STATE BANK OF INDIA vs M/S YAKIMA FILTERS P.LTD. & ORS. on 27 March 2026

: - COMMON ORDER - :

1. This Transfer application is originally filed before the Debt Recovery Tribunal-I Bangalore and got transferred to this Tribunal and numbered as above. The case as put forth by the applicant in the OA is as follows:- The 1st defendant is a Private Limited Company with defendants 2 to 4 as its directors and for setting up a unit to manufacture specialty carbons including Nano Silver Impregnated Acitvated Carbon had approached the applicant bank for credit facilities to the tune of Rs.25 crores. It is also contended that the said credits were secured by hypothecation and mortgage, apart from personal guarantee of defendants 2 to 4. It is further contented that the 4th defendant had also created mortgage of his property thereby the facilities being secured by mortgage of properties belonged to 1st and 4th defendant.

2. It is also contended that the defendant had also executed agreements obliging themselves to the terms of lending. The applicant had further stated that due to delay in implementation of the project and escalation of cost, the Term loan had been rescheduled, terms of which also stood accepted by the defendants. It is also the case of the applicant that the rate of interest become revised by virtue of the re-schedulement.

3. It is also the case of the applicant that the defendants though were obliged to adhere to the terms and conditions of lending had failed in compliance of the same resulting the applicant left with no remedy other than to file this OA apart from resorting to the measures under the SARFAESI Act. This OA is filed after the issuance of lawyer notice in respect of present proceedings, for which only 4th defendant had issued a reply. Hence on the above contentions, the applicant seeks for issuance of a Recovery Certificate for Rs.22,28,81,763.47 and also a prayer to allow the same to be recovered by proceedings against A and B schedule properties.

4. The defendant had filed a counter claim which stood unnumbered as IR.684 of 2016 and the same is dealt separately in the later part of this order.

5. The 1st and 2nd defendants filed their written statement contending that the documents relied upon by the applicant are inadmissible in evidence as proper stamp duty is not paid on the said documents. It is also contended that signatures of the borrowers were obtained in blank papers. It is also stated that the bank did not release working capital to run the unit. It is further contended that the statement of accounts is not acceptable in evidence and also that the interest is capitalized. It is also contended that there is no valid mortgage and stamp duty payable as per Karnataka stamp Act is not paid.

6. The defendants 1 to 3 filed additional statement contending further that the 2nd defendant is a Citizen of America and is the inventor of US patent for a technology called Single Pass Technology to produce safe and healthy water. It is also stated that even as the defendants was contemplating a consortium loan from Canara Bank, Union Bank of India and UCO Bank, the applicant Bank approached the 2nd defendant and assured financial assistance. It is also the case of the defendants 1 to 3 that believing the assurance of the Applicant Bank the defendants brought in foreign currency and had carried out the initial work for which the defendants 1 to 3 claim that they had invested more amounts than the margin money. It is contented that out of Rs.25 crores sanctioned only an amount of Rs.16,12,92,142.80 was released as Term Loan and the Sanctioned Cash Credit was not released. Hence according to the 2nd defendant, the bank without releasing the entire amount had illegally classified the loan account as NPA when the project was incomplete. It is also stated that as the entire sanctioned amount was not disbursed the defendant was compelled to organize funds to pay interest during the implementation of the project. The defendants 1 to 3 are also having a case that the bank did not allow the 2nd defendant to bring in a foreign finance. Hence according to defendants 1 to 3, the applicant had violated the sanctioned terms resulting the failure of the project and due to the same the defendants had incurred loss and to work which the Bank is liable to compensate the defendant to the tune of Rs.146,28,92,236.96.

7. The 4th defendant had filed the written statement contending that he was an associate who played only a limited role in the 1st defendant company and had not given any undertaking to the applicant bank. The 4th defendant also contends that the claim put forth by the Bank is barred by limitation. The 4th defendant further contends that the 4th defendant was a director for a short period and had not participated in the business and had also resigned from the Directorship.

