KARNATAKA GRAMIN BANK vs SRI. K. TAGORE & ORS. on 29 September 2025

FINAL ORDER

The present Application was originally filed before the Debts Recovery Tribunal-I, Bengaluru on 06.07.2012 under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act 1993 and numbered as OA 1274/2012, to recover a sum of Rs.26,45,670/- (Rupees Twenty Six Lakh Forty Five Thousand Six Hundred and Seventy only) with further interest thereon and costs from the Defendants jointly and severally.

2. Subsequently, in view of the Government of India Gazette Notification dated 30.01.2017, the Application was transferred to this Tribunal and re-numbered as TA No.1600/2017.

Brief facts of the case:

3. The case of the Applicant Bank is that, Defendant Nos.1 & 2 are residents of Madagiri, Manvi Taluk, Raichur District and H.No.7-6- 3 (TA 1600/2017)

61/A17, Vasavi Nagar, Near Infant Jesus School, Raichur Post, Tq & District respectively, approached the Applicant bank for sanction of Credit facility/Pledge Loan of Rs.25.00 lakh against the security of 2500 Paddy Bags. Applicant bank sanctioned the Pledge Loan/Warehouse Loan of Rs.25,00,000/- (Rupees Twenty Five lakh only) on 09.07.2009, repayable in 12 months from the date of first disbursement along with interest @ 13% p.a. compounded half- yearly and penal interest @ 2% p.a. in case of default. The interest was subject to change as per the Reserve Bank of India notifications.

4. Defendants executed necessary loan and security documents on 09.07.2009 which include, Application for Pledge Loan/Ware House Loan, Produce Loan Agreement, Pronote for Rs.25,00,000/- & Take Delivery Letter, Godown/Building on Lease Agreement, Specimen Signature Card and the Letter of Access executed by the godown owner. and Proforma of the Letter to be obtained from the borrower. As security for repayment of the credit facility, Defendants pledged 2500 Paddy Bags.

5. After availing the credit facility, Defendants failed to repay the loan dues despite various reminders/notices and committed default. The Applicant bank issued Recall letters to Defendants 4 (TA 1600/2017)

recalling the outstanding amount due in the loan account. As there was no positive response from the Defendants, the applicant bank has filed the present Application to recover the amount due from the Defendants.

6. After the filing of this Application, summons sent to Defendants. Defendant Nos.1 & 2 entered appearance by filing vakalat through Counsel and filed Statement of Objections. During the course of proceedings, vide the orders passed in IA 256/2014, the 3rd Defendant was impleaded as a party in the present application; the 3rd Defendant has filed written statement on 04.07.2014.

7. Written Statement filed by Defendant No.1, in brief:

(a) Defendant applied for the loan of Rs.25,00,000/- against the hypothecation of 2500 paddy bags/units after executing necessary documents not for himself, on behalf of Mr K.V. Krishna Rao. The bank has got pledged 2500 bags from Defendant No.1 and sold only 1749.5 bags; there is no account for remaining 750 bags. The bank agreed to sanction loan @ 12% p.a. of interest but calculating 16.25% is contrary to the Sanction Memorandum dated 09.07.2009.

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(b) 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.

(c) 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 6 (TA 1600/2017)

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.

(d) 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.

(e) 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.

It is prayed by Defendant No.1 that the application may be 7 (TA 1600/2017)

dismissed with cost.

8. Written Statement filed by Defendant No.2 & 3, in brief:

(a) It is admitted that the Defendants availed the loan of Rs.25.00 lakh on 09.07.2009 repayable within 12 months; the loan was made available against the pledging of 2500 old Paddy Bags of old sona and the paddy bags were to be deposited and stored in the godown of K.V.K. situated at Bijangere. The defendants were contemplating to dispose of the Paddy bags on a competitive price. Due to Government policies prohibiting export of Non-basumathi rice, Defendants opted not to sell the paddy at that point of time as it would result in loss. This caused the delay in excess of twelve months for the Defendants to sell the paddy.

(b) In the meantime, applicant started demanding repayment of loan with interest and penal interest thereon and threatened to auction the paddy by displaying and publishing the names of Defendants in the list of defaulters in the local newspapers. Bank obtained signatures on blank formats purporting to be No-Objection Certificate letters from Defendants to dispose of the paddy on its own.

(c) Further, the applicant threatened the Defendants that in the event of publication of names of Defendants and the paddy sold in 8 (TA 1600/2017)

public auction, it would not fetch expected price and the cost of publication and auction charges to be borne by Defendants. Bank further assured that they would sell the paddy as per law in the presence of Defendants and would fetch better price to Defendants.

(d) The Defendants were shocked when they received the summons from the Tribunal about the filing of the above application by Bank seeking recovery. On enquiry, it was revealed that the bank has illegally sold 3800 paddy bags belonging to Defendants in an alleged private auction for a paltry-sum and adjusted the same against the illegal claim and filed the Application for recovery of the alleged sum. There is no whisper in the Application regarding the illegal sale of paddy bags for a throw-away price causing loss to Defendants and the Defendants were not informed about it. The Bank is called upon to furnish the details of alleged private sale carried out by it.

