KARNATAKA GRAMIN BANK vs SRI. K. RAVIKUMAR & ORS. on 23 June 2025

FINAL ORDER

1. The applicant bank has filed the present application against the defendants for recovery of the sum of Rs.26,42,181/- with interest and accost as OA.No.943/2012 on the file of Debts Recovery Tribunal – I, Karnataka at Bengaluru and the said OA was transferred the file of this Tribunal and was renumbered as above.

2. The case of the applicant bank is that defendant applied for an Agricultural Pledge loan for Rs.33,00,000/- vide Ex.A3 – Loan Application; that the applicant bank sanctioned the said loan vide Ex.A4 sanction letter; that at the time of availing the said loan, the defendants executed Ex.A5 Demand Promissory Note, Ex.A6 – Produce Loan Agreement, Ex.A7 and A8 –Letters; that the defendants undertook to pledge 3300 bags of Sona Masoori Paddy stored in godowns; that by letter of Safety and access, the defendants undertook to store the said paddy bags. It is also the case of the applicant that, the defendants undertook the responsibility for the safety of the goods and also permit the bank officials to have regular inspection of the same. It is further contended that the defendants failed to repay the loan resulting the same was classified as Non-Performing Asset on 22.02.2012. It is also contended that in terms of Ex.A8 Consent letter, the applicant bank therefore sold the stock of paddy for Rs.16,01,766/- and after adjusting the same to the loan account, the balance amount of Rs.24,64,602/- is outstanding in the account, which is the subject matter of this TA.

3. The applicant bank has filed its evidence through Sri. Achutha Padiyar, Branch Manager and produced the loan documents and marked the same as Ex.A3 to A13. The applicant bank also filed a copy of duly certified statement of accounts and got the same marked as Ex.A13.

4. The first defendant had let in their evidence admitting the availment of financial facility from the applicant bank. The defendant contends that because of prohibition by the Government for export of non-basumati rice, there is delay in sale of paddy and in the meanwhile, the bank threatened to auction the paddy by public auction and display the names of the defendants in the list of defaulters in local newspapers. It is also stated that the bank officials obtained signatures on blank forms by coercion which later turn out to be No Objection Certificate for disposal of the paddy by the bank. It is also contended that the applicant bank also threatened the defendants that if the paddy is sold in public auction, sale would not fetch expected price and defendants would also have to bear the cost of publication and auction charges. Hence, according to the defendants under such distress circumstances, the bank took signatures of defendants on purported No Objection Letters on the assurance that it would sell paddy in accordance with law and fetch better price for the defendants after giving details of private auctioneers and in the presence of defendants. It is also contended that the applicant bank has never informed anything to the defendants, that only after receipt of summons in the present case, the defendants came to know that the bank has illegally sold paddy bags in an alleged private auction for a paltry sum and adjusted the proceeds into loan account. The bank has never informed the defendants the manner of its illegal disposal of paddy bags; that said illegal sale of paddy bags has caused unbearable and irreversible loss to the defendants. The defendant contends that the bank had no authority to sell the paddy in the manner done by the bank; that the bank has not furnished the details of alleged private sale carried out by it. The ledger extract produced by the bank does not give the particulars of amount paid, payable and recovery by the bank and suit is to be dismissed.

5. It is contended that, the paddy bags ought to have been sold in public auction only and that the entire action of the bank is illegal. It is also the case of the defendant that, because of illegal private auction of the paddy bags by the bank, the defendants have suffered enormous loss.

6. The second defendant had also filed his written statement contending that he did not stand as surety; that though the applicant bank pledged 3300 paddy bags, they sold only 2742 bags and there is no account for the balance 558 bags. It is also stated that the bank has not given any account regarding the bags which is valued at Rs.8,09,100/-. It is also the case of the 2nd defendant that the entire loan amounting to 70 in number was sanctioned to one Sri.K.V. Krishna Rao who was de-facto owner of the stocks of paddy and the transactions took place between said Sri.K.V. Krishna Rao and officials of the bank in collusion. It is alleged that, the bank sold the paddy with delay and if the applicant bank had acted in time, the bank would have realized entire amount; that the bank has sold the paddy for a lower price colluding with traders. It is also stated that no account for 2742 bags and no mention about the same is made in the OA/TA. Hence, it is the case of the defendant that the bank unnecessarily delayed the sale of paddy in collusion with Sri.K.V. Krishna Rao, and that the second defendant is made a scape-goat. It is also contended that it is only the said Sri. K.V. Krishna Rao who is liable to pay and that the claim on the

2nd defendant is liable to be dismissed.

