”) and its officers, directors, employees, representatives, consultants and agents from and against any and all losses, liabilities, obligations, costs and/or damages, pertaining to actions, claims, demands, proceedings (including the cost of defending or settling any action, claim or demand) which may be incurred/suffered or as may be suffered or instituted against the Indemnified Party arising out of or as a result of lapse, error, action, omission, negligence etc., on the part of indemnifying party/ies or any or its staff, employees, agents, associates, directors, etc., while performing the obligations under this agreement; or on account of, A) a breach of this Agreement by indemnifying party;

b) actor omission of negligence or misconduct or bad faith or criminal breach of trust or default of the indemnifying party, its agents, employees or sub-contractors or of any other person for whose acts or omissions the indemnifying party is vicariously liable; damage, loss, death or injury of or to any person; or damage or loss to the personal effects of any person, caused by any act or omission of the indemnifying Party, its officers, servants, agents, sub-contractors, invitees and licensees arising out of the performance of this Agreement; Minutes in pursuant to the Tripartite Agreement which is produced as A11 and A12 also evidences that, the 2nd defendant had undertaken to resolve the issue within a time limit by closing the account where the fraudulent transaction has taken place. Going 11 TA/42/2019

by the minutes is clear that, the 2nd and 3rd defendant had virtually agreed that a fraud has been taken place in the account which also fortified the case of the applicant bank.

17. even though Clause 17 of the Annexure A3 stipulates that only courts in Mumbai will have exclusive jurisdiction, the same will not take away the jurisdiction of this Tribunal on the said clause cast only the ‘courts’ in Mumbai with jurisdiction can only be construed as an agreement U/s.20 of the Code of Civil Procedure and will not take away the jurisdiction of this Tribunal as governed U/s. 17 of the Act. It is trait law that, the parties cannot confer jurisdiction on a court which does not have already have it by law. Hence, this Tribunal is not inclined to accept the contention of the 2nd defendant as to territorial jurisdiction of this Tribunal to entertain this application.

18. There is no contra-evidence available on record to repudiate the claim of the applicant bank regarding the availing of loan by Defendants, execution of loan and security documents and the default committed in repaying the loan dues. Therefore, in the absence of any material proof or evidence to repudiate the claim of the applicant bank, the claim made by the applicant bank stands proved. However, in view of the fact that, the facilities are availed 12 TA/42/2019

against the pledge of paddy apart from other security and the TA relates to 2019, this Tribunal is of the view that, the pendentalite and future interest has to be awarded at the rate of 6.00% p.a. (simple).

19. Hence in view of the above finding which cover both the issues raised in this manner, this Tribunal is of the view that OA is liable to be allowed.

20. In the result, TA.No.42/2019 stands allowed, i) The applicant is allowed to recovery an aggregate sum of Rs.59,47,029/- (Rupees Fifty Nine Lakh Forty Seven Thousand and Twenty Nine only) with further interest of 6.00% p.a.(simple) from the date of filing OA till the realization from defendants, after giving credit to all the amount recovered and received during the pendency of the TA.

ii) In the event of failure of the defendants to pay the aforesaid amount, the bank is at liberty to proceed against the defendants jointly, severally and personally and their other assets are liable for all such amounts due under the loan account.

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iii) The applicant bank is allowed cost of the proceeding which applicant to file cost memo within 7 days from the date of receipt of the order.

iv) The Recovery Certificate to be drawn in terms of this order and transferred to Recovery for execution.

v) Interim Application pending, if any, stands disposed of with this Final Order.

21. 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 the Stenographer (PR), transcribed by her, corrected and signed and pronounced by me in the Open Court, this the 27th Day of February 2026].

(T. RAJESH) PRESIDING OFFICER

DRT-II, BENGALURU ANNEXURES WITNESSES EXAMINED FOR THE APPLICANT BANK: AW-1: Sri. Satyanarayana Tatikonda, Chief Manager of the applicant bank.

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Exhibits on the part of the Applicant: Annexure Particulars A3 Notarized of the Tripartite Agreement Dated 10.02.2016 A4 Original applicant dated 18.05.2017 A5 Original Sanction Letter Dated 18.05.2017 A6 Original warehouse receipt No.CNX/CAN/2017- 2018/ 01402 dated 17.05.2017 A7 True copy of the COMLIVE report on pledge of stock of paddy A8 Original Demand Promissory Note for Rs.48,00,000/- and Take Delivery Letter to Demand Promissory Note dated 18.05.2017 A9 Original of the letter for loans against LIC policy/NSC/Post office Time Deposits/Govt. Securities/ NDRECEIPTS/KVP/ BONDS dated 18.05.2017 A10 Original Godown Inspection Report dated 14.07.2017 A11 Notarized Minutes of Tripartite meeting held on 20.03.2018 A12 Notarized Minutes of Tripartite meeting held on 22.05.2018 A13 Original legal notice issued to the defendant No.1 A14 Original legal notice issued by the bank to defendant No.3 dated 19.09.2018 A15 Original legal notice issued by the bank to defendant No.2 dated 19.09.2018 A16 True extract of the statement of account certified under Bankers’ Book of Evidence Act, showing the outstanding liabilities under the Produce loan Account No.1711844011618 WITNESS EXAMINED FOR THE DEFENDANTS: -Nil-

(T. RAJESH) PRESIDING OFFICER