CANARA BANK vs SMT. SUJATHA S.PATIL & ORS (GULBARGA) on 31 July 2026

FINAL ORDER

1. The Application was filed before the Debts Recovery Tribunal-I, Bengaluru on 24.10.2016 Under Section 19 (1) of the Recovery of Debt And Bankruptcy Act, 1993 and numbered as OA No. 2094/2016, seeking for issuance of a Recovery Certificate for Rs. 1,83,04,718/- (Rupees one crore eighty-three lakh four thousand seven hundred and eighteen only). Subsequently, owing to bifurcation of jurisdiction vide Government of India Gazette Notification dated 30.01.2017, the Application (OA No. 2094/2016) was transferred from Debts Recovery Tribunal -I, Bangalore to this Tribunal and renumbered as TA No. 1263/2017.

2. It is the case of the Applicant that Defendant No. 1 is the proprietrix of Bhagya Laxmi Trading Company, engaged in the business of wholesale trading of pulses and other agricultural produce. Defendant No. 1, being the wife of Defendant No. 2 and daughter-in-law of Defendant No. 3,

availed an Open Cash Credit (OCC) facility of Rs. 25,00,000/- (Rupees Twenty-Five Lakh Only) from the Applicant Bank for her business requirements. Defendant Nos. 2 and 3 stood as guarantors for the said facility, and Defendant No. 3 created an equitable mortgage over the Schedule Property by depositing the title deeds as collateral security.

3. It is also the case of the Applicant that, to secure the said credit facility, the Defendants executed the requisite loan and security documents in favour of the Applicant Bank, including the Cash credit agreement, Pro-note, Letter of Deposit of Title Deeds, Guarantee covering letters and Guarantee agreements, thereby undertaking to repay the outstanding dues in accordance with the terms and conditions of the loan.

4. It is the case of the Applicant that the Defendants, despite availing the credit facility, after agreeing with the Terms and Conditions for the loan, failed in complying with the same, resulting in defaults and consequentially turning the loan accounts as Non-Performing Asset (NPA).

5. In the above circumstances, the applicant approached this Tribunal by filing this TA seeking issuance of Recovery Certificate for the amount due in the account.

6. Summons were duly served on the Defendants. During the pendency of the proceedings, the Applicant filed I.A. No. 1073/2017 stating that Defendant No. 3 had expired and seeking to bring his legal representatives, namely Defendant Nos. 3(a) to 3(f), on record. The application was allowed on 22.03.2021, and Defendant Nos. 3(a) to 3(f)

were accordingly impleaded. Thereafter, Defendant Nos. 1, 2, and 3(a) to 3(e) were placed ex parte on 02.07.2025, while Defendant No. 3(f) appeared through counsel, filed a written statement, but did not adduce any evidence. Subsequently, learned counsel for Defendant No. 3(f) filed a memo informing that Defendant No. 3(f) had also expired and produced a copy of the death certificate. The Applicant thereafter filed a memo contending that Defendant Nos. 3(a) to 3(e), who are already on record, are also the legal heirs of the deceased Defendant No. 3(f), and therefore no further steps were required for bringing the legal representatives of Defendant No. 3(f) on record.

7. In the written statement, Defendant No. 3(f) contended that the schedule property allegedly mortgaged to the Applicant is an ancestral property inherited by late Smt. Gurubai S. Patil, the grandmother of Defendant No. 3(f) and daughter of Defendant Nos. 1 and 2. It is further contended that, apart from Defendant No. 3(f), there are other legal heirs of Defendant No. 3 who are entitled to claim their respective shares in the ancestral property. Accordingly, Defendant No. 3(f), along with the other legal heirs, has instituted a partition suit claiming their respective shares in the said property. It is also contended that Defendant No. 3(f) was not a party to the alleged loan transactions and had neither received any consideration in cash or kind nor was she informed of the loans allegedly availed by Defendant Nos. 1, 2, and 3 by creating a mortgage over the schedule property, in which she and the other legal heirs claim a share.

8. The Applicant examined AW-1, who filed his proof affidavit

reiterating the averments made in the T.A. and produced documents marked as Exhibits A-1 to A-15.

