KARNATAKA GRAMIN BANK vs MR. C.H.SRINIVASA RAO & ORS. on 29 September 2025

FINAL ORDER

1. The present Original Application in short (OA) has been filed under section 19 of Recovery of Debts and Bankruptcy Act 1993 due for seeking issuance of Recovery Certificate against the defendants for Rs.26,65,372.50/- (Rupees Twenty Six Lakh Sixty Five Thousand Three Hundred Seventy Two and Fifty Paise only), due in an pledge loan/warehouse loan of Rs.30,00,000/- alleged to have been availed by the defendants from erstwhile Pragati Gramin Bank, which later got amalgamated with the applicant bank.

2. It is the case of the applicant bank that, the above-mentioned credit facility for Rs.30,00,000/- was availed by the defendants by pledging 3800 Paddy bags stored in a godown. It is also contended that the apart from the execution of the loan documents, pledged over the paddy of 3800 bags is created.

3. It is the case of the applicant bank that, despite availing the facility, agreeing to fulfill their commitment to repay the same without default, the defendants failed to repay the same forcing the applicant to sell off the stock of paddy and credit the sale proceeds to the loan account. In view of the above scenario the applicant seeks for issuance of the Recovery Certificate for the amount outstanding in the loan account to allow the same to be recovered by proceeding against the defendant and also against the schedule.

4. The defendants appeared and filed written statement contending Defendant applied for the loan of Rs.42,00,000/- against the hypothecation of 4500 paddy bags/units after executing necessary documents not for himself, on behalf of Mr K.V. Krishna Rao. The bank has got pledged 4500 bags from Defendant No.1 and sold only 4,286 bags; there is no account for remaining 214 bags. The bank agreed to sanction loan @ 12% p.a. of interest but calculating 16.25% is contrary to the Sanction Memorandum dated 02.02.2010.

5. The Bank colluded with K.V.Krishna Rao who is MD of Vishwa Shanthi Agro Industries (Rive Mill) and gave an undertaking on behalf of Defendant No.1 to pay the loan. The Loan which was advanced by Bank to the Defendant was advanced to Mr K.V.Krishna Rao, who is the defacto owner of the stock (Paddy Bags). Like this, Mr K.V. Krishna Rao pledged the stock around 70 names/persons and got the amount sanctioned and entire amount received by him in collusion with the bank officials.

6. Though there is a letter taken from the Defendant to sell the paddy, the bank intentionally have not sold the paddy at prevailing price and only sold in the year 2011 in different dates. The bank could have sold the material when the price was higher. It is the bank’s fault and only to make favour to one Mr K.V. Krishna Rao who is the Managing Director and also given undertaking on behalf of 70 loanees including Defendant No.1. The MD, Vishwa Shanthi Agro Industries has given an undertaking to the applicant on 14.10.2010 and 14.01.2011 stating that the stock which is in the custody of Bank belonged to him and also admitted that the loan was availed by him in the name of 70 farmers against the personal co-obligation of himself. (Copies of the undertakings produced as Documents 1 & 2). He has requested the bank not to auction the pledged paddy stock and agreed to repay the loan which shall commence on 18.10.2010 and within a month i.e., 17.11.2010; agreed to pay all the dues within 17.11.2020 and had also requested not take action against the farmers.

7. By taking the Undertaking, Bank kept quiet without taking any action against the farmers. The Bank kept quiet without taking any action against the loanees though they could have easily recovered by selling the stock. In the Application, the bank has not stated the procedure followed by it while disposing the stock.

8. The said Mr Krishna Rao also undertaken that all the dues will be repaid by them and the bank is at liberty to take legal action against him, including the disposal of assets pledged to Bank. Though the moratorium period was over, Bank kept quiet without taking any action in collusion with Mr Krishna Rao. Now due to some misunderstanding with each other and without having any other remedies, bank hurriedly approached this Tribunal with wrong information. Defendant No.1 has been made a scapegoat and the application is filed only to harass the Defendant No.1.

9. The applicant had let in their evidence by filing their Proof Affidavit reiterating the contention of the TA and producing the loan documents which got marked as Exhibits A3 to A12. The defendants also filed their defense evidence by filing their respective proof of affidavit in terms of the contention taken in the written statement.

10. Defendant No.1 filed Evidence Affidavit, the same was considered as DW-1 and marked as Ex.D1. The DW-1 reiterated the contentions raised in the Written Statement.

11. Heard the applicant, despite granting sufficient adjournments there is no representation for the defendants continuously and hence the defendants’ side taken as heard.

12. The following issues arise for consideration in this matter: i) Whether the applicant had proved their claim based on the documents they relied upon and produced in the TA? ii) Whether the defendants case that the pledged paddy were sold in price too low in relation to the availing marked price at that time and thereby causing any damage to the defendants is to be accepted?

iii) What order are to be passed? Since all these issues are interrelated, the same are gone into and decided together.