(e) Bank had taken the signatures of the Defendants on blank documents and had filled later as evident from the copies of documents enclosed to the application. There is no jurisdiction or basis for the alleged claim. The ledger extract produced by bank does not give the particulars of the amounts paid, payable and recovered by Applicant bank.

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Heard and perused the records.

10. In the present case, Defendant Nos.1 & 2 availed the loan from the applicant bank by pledging the 2500 paddy bags; Defendant No.3 was impleaded as party to the Application vide the orders passed in IA 256/2014; 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.

11. To prove the case of the Applicant Bank, its Senior Manager Sri. D. Shankar Gouda S/o. Sri D. Basana Gouda filed Evidence Affidavit, the same was considered as AW-1 and marked as Ex.A1, the list of documents came to be marked as Ex.A2 and the documents came to be marked as Ex.A3 to Ex.14. Defendant No.1 filed Evidence Affidavit reiterating the contentions raised in his Statement of Objections, the same was considered as DW-1 and 10 (TA 1600/2017)

marked as Ex.D1. Along with the Affidavit, Defendant No.1 has filed the photocopy of the Undertaking dated 14.10.2010 and 14.01.2011 by Defendant No.3 (Document Nos.1 & 2) personally undertaking to repay all the dues of farmers within the stipulated time and not to take any action against the farmers.

12. 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.

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13. In this context, the Tribunal places reliance on the 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”

14. 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 09.07.2009 (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.

15. 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 12 (TA 1600/2017)

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, if not appropriated to loan account as on the date of this Order.

16. 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 A14. Ex.A14 is the certified statement of account pertaining to the loan account of Defendants containing the details of loan transactions and duly certified under the Bankers Books Evidence Act 1891. 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.

17. 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 13 (TA 1600/2017)

absence of any material proof or evidence to repudiate the claim of the applicant bank, the claim made by the applicant bank stands proved.

18. It is alleged by Defendant No.1 that 2500 paddy bags were pledged by Defendants and the bank has sold only 1749.5 bags and there is no account for the remaining paddy bags. In this connection, the Applicant’s Witness (AW-1) in his Evidence Affidavit (Ex.A1) has averred that the Bank has sold 1749.5 paddy bags which were fit for human consumption & credited the sale proceeds to the loan account of the borrowers. Remaining stock was damaged due to pest attack, rat eaten, long storage, unfinished flooring etc. Thus, the applicant bank has clarified the issue and affirmed that the sale proceeds realized were credited to the loan account of the borrowers.

19. Defendant No.1 alleged that he has been made a scapegoat and the application has been filed only to harass the Defendant No.1 the Defendant No.3 Mr K.V.Krishna Rao gave an undertaking on behalf of the Defendant No.1 to repay the loan; the loan advanced to the Defendant was advanced to Mr K.V.Krishna Rao, who is the defecto owner of the stock (Paddy bags); further, said Krishna Rao 14 (TA 1600/2017)

pledged stock around 70 names/persons and got the amount sanctioned and entire amount received by him in collusion with the bank officials.

20. The Defendant No.1 has not denied the availing of loan from applicant bank; the execution of documents along with the terms and conditions stipulated for the loan and the default committed in repaying the dues. The applicant bank has established its case beyond any doubt by producing material evidence and by marking the documents- Ex.A3 to A14 to prove the loan transactions and the default committed by Defendants in repaying the loan. Therefore, the Defendant No.1 is equally liable to the Claim made by applicant bank along with the other Defendants jointly and severally.

21. 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 15 (TA 1600/2017)

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).

22. 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.

23. In the result, TA.No.1600/2017 stands allowed,

i) The applicant is allowed to recovery an aggregate sum of Rs.26,45,670/- (Rupees Twenty Six Lakh Forty Five Thousand Six Hundred and Seventy 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 16 (TA 1600/2017)

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.

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. [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].

Sd/- (T. RAJESH) PRESIDING OFFICER

DRT-II, BENGALURU ANNEXURES WITNESSES EXAMINED FOR THE APPLICANT BANK: AW-1: Sri. D. Shankar Gouda, Manager of the applicant bank. Exhibits on the part of the Applicant: Annexure Particulars A1 Applicant Evidence A2 List of Documents

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A3 Application for Pledge loan/Warehouse loan dated 09.07.2009 submitted by the defendants. A4 Sanction memorandum dated 09.07.2009 A5 Produce loan agreement dated 09.07.2009 executed by the defendants A6 Pronote dated 09.07.2009 for Rs.25,00,000/- & Take Delivery Letter to DPN dated 09.07.2009 A7 Godown/Building on Lease Agreement dated 09.07.2009 executed by the defendants and lease agreement dated 24.02.2010 A8 Specimen Signature Card dated 09.07.2009 submitted by the defendants A9 Letter of Access dated 09.07.2009 executed by the defendants. A10 Proforma of the Letter to be obtained dated 09.07.2009 A11 Recall letter dated sent by the applicant bank A12 Godown/building on lease, agreement dated 09.07.2010 A13 Certified statement of account pertaining to the loan account of the defendants A14 Statement showing the total outstanding in the loan account of the defendants

Sd/- (T. RAJESH) PRESIDING OFFICER