STATE BANK OF INDIA vs M/S.SHANTHA PROJENCTS P LTD & ORS (HOSPET) on 12 June 2026

:FINAL ORDER:

1. This OA is originally filed before DRT-I, got transferred and re- numbered as above is filed by the applicant bank seeking issuance of recovery certificate of Rs.51,14,81,831/- ( Rupees Fifty One Crore Fourteen Lakh Eighty One Thousand Eight Hundred and Thirty One only) alleged to have been due in Two Term loan and One Cash credit facility availed by the defendants.

2. It is the case of the applicant that, the credit facilities have been availed by the 1st defendant company for which 2nd and 3rd defendant have executed personal guarantee, apart from creating mortgage on the schedule properties. It is contended in the OA that, the 1st defendant is the limited company have availed Term loan facility of Rs.32.50 Crores and Letter of Credit (Capex) sub-limit of Rs.25.00 Crore from the applicant bank which stood sanctioned on 09.05.2011 for the purpose of setting up a 10 MW power plant. It is also stated that, as the cost for setting up escalation of project, the bank has further sanctioned and disbursed an amount of Rs.3.70 Crores as Term Loan II and further Working Capital facility of Rs.6.50 Crores making the total sanctioning to Rs.42.70 which comprised working capital of Rs.6.50 Crores and Term Loan for Rs.32.00 Crore and Rs.3.70 respectively.

3. It is also stated that, for the due payment of the credit facility hypothecation over the receivables and current assets were created. Apart from creating security over the schedule properties. The 2nd and 3rd defendant being the Directors stood as personal guarantor for the repayment of the credit facility and had mortgage C & D property to the bank. The 4th defendant had also executed a Corporate Guarantee deed dated 28.02.2013. it is also the case of the applicant, despite the availment of the credit facilities agreeing to fulfill the obligation as to the repayment, no repayments were coming resulting the accounts being declared as a NPA an demand notice under S.13(2) of the SARFAESI Act being issued on 13.08.2024. the bank is also relying upon the letter of confirmation of balance issued by the defendants in the year 2014, since the repeated efforts of the applicant to get the money recovered failed, the present TA is filed.

4. The respondent had filed this objections along with a Counter Claim contending that, the defendant had sustained loss due to the cohesive enforcement of interest payment without any moratorium considering the RBI Prudential norms on Income Recognition and Assets Classification. It is contended by the defendant that, the classification of the account as NPA is not in accordance with the prudential guidelines of the RBI as the bank should not have classify an advance account as NPA merely duel to existence of some deficiency which are temporarily in nature and non- availability of adequate drawing power based on the latest available stock statement, the balance outstanding exceeding the limit temporarily, on non-submission of stock statements. It is also stated that, there are some occasions in which the project is delayed for legal and other reasons. The bank should have considered the re-schedulement of the said facility in accordance with the delay, if the same cannot be attributable to the conduct of the borrower.

5. Apart from the above, it is stated that the respondent bank being a scheduled nationalize bank is not merely a financing agent but as larger economic cause behind its business of financial industrial projects, the credit loans are not followed by the banks. Despite, the specific direction in that regard had been put forth by RBI. The defendants were compelled to bring on more investment on the power project because of the in action of the bank in duly considering the financial position of the defendants due to reason beyond their control. It is also stated that, the bank had also stated that, the bank had also failed to consider the request of the borrower to regularize the account on receipt of additional security provided by the third parties. Hence, according to the defendants the project in its completed form would have generated a revenue of Rs.3.65 Crores, a month against the cost of production of Rs.2.8 Crores. Hence, the expected profit of Rs.61.11 lakhs in a month could not be generated because of illegalities committed by the respondent bank. Hence on the above contention the defendant seeks for dismissal of the OA as well counter claim for Rs.66,80,00,000/- with pendalite interest. The counter claim is numbered as IR 100/2017 which is dealt with separately in the order.

6. The bank had filed with written statement to the counter claim contends inter alia that, the counter claim is filed by the defendant is not legally maintainable. Apart form the above, the bank had reiterated the contention as taken in the OA and contends that, the counter claim has been filed after the expiry of time stipulated by the statute for filing written statement and hence liable to be declined. Apart from the above the applicant bank has denied the contention as taken in the counter claim and had further contended that all these happened due to the improper maintenance of machinery and factory came to closed between December 2013 to January 2014, which resulted non supply of power from KPTCL. It is also pointed out by the applicant bank that the operation of plant and running of the same is nothing to do with the respondent bank and repayment condition as stipulated in the loan agreement having no condition stipulated that to repayment should commence only on the successful operation of the plant. The respondent had further denied the contention of the counter claimant as to the offering additional security and contends that, despite the request of the bank to grant additional security, the same was not furnished by the defendants. Hence, according to the applicant bank, the counter claim is also liable to be dismissed.

7. Based on the above pleading, this Tribunal is of the view that, the only issue arise for consideration in the OA is as whether the applicant had succeeded in proving the OA claim and the only issue arise for the consideration in the counter claim i.e. IR 100/2017 is whether the counter claimant establish that, they are entitled to recover the amount of Rs.66,80,00,000/- from the applicant bank, in view of the alleged failure of the applicant bank to adhere to the terms of lending and norms put forth by RBI.