13. In the present case, Defendant Nos.1 & 2 availed the loan from the applicant bank by pledging the 3800 paddy bags; Defendant No.3 was impleaded as party to the Application vide the orders passed in IA 4670/2012; after availing the loan, Defendants failed to repay the loan amount due and the Defendant No.3 also failed to pay the loan amount due as undertaken by him; the applicant bank sold the paddy bags in auction and appropriated the sale proceeds towards the loan account of the Defendants and filed the present application to recover the balance amount due from the Defendants.

14. The availing of loan facility, execution of loan documents and the pledge of paddy bags are not in dispute. It is alleged by Defendants that the Applicant bank obtained signatures of Defendants on the blank formats purporting to be No-Objection Certificate Letters from Defendants to dispose of the Paddy on its own. If it is really so, nothing prevented the Defendants from raising objections to sign the blank documents or else to fill-up the blanks before appending their signature. Having availed the loan by executing various loan documents, accepting the terms and conditions of the loan, pledging of paddy bags and after committing default in repaying the loan dues, the Defendants cannot be allowed to turn around and raise such allegations now, which is not acceptable. Therefore, the allegation is liable to be rejected.

15. In this context, the Tribunal places reliance on judgment of the Hon’ble High Court of Andhra Pradesh in the case titled

Corporation Bank V/s Sushil Enterprises (2004) 1 ISJ Banking 160, wherein it is held that: “Nobody is expected to sign the documents without reading or when it is blank and if he does so he does at his own risk and the very fact that the plaintiff bank has disbursed the loan amount and Defendant had availed it also shows that the documents were valid and duly executed”

16. It is the case of the Defendants that applicant bank has illegally sold the pledged paddy bags for a throw away price and the details have not been furnished by bank. Document No.7 filed with the OA i.e., Letter of Access dated 23.04.2010 (Ex.A9) has been executed by the Godown ownder, the Defendant No.3 Sri K. V. Krishna Rao in favour of the Applicant Bank with the details of godown where the pledged goods are stored. That being the case, it is surprising to note the allegation of Defendants that they are not aware of the sale of goods and the bank has illegally sold the pledged paddy bags.

17. Regarding the details of disposal of paddy stock, the applicant bank has filed a detailed Memo on 18.01.2023 showing the particulars of Paddy stock disposed of, date of sale, bidders, amount etc. Therefore, the Applicant bank is directed to give credit to the sale proceeds realized out of the pledged paddy bags to the loan account of Defendants after deducting the expenses incurred, is not appropriated to loan account as on the date of the

Order.

18. It is alleged by Defendants that there is no basis for the claim made by the Applicant bank. To establish their claim, applicant bank has filed the proof/documentary evidence through the Evidence Affidavit of AW-1 and by marking of documents-Exhibits A3 to A12. Ex.A12 is the certified statement of account pertaining to the loan account of Defendants containing the details of loan transactions and showing a balance outstanding due of Rs.26,65,372.50. The Defendants have not pointed out any discrepancy in the Statement of Account filed by the applicant bank. Further, the Defendants have not produced any proof or documentary evidence to dispute the claim made by applicant bank.

19. 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 against the pledge of paddy apart from other security and the TA relates to 2012, 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).

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.1585/2017 stands allowed,

i) The applicant is allowed to recovery an aggregate sum of Rs.26,65,372.50 (Rupees Twenty Six Lakh Sixty Five Thousand Three Hundred Seventy Two and Fifty Paise 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. The schedule to the OA be the schedule 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 29th Day of September 2025].

(T. RAJESH) PRESIDING OFFICER

DRT-II, BENGALURU

ANNEXURES WITNESSES EXAMINED FOR THE APPLICANT BANK: AW-1: Sri. D. Shankar Gouda, Senior Manager of the applicant bank. Exhibits on the part of the Applicant: Annexure Particulars A1 Applicant Evidence A2 List of Documents A3 Application for Pledge loan/Warehouse loan dated 28.01.2009 submitted by the defendants. A4 Sanction memorandum dated 28.01.2009 A5 Produce loan agreement dated 28.01.2009 executed by the defendants A6 Pronote dated 28.01.2009 for Rs.30,00,000/- & Take Delivery Letter to DPN dated 28.01.2009 A7 Godown/Building on Lease Agreement dated 28.01.2009 executed by the defendants. A8 Specimen Signature Card dated 28.01.2009 and Certificate of loan papers obtained submitted by the defendants A9 Letter of Access dated 23.04.2010 executed by the godown owner. A10 Recall letter dated 20.06.2010 sent by the applicant bank A11 Recall letter dated 03.07.2010 sent by the applicant bank A12 Certified statement of account pertaining to the loan account of the defendants

(T. RAJESH) PRESIDING OFFICER