7. The second defendant has also filed his evidence affidavit reiterating what is stated by him in the written statement and marked photocopy of two letter which marked as Ex.D3 and Ex.D4.

8. the applicant bank has also filed its objections statement to the purported counter claim made by the first defendant in which they would contend that the first defendant in which they would contend that the first defendant has no locus standi to raise the counter claim which is not maintainable in law. It is also stated that he defendant had given consent for sale of the paddy in private sale vide Ex.A10 and bank has never informed the defendant about such sale vide Ex.A11. Even after issuance of Ex.A11 the defendant later raised issue of private sale.

9. The witness of the applicant by name Sri. Achutha Padiya, working as Branch Manager in the applicant bank was also cross examined by the defendants on 14.06.2016.

10. Based on the above pleadings and documents and after hearing the argument of the Ld. Counsels for respective parties, the following points arise for my consideration:

a) Whether the applicant has made out a case to allow the TA?

b) To what reliefs the parties are entitled?

11. The applicant had let in evidence through AW-1, who had deposed in their Proof Affidavit in terms of their TA claim. Even though the said witness is cross examined in detailed nothing was brought out to discrete the AW-1.

12. There is no dispute with regard to the availing of the loan, execution of loan documents including the Ex.A10 consent letter dated 17.06.2011 given by the defendants to the applicant for sale of the paddy by the bank for realization of the outstanding in the loan account. Even though the defendants contends that Ex.A11 obtained by coercion, no evidence as to any coercion is adduced nor the defendant had never complained to anyone about the alleged coercion.

13. The dispute raised by the defendants is with regard to the manner of sale of the subject paddy by the applicant bank which the defendants say was for much lower value than it was worth and also in terms of quantity that out of 3300 bags pledged, only 2742 bags were sold and there is no account for the remaining balance 558 bags. The value of the said 558 bags was Rs.8,09,100/- which should have been credited to the loan account. The further contention of the defendants is that the loans were guaranteed by one Sri.K.V. Krishna Rao and the bank has colluded with him. It is further contended that the bank has also delayed the sale of the paddy which has resulted in deterioration of the paddy.

14. The above contentions cannot be entertained for the reason that once an unconditional right is given by the defendants to the applicant bank for private sale of the pledged paddy, in case of his default in repayment of the loan. It is not open to the defendants to question the sale on such routine grounds especially after the issuance of Ex.A11. Further, the defendants cannot expect the bank to be a dealer in paddy. The defendants’ Ex.A10 consent letter authorizing the bank for private sale of the paddy, is taken by the bank only as a last recourse open to bank to realize the outstanding dues in the loan account in case of default. The defendants were bound to repay the loan within one year as promised and undertaken by them and cannot expect the bank in indulge in trading of the paddy. In other words, the defendants cannot be permitted to take loan and forget the repayment in time leaving the paddy with the bank as if it was the duty of the bank to sell the paddy and adjust the loan. The paddy was not left at the custody of the bank by the defendants by way of sale nor was the paddy resold by the bank to 3rd parties in its course of business. The bank only had its rights over the paddy by way of a pledge and/or as security. The paddy remained under the custody of the defendants. The bank primarily created a security over the same

in the form of pledge for repayment of the loan it advanced to the defendants and has not purchased the same from the defendants. The defendants instead of repaying the loan with interest in time as promised and undertaken by them, has left the paddy at the disposal of the bank. The bank issued vide Ex. A12 legal notice dated 08.12.2011 for which there was no response from the defendants. No objection was raised about the sale of the paddy by the defendants after receipt of the said notice. Such contentions are raised for the first time by the defendants in the written statement.

15. This is also to be noted that, the availment of the credit facility as well as the security created over the paddy is not in dispute. Even though the defendant has put up a case that the applicant had solved the security without following the transparent procedure is to be seen from the fact that, the applicant who has extend the security for the prompt repayment of the loans having failed to do so. It is also evident that the defendants have taken no steps or not made any communication with the bank to facilitate to obtain maximum price for the pledge paddy. Having failed to repay the amount and raising any dispute as to the liquidator of the paddy at appropriate times, the defendants cannot be heard to contend that the sale of the paddy is not in transparent way. It is to be noted that the business of the bank is not for vending the paddy or any other security and the attempt of liquidate the security can only be seeing as distress measure by the bank to realize the amount due. If, at all the defendant having any complaint they failure to raising a valid counter claim or a claim of set off evidences the lack of bonafide and that the present attempt of the defendant is to scuttle the measures of the bank to realize the due amount.