8. Counter claim The 1st and 2nd defendants had filed their Counter Claim contending as follows:

9. The documents relied upon by the Bank are inadmissible in evidence as proper stamp duty is not paid on the said documents. It is also stated that the signature of the borrowers was obtained in blank papers and that the bank did not release working capital to run the unit. It is also contended that there is no valid mortgage as stamp duty payable as per Karnataka stamp Act is not paid.

10. The defendants 1 to 3 in the Counter Claim further stated that the 2nd defendant is a Citizen of America and is the inventor of US patent for a technology called Single Pass Technology to produce safe and healthy water. It is also stated that even as the defendants was contemplating a consortium loan from Canara Bank, Union Bank of India and UCO Bank, the applicant Bank approached the 2nd defendant and assured financial assistance. It is also the case of the 2nd defendant that believing the assurance of the Applicant Bank the defendant brought in foreign currency and had carried out the initial work for which the 2nd defendant claim that they had invested more amounts than the margin money. It is contended that out of Rs.25 crores sanctioned only an amount of Rs.16,12,92,142.80 was released as Term Loan and the sanctioned Cash Credit was not released. Hence according to the 2nd defendant, the bank without releasing the entire amount had illegally classified the loan account as NPA when the project was incomplete. It is also stated that as the entire sanctioned amount was not disbursed, the defendant was compelled to organize funds to pay interest during the implementation of the project. The 2nd defendant is also having a case that the bank did not allow the 2nd defendant to bring in a foreign finance. Hence according to defendants 1 and 2, the applicant had violated the sanctioned terms resulting the failure of the project and due to the same the defendant had incurred loss and to work which the Bank is liable to compensate the defendant to the tune of Rs.146,28,92,236.96.

11. Hence according to the Counter Claimant, they have to organize funds to pay interest during implementation of the project. On the basis of above contentions, defendants put forth a case that the bank is the contributing factor for failing the business. The non disbursement of the working capital facility is also set up as a ground for counter claim. In the grounds of the counter claim the defendants 1 and 2 had put forth the alleged violation of agreed sanction terms, RBI norms and violation of constitutional provisions of Article 12,14,141 and also as to the violation of natural justice. Hence on the basis of above contentions the defendants 1 and 2 sought for a relief of Rs.146,28,92,236.96 with further interest.

12. The applicant filed their written statement to the counter claim contending as follows:- The counter claim put forth by the defendants are barred by limitation as the said application is not filed along with the Written statement. It is also contended that the counter claim is the result of an afterthought. The contention of the defendants 1 and 2 that applicant did not disburse the entire amount is denied by the applicant. The applicant further contends that an amount of Rs.18.95 crores had been disbursed against the sanctioned amount of Rs.25 crores. It is also stated that the working capital was not disbursed as the defendant company failed to provide documents required by the bank at that point of time. It is also the case of the Bank that the question as to running of the factory arise only after the completion of the factory. The company failed to provide project completion certificate.

13. It is also contended that the 1st defendant company had also diverted funds to the tune of Rs.3,53,21,371/- to Mr. Syed Fazlulla and

Associates. It is also pointed out that NPA classification is consequential to the non-service of interest from April 2012 and installment from May 2012. The Bank is also having a case that though the applicant company had sold LGAC (char) around Rs.50 lakhs the sale was not routed through the account with the Bank. The defendants company failed to produce documents proving the of completion of the project. The applicant Bank also pointed out that the company had also issued an e- mail stating that the company had been closed due to labour unrest and justifiable demands from labours.

14. Applicant had let in evidence through AW1 who filed the proof affidavit in terms of the pleadings in the OA and rejoinder to the counter claim and got marked the documents Ext A3 to A35. The 1st and 2nd defendant filed their proof affidavit through 2nd defendant wherein the contentions in the written statement were reiterated.

15. During the pendency of the OA, the 2nd defendant expired and it is brought on record that 3rd defendant is the legal representative of deceased 2nd defendant.

16. The defendants 1 and 3 did not adduce any evidence either by way of defense or in support of their counter claim. The defendant no.4 had produced and got marked the following documents as Ext.D1 to D6.