9. The defence raised by Defendant No. 3(f) is devoid of merit. In the written statement itself, Defendant No. 3(f) has admitted that she and the other legal heirs are claiming rights over the schedule property. However, except for filing the written statement, Defendant No. 3(f) neither adduced any oral or documentary evidence nor established that the mortgage created in favour of the Applicant is invalid or not binding on the legal heirs. It is well settled that a valid mortgage creates a security interest in the mortgaged property, and such security interest survives the death of the mortgagor and continues to be enforceable against the mortgaged property in accordance with law. Therefore, the claim of the legal heirs over the schedule property, by itself, does not affect or defeat the Applicant's right to enforce the mortgage. Accordingly, the defence raised by Defendant No. 3(f) is unsupported by evidence and is liable to be rejected.

10. The evidence adduced by the Applicant has remained un-rebutted and, therefore, stands proved. The documents produced by the Applicant, including the loan and security documents, guarantee documents, Memorandum of Deposit of Title Deeds, and Demand Promissory Note, are found to be admissible and sufficient to establish the claim made in the present TA. The said documents establish the liability of Defendant No. 1 as the borrower and Defendant Nos. 2 and 3 as guarantors for repayment of the outstanding dues. Since Defendant No. 3 had created an equitable mortgage over the Schedule Property, the security interest created in

favour of the Applicant continues to remain enforceable against the said property in accordance with law. The claim of the Applicant is also found to be within the period of limitation, and there is no material to show capitalization of penal interest in the amount claimed.

11. Accordingly, Defendant Nos. 1, 2, and 3 are jointly and severally liable to pay the amount due to the Applicant. Since Defendant No. 3 died during the pendency of the proceedings, Defendant Nos. 3(a) to 3(f) were brought on record as his legal representatives. Subsequently, Defendant No. 3(f) also died during the pendency of the proceedings, and the Applicant has contended that Defendant Nos. 3(a) to 3(e), who are already on record, are also the legal heirs of the deceased Defendant No. 3(f). Therefore, the legal representatives of the deceased Defendants are liable only to the extent of the estate of the respective deceased Defendants devolved upon them. Accordingly, the issue regarding proof of the TA claim is answered in favour of the Applicant, and the Applicant is held entitled to the reliefs sought in the TA.

12. Since the TA claim has been arrived at by calculating interest at the agreed rate, pendente lite and future interest are awarded at 10.00% per annum (simple). The prayer for interest with monthly rests and for penal interest for the future period is hereby declined.

13. In view of the above

i. TA 1263 OF 2017 stands allowed

ii. The Applicant is allowed to recover an aggregate sum of Rs. 1,83,04,718/- (Rupees one crore eighty-three lakh four thousand

seven hundred and eighteen only) from the Defendant No. 1 and 2 jointly, severally and personally with pendente lite and future interest of 12.00% p.a. (simple), from the date of filing of the TA till the realization, after giving credit to all the amounts recovered and received during the pendency of the TA if any, and allow the same to be recovered by proceeding against the schedule property. Property schedule to the OA be the schedule to the Recovery Certificate.

iii. Defendant Nos. 3(a) to (e) are only liable to the extent of the estate inherited by them form the deceased Defendant no.3 and also the estate Defendant No. 3(f) had inherited form the deceased Defendant no.3.

iv. In the event of any balance amount remaining due and payable after enforcement of the mortgage security, the Applicant Bank shall be at liberty to proceed against the Defendant Nos. 1 and 2 personally and against their other assets for recovery of such balance amount, in accordance with law. v. Interim application pending, if any, stands disposed of in terms of this final order.

vi. A Recovery Certificate is to be drawn and issued to the recovery Officer to enable recovery of the as per the above terms.

vii. 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.

14. 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 PY directly on the Computer, after its transcription, corrected and pronounced by me in the open Court on this the 31st day of July, 2026).

Sd/- (T. RAJESH)

PRESIDING OFFICER

ANNEXURES WITNESSES EXAMINED FOR THE APPLICANT BANK: AW-1: Sri. Bhoom Reddy, Manager & P A Holder, of Applicant Bank. Exhibits on the part of the Applicant:

Exhibit Nos. Date Particulars of Documents A1 11.01.2003 Loan application A2 21.12.2002 Letter of Proprietorship A3 22.01.2003 Cash Credit Agreement A4 22.01.2003 Pro-note A5 03.02.2005 Letter evidencing Deposit of Title Deeds A6 to A9 22.01.2003 Guarantee covering letters and Guarantee agreements A10 to A13 20.01.2006, 26.12.2009, 29.11.2012, 28.10.2015 Letters of Revival A14 02.08.2016 Recall notice A15 -- Certified account statement

Witness Examined for the Defendants:

-Nil- List of Documents Exhibited for the Defendants:

-Nil-

Sd/-

(T. RAJESH)

PRESIDING OFFICER