16. Even though, AW-1 was cross examined at length by the defendant and the relevant portion of the cross examination is extracted as below: The bank’s witness, one Mr. Achutha Padiyar working as the Chief Manger in the bank was cross examined by the LD. Counsel appearing for the 1st defendant and in the cross examination, the said witness admitted as follows:- “… regarding sale of the paddy, paper publication is to be given by fixing the date of sale by inviting general public to purchase paddy. Valuation has to be obtained from APMC or it has to be collected from the newspaper report…” “… Paddy is in question was in exclusive custody of the bank. Bank did not obtain any report regarding quality of paddy in question prior to sale in question.. "... It is true that in the case on hand total bags are sold by the bank 1869 as against 2150. On account of loss on account of pilferage, gunny bags lost strength... "... There is no mahazar regarding weighing of paddy..."

"... immediately after completion of one period from the date of pledge, the bank did not check the quality of the paddy. Receipt issued by the bank in favour of the purchasers was not produced in this case. Hence lam not able to depose the name of the purchasers.

"... It is true suggest that as per guidelines of RBI agricultural production to sell only to the registered of dealers of APMC. It is true that in the said sale, middle man is not required. Annexure of Ex.A12 indicates that bank has given commission to a middle man for sale of the paddy in question..." "... without seeing the pass sheet I am not able to depose the said sale consideration by way of cash, cheque, DD etc.,. I am not able to depose by what mode commission was given to the middle man ie., by cash, cheque or DD. Bank will produce pass sheet to the Tribunal on or before next date...". "We are not able to produce the documents regarding the details of the purchasers..."

17. Hence, it is evidence from the evidence of the AW-1 that the bank had sold the paddy after paper publication. The so called loss caused to the defendant due to the pilferage, gunny bags cannot be gone into due to the failure of the defendants to raise any claim for set off. The absence of any objection raised even after committing the default and having full knowledge that the bank will sell off the security itself evidence that the present dispute try to be raised in this TA, can only be an afterthought. The admitted document Ex.A10 also will expose the hollowness of the defense setup by the defendant.

18. Having extended security obliging to repay the loan promptly and regularly and having failed in doing so, the defendant who did not raise their little finger against the attempt of the bank to sell off the security cannot turned back on later stage and say that the liquidation of the security is improper and by such liquidation they sustained loss.

19. On consideration of discussions as held above and also taking into fact that there is no dispute as the availment of the credit facility, defaults committed in the accounts and creation of security to enabling the bank to sell off the same at the appropriate time, this Tribunal is of the view that the bank had succeeded in proving their things as said forth in the TA and the defense set forth can only be an afterthought and is liable to the discarded. Hence, the applicant is found an entitled for the TA claim. The claim of the applicant is well within the time of limitation. Taking note of the fact that the facility is extended in relation to agricultural purpose and the security is already sold, the penda lite and the future interest is awarded at 6.00% p.a. (simple).

20. 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.

21. In the result, TA.No.1417/2017 stands allowed,

i) The applicant is allowed to recovery an aggregate sum of Rs.26,42,181/- (Rupees Twenty Six Lakh Forty Two Thousand One Hundred and Eighty One 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 OA and allowed the same to be recovered by proceeding against schedule properties. The schedule properties to the OA be the schedule properties to the Recovery Certificate.

ii) If the sale proceeds are not found sufficient to cover the amount due and payable to the applicant bank, the defendants jointly, severally and personally and other assets are liable for all such amounts due under the loan accounts.

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.

22. 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 23th Day of June 2025].

Sd/- (T. RAJESH) PRESIDING OFFICER

DRT-II, BENGALURU

ANNEXURES WITNESSES EXAMINED FOR THE APPLICANT BANK: AW-1: Sri. Ramesh K, Branch Manager of the applicant bank. Exhibits on the part of the Applicant: Annexure Particulars A1 Applicant Evidence A2 List of Documents A3 Loan application dated 08.02.2010 A4 Sanction memorandum dated 08.02.2010 A5 DPN & Take Delivery letter to DPN dated 08.02.2010 A6 Produce loan agreement dated 08.02.2010 A7 Letter of safety dated 08.02.2010q

A8 Letter of Access dated 08.02.2010 A9 Godown/Building on Lease Agreement dated 08.02.2010 A10 Letter dated 17.06.2011 consenting for private sale of the pledged paddy stock by the defendant No.1. A11 Copy of the letter dated 29.10.2011 of the applicant for having sold the stock of paddy A12 Copy of the legal notice dated 08.12.2011 A13 Copies of the statement of account certified under Bankers’ Book of Evidence Act.

Sd/- (T. RAJESH) PRESIDING OFFICER