Ext.D1–Board Resolution of Yakima Filers Pvt. Ltd. dated 30.12.2011. Ext.D2- Order of remand of Dr.Aslam Muhammed Ali Borrower in CC No.113/SW/2011 dated 23.07.2013. Ext.D3- Remand application No.181/RA/2013 dated 20.7.2013. Ext.D4- Letter of Narbada Valley Chemical Industries Pvt Ltd. dt.28.04.2011. Ext.D5 – Private and confidential letter against M/s Yakima Filters Pvt Ltd dated 05.07.2011. Ext.D6- Order of Gujarath High Court in batch case of Special Criminal Applications 2429, 2430, 2431 and 2509 to 2512, 2707 to 2709 of 2011 dated 12.11.2013.

17. Heard the Ld counsel for the applicant and defendant no.4. The following issues arise for consideration in this OA.

i) Whether the applicant had succeeded in proving the TA claim against the defendants.

ii) Whether the 4th defendant cannot be held liable for the renewal facility extended after the so claimed retirements? The following issues arise for consideration in the counter claim.

i) Whether the counter claimant had succeeded in proving damages, if any and whether the applicant can be held liable? Issue No. i) Whether the applicant had succeeded in proving the TA claim against the defendants?

18. The applicant had let in evidence through AW1 and got marked following documents as Ext A3 to A35.

Ext.A3- Letter containing the Terms and Conditions. Ext.A4- Agreement of loan for overall limit. Ext.A5- Agreement of Hypothecation of Goods and Assets. Ext.A6- Deed of guarantee by 2nd and 3rd defendants. Ext.A7- Letter regarding grant of individual limit within overall limit. Ext.A8- Resolution of 1st defendant. Ext.A9- Letter containing the Terms and Conditions. Ext.A10- Extract of Board Resolution. Ext.A11- Modification of Terms and Conditions of sanction. Ext.A12- Letter evidencing confirmation of Deposit of Title Deeds. Ext.A13- Letter evidencing confirmation of Deposit of Title Deeds. Ext.A14- Letter evidencing confirmation of Deposit of Title Deeds. Ext.A15- Letter evidencing confirmation of Deposit of Title Deeds. Ext.A16- Modification in Terms and Conditions of sanction. Ext.A17- Deed of Guarantee for overall limit. Ext.A18- Balance Sheet of the Company. Ext.A19- Statement of account. Ext.A20- ROC – Form No.8. Ext.A21- Lawyer notice with A/D cards Ext.A22- Letter of Allotment rate lands in Hassan Sector Specific Special Economic Zone. Ext.A23- Allotment letter by KIADB to D1. Ext.A24- Possession Certificate. Ext.A25- Confirmation letter of Allotment Ext.A26- Lease Agreement Ext.A27- Receipt by relating to yearly lease rent. Ext.A28- Permission to create mortgage. Ext.A29- Sale Deed in favour of D1 in r/o. property no.806/2. Ext.A30- Sale Deed in favour of D1 in r/o. property no.844/2. Ext.A31- Sale Deed in favour of D4. Ext.A32- Translated copy of Ext.A30. Ext.A33- Translated copy of Ext.A31. Ext.A34- Resolution of D1 company. Ext.A35- Reply given by 4th defendant.

19. Though the defendants 1 to 3 (as they were then) filed written statement contending that only an amount of Rs.16,12,92,142.80 was sanctioned the sanction tickets and the loan documents produced by the applicant clearly establish that the said contention has no basis. The 4th defendant who is contenting the matter is not disputing the original sanction and disbursement. The defendants though dispute the contention of the applicant that they executed the loan documents had not disputed their signatures in the loan documents and the Bank had had also produced the title documents evidencing the mortgage. It is also came out that during the pendency of the OA, the secured assets were sold and there is no successful challenge on to the invocation of Securitization measures, which leads this Tribunal to hold that the contention of the applicant as to creation of mortgage is proved. The statement of accounts as produced by the applicant is evidencing the defaults in the account as on date of filing of the Application. Issue No. ii) Whether the 4th defendant cannot be held liable for the renewal facility extended after the so claimed retirements?