8. The applicant had let in evidence and got marked the following documents as Exhibit A1 to A31. Despite, granting sufficient opportunity no defense evidence was adduced in the OA nor any claimant evidence adduced in the counter claim. The documents produced by the applicant are sufficient to prove the OA claim as the applicant had produced the sanction ticket in respect of the credit facilities and deed of guarantee executed by the borrower as well as the personal guarantee and also the corporate guarantor i.e. the 4th defendant in respect of hypothecation assets is already produced. Apart from the certified extraction from the board of resolution of the 4th defendant corporate guarantor empowering the 4th defendant to extend the corporate guarantee for the said facility. Even though a relief is sough against in respect of the schedule properties claiming that, the same are mortgaged with the bank and the mortgage also stands proved by the bank, this Tribunal is not adverting to the same for the simple reason that during the pendency of the OA, the schedule properties were sold and bank had filed IA.2877/2025 seeking deletion of the schedule properties which stands allowed by the order dated 28.01.2026 resulting the deletion of the schedule properties form the relief. The loan agreement duly signed by the defendants are duly establishes their obligation to pay off the liability. The statement of account as produced by the applicant bank evidences that, the amount sanctioned had duly been disbursed to the loan accounts and defendants failed in repayment of the same resulting the amount as claimed in the OA fell due in the respective account.

9. No defense evidence is adduced in rebutting the contention of the applicant, though written statement filed along with the counter claim, so supporting evidence is let in by the defendant.

10. Going by the documents relied upon and marked by the applicant it can be safely concluded that the applicant had succeeded in proving the OA claim and the amount as claimed in the OA claim is to be recovered by the applicant.

11. As far as the 1st defendant company is concerned, it is stated that, the proceedings were initiated before the NCLT Bangalore, wherein a corporate resolution plan had been approved by that Tribunal.

12. In respect of the counter claim, the applicant bank has filed their written statement to the loan, refuting the contention of the counter claim. No evidence was let in by the counter claimant in support of any of the contentions as taken in the counter claim leads this Tribunal to find that the counter claim is liable to be dismissed for want of evidence.

13. Taking into consideration the facts that the credit facilities were availed against the security of mortgaged properties and the security is already sold, this Tribunal in view of the OA can be allowed with a reduced interest @8.00% p.a. (simple).

14. In the result, TA.No.77/2017 stands allowed.

i) The applicant is allowed to recovery an amount of Rs.51,14,81,831/- ( Rupees Fifty One Crore Fourteen Lakh Eighty One

Thousand Eight Hundred and Thirty One only)under Overdraft facility with further interest of 8.00% p.a.(simple) from the date of filing OA till the realization from defendants No.2 to 4, after giving credit to all the amount recovered and received during the pendency of the OA.

ii) In the event of failure of the defendants to pay the aforesaid amount, the bank is at liberty to proceed against the defendants No.2 to 4 jointly, severally and personally and their other assets are liable for all such amounts due under the loan account.

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.

16. 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 12th Day of June 2026].

Sd/- (T. RAJESH) PRESIDING OFFICER

Counter Claim IR 100/2017

In view of the above discussion, the counter claim stands dismissed. No Order as to costs. [Dictated to the Stenographer (PR), transcribed by her, corrected and signed and pronounced by me in the Open Court, this the 12th Day of June 2026].

Sd/- (T. RAJESH) PRESIDING OFFICER

ANNEXURES WITNESSES EXAMINED FOR THE APPLICANT BANK: AW-1: Mr. Raghunandan K, Asst. Manager of the applicant bank. Exhibits on the part of the Applicant: Annexure Particulars A1 Sanction Letter Dated 09.05.2011 A2 Extract of board resolution dated 01.07.2011 A3 agreement of loan for overall limit dated 07.07.2011 A4 Agreement of hypothecation of Goods and Assets dated 07.07.2011 A5 Deed of Guarantee executed by defendant 2 and 3 dated 07.07.2011 A6 Letter regarding grant of individual limits within the overall limit dated 7.7.2011 (Form C-5 ) A7 Deed of Assignment dated 5.11.2011 executed by M/S. Shantha Projects Pvt. Ltd. in favour of State Bank of India. A8 Escrow Account Agreement dated 5.11.2011 executed by Shantha Projects Pvt. Ltd. in favour of State Bank of India. A9 Revival Letter dated 9.8.2012 executed by Defendants. A10 Sanction Letter dated 4.4.2013 for Rs.36.20 crores. A11 Extract of Board Resolution dated 6.4.2013

A12 Supplemental Agreement of Loan for increase in the Overall limit dated 9.4.2013 Form C-IA A13 Supplemental Agreement of Hypothecation of goods and assets for increase in the overall limit dated 9.4.2013 (Form C-2A) A14 Supplemental Deed of Guarantee for increase in overall limits dated 9.4.2013 (Form C-4-A) A15 Letter Regarding the grant of individual limits within the overall limits dated 9.4.2013 (Form C-5) A16 Revival Letter dated 9:4:2013-(Form-C6) 07.11.2011 A17 Deed of Assignment dated 9.4.2013 A18 Promoters Undertaking executed Defendants 2 and 3 dated 09.04.2013 A19 Escrow Account Agreement dated 6.4.2013. A20 Sanction Letter dated 19.8.2013 for Rs.42.70 crores A21 Extract of Board Resolution dated 20.8.2013 A22 Supplemental Agreement for overall limit dated 20.8.2013 (Form c-IA) A23 Supplemental Agreement of Hypothecation of goods and assets for increase in the overall limit dated 14.8.2013 (Form c-2A) A24 Deed of Guarantee for overall limit extended by M/S. Padmavathi Commercial Impex Pvt. Ltd. (Form C-4) A25 Office copy of the legal notice dated 21.08.2015 A26 Supplemental Deed of Guarantee for increase in overall limit executed by Defendants 2 and 3 dated 20.8.2013 (Form c-4A) A27 Letter regarding the Grant of individual limits within overall limits executed by First Defendant dated 20.8.2013 (Form C-5 A28 Balance confirmation letter dated 03.07.2014 A29 Statement of term loan A30 Statement of term loan A31 Statement of cash credit

Sd/- (T. RAJESH) PRESIDING OFFICER