20. Now as to the defense set up by the defendant no.4 that by virtue of the resolution dated 30.12.2011, the letter of disbursement request for release of loan is to be attested by both directors. It is also contented that said resolution was duly communicated to applicant Bank. Hence according to the 4th defendant after the acceptance of the said resolution by the bank the 4th defendant cannot be held liable for further transactions took place after the said date. In this regard the 4th defendant had produced Ext.D1 the copy of the resolution in support of the said contention. Even though the defendant no.4 contends that the said resolution was duly communicated to the bank, no proof as to the same is produced in evidence. Even though Ext.D1 is stated to be a copy given to the SBI, CBD Branch, the same is not sufficient to prove the communication of the same. In the absence of any evidence as to the service of the same to the Bank, this Tribunal is of the view that the contention of the 4th defendant in this regard cannot be accepted. In this regard it is pertinent to note that the sale of secured assets including that of 4th defendant happened after filing of the OA and the said Securitization proceedings initiated by the Bank on the basis of above loan documents remain concluded and hence 4th defendant is in a way estopped by acquiescence in contending against the claim. The documents Exts.D2 to D6 though evidenced the creation of fraudulent Board Resolution and other documents by defendant no.2, the same will not come in aid of the 4th defendant as the same are not consequential to the complaints made on behest of defendant no.4.

21. In view of the discussions herein before and finding entered therein this Tribunal is of the considered opinion that the applicant had succeeded in proving the OA claim and is entitled to realize the same by proceeding against mortgage properties and other assets of the defendants.

22. Taking note of the fact that this case is prolonged for nearly thirteen years, though the bank cannot be faulted for the same and also the fact that all the Secured Assets of the defendants were liquidated resulting substantial recovery the pendentalite and further interest is awarded at 9% p.a. (simple).

23. In the result i) TA.204 of 2017 stands allowed. ii) The applicant is entitled to realize altogether an amount of Rs.22,28,81,763.47 with further interest @ 9% p.a. (simple) from defendants 1, 3 and 4 and their assets after deducting all the amounts received and recovered during the pendency of the OA.

iii) The applicant is entitled for cost of this litigation for which cost memo to be filed in 7 days from the date receipt of this order.

iv) A Recovery Certificate is to be drawn and issued to the recovery Officer to enable recovery of the as per the above terms. v) Interim application pending, if any, stands disposed of in terms of this final order.

vi) Applicant is allowed to realize cost of the proceeding for which cost memo is to be filed in 7 days’ time from the date of receipt of the copy of the order.

24. 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.

Sd./-

(T. RAJESH)

DRT-II- BANGALORE

Counter Claim (I.R.No.684/2016) in TA.No.204 of 2017

Issue No. i) Whether the counter claimant had succeeded in proving damages, if any and whether the applicant can be held liable for the same?

25. In this regard is to be noted that the counter claimant apart from putting forward the counter claim had though filed a proof affidavit had not produced and marked any evidence in support of their contention.

26. The counter claim is raised contending that the bank had not followed the terms of lending in their disbursement. Having accepted the amounts disbursed without raising their little finger, the borrowers cannot be heard to contend that the lending is not in accordance with the terms.

27. Even though the counter claimant had contended that they were compelled to bring in funds because of the alleged failure of the bank in disbursement, no evidence was forth coming as to their entitlement to get the full amount received at relevant point of times.

28. Though the counter claimant attributes inaction and failure in compliance of terms by the Bank, no specific pleadings or evidence is available even to presume the above alleged inaction or deficiency in service by the bank.

29. In view of the fact that there is no evidence available as to the contentions as taken in the counter claim, the same is to be dismissed.

30. Accordingly counter claim IR.684 of 2016 stand dismissed. No orders as to cost. (Dictated to PS, transcribed by him corrected and pronounced by me in the open Court on this the 27th day of March,

Sd./-

(T. RAJESH)

Hon’ble Presiding Officer

DRT-II- BANGALORE