CANARA BANK vs M/S. IMPERIAL IMPEX (India) Mr.Khaja Hussain on 28 November 2025

: - O R D E R - :

1. his Original Application was filed before the Debts Recovery Tribunal and was originally numbered as O.A. No. 1534 of 2014. It was subsequently transferred to this Tribunal and renumbered as TA No. 811 of 2017. The application has been filed seeking issuance of a Recovery Certificate for a total sum of Rs. 32,88,615/- (Rupees thirty- two lakh eighty-eight thousand six hundred and fifteen only), comprising Rs. 14,42,933/- (Rupees fourteen lakh forty-two thousand nine hundred and thirty-three only) due under the Term Loan, and Rs. 18,45,682/- (Rupees eighteen lakh forty-five thousand six hundred and eighty-two only) claimed to be due under the Overdraft Cash Credit facility.

2. It is the case of the applicant that Defendant No. 1 is a registered proprietorship firm and Defendant No. 2 is the proprietor of the said firm. During June 2010, the Defendants approached the applicant for financing the business of readymade garments, pursuant to which the applicant sanctioned the following credit facilities:

1. Term loan for Rs.15,00,000/- (Rupees fifteen lakh only) for purchase of machinery.

2. Working capital for Rs.15,00,000/- (Rupees Fifteen lakh only) for working capital.

It is also contended that the facility was secured by hypothecation of stocks and cloth. It is further stated that the Defendants had subsequently acknowledged the debt. Originally, it was pleaded that the applicant had seized the hypothecated machinery and other hypothecated assets and disposed of the same in accordance with law. The pleadings were subsequently amended to state that the sale was conducted as requested by the Defendant No.2, through a person identified by him. It is also the case of the applicant that an amount of Rs. 2,75,000/- (Rupees two lakh seventy-five thousand only) was realized from the said sale and credited to the account.

3. It is also the case of the applicant that, despite availing the facility and agreeing to service the account promptly and regularly, the Defendants failed to comply with the said terms, resulting in a substantial default in the account and compelling the applicant to file this TA.

4. The Defendants originally filed their written statement, admitting the availment of the credit facilities as stated by the applicant. In respect of the repayment, the Defendants contend that there was a Holiday of three months. Further, the Defendants contend that the facility was secured under the Credit Guarantee scheme of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). It is also contended that the applicant received a subsidy amount of Rs. 7,60,000/- (Rupees seven lakh sixty thousand only).

5. It is further the case of the Defendants that the Bank had obtained their signatures on blank papers and failed to raise a claim under the Credit Guarantee. Apart from the above, the Defendants have given a para-wise denial of the averments made in the TA. The contentions regarding the sale of the hypothecated assets and the adjustment of Rs. 2.76 lakhs are also denied. It is further contended that the applicant had charged exorbitant interest contrary to the guidelines of the Reserve Bank of India. The Defendants also contend that the debt claimed in the TA is not a legally recoverable debt. Subsequently, an amended written statement was filed denying the averments brought out by the amendment of the TA, particularly regarding the alleged sale of the hypothecated assets, which the applicant claims was conducted as instructed by the Defendants.

6. In the light of rival pleadings, the following points raise for consideration i) Whether the applicant is entitled to recover the amount as claimed in the TA? ii) Whether the applicant’s action of disposing the hypothecation is in accordance with law?

7. Both these issues are gone into and decided together.

8. The applicant had let in evidence the documents A3 to A49 on 07.02.2022 and A50 to A57 on 15.07.2022. The last of documents is appended at the end of this order. No defense evidence was let in by the defendants.

9. The defendants though are not admitting the availement of the credit facilities, there is no challenge as to the disbursement of the facility is put forward by the defendants. The contention of the defendants that they were made to sign blank documents cannot be accepted. It is to be noted till date there is no challenge as to the loan agreements.

10. The documents produced and marked by the applicant are sufficient prove the TA claim. The documents are found to be admissible in evidence. The loan documents, produced by the applicant along with the statements of accounts prove that the amount as claimed in the OA is out standing in the date of filing. The documents produced to prove the exclusive of the loan agreement is sufficient to fasten the liability on the defendants.

11. The contention regarding the Credit Guarantee Scheme will not assist the Defendants, as it is well-settled that the Credit Guarantee does not absolve the borrower of their liability. The Defendant’s contentions concerning the government subsidy are also without merit, as even if such a credit was made to the loan account, the Defendants did not raise any objection to the same at any point in time.

12. The Defendants seriously dispute the applicant’s contention regarding the circumstances under which the hypothecated assets were sold. By way of amendment, the applicant contends that the sale of the hypothecated assets was conducted at the instance of a person identified by the Defendants. This contention is strongly refuted by the Defendants through the filing of an additional written statement. However, this denial must be viewed in light of two facts. Firstly, in the original pleadings of the TA regarding the sale of hypothecated assets, the Defendants had only made a general denial. Secondly, despite the credit of Rs. 2,75,000/- to the account, the Defendants did not raise any objection until they filed their written statement. In their written statement, the Defendants contend that the sale proceeds amounted to Rs. 2,76,000/-, whereas the applicant contends that the sale realized Rs. 2,75,000/-. The Defendants cannot plead ignorance regarding the said credit when it was duly made.

13. Moreover, since the Defendants are not disputing the hypothecation of the movables, there can be no dispute regarding the right of the Bank to proceed against the hypothecated assets. The Defendants had at no point of time prior to filing their written statement, raised any issue concerning the sale of the hypothecated assets. In the light of the above discussion, this Tribunal is not inclined to accept the Defendant’s challenge with respect to the sale of the hypothecated assets.

14. In view of the above, this Tribunal finds both the points in favour of the applicant bank.

15. Hence this Tribunal is of the view that the applicant is entitled to succeed in the TA. The claim of the applicant is well within limitation as the defendants had acknowledged the debt. There is no capitalization of penal interest.

16. Since the TA claim has been arrived at by calculating interest at the agreed rate along with penal interest, and taking note of the fact that the hypothecated assets have already been liquidated — which, according to the applicant, was done with the consent of the Defendants — pendente lite and future interest is awarded at a simple rate of 12% (simple).

17. Hence, i) TA.811 of 2017 stands allowed. ii) The applicant is entitled to realize altogether an amount of Rs.32,88,615/- (Rupees thirty two lakh eighty eight thousand six hundred and fifteen only) being the total of Rs.14,42,933/- (Rupees fourteen lakh forty two thousand nine hundred and thirty three only) due in Term loan and Rs.18,45,682/- (Rupees eighteen lakh forty five thousand six hundred and eighty two only) due in Over Draft with further interest @12% (per annum) (simple) from the defendants and also by proceeding personally against 2nd defendant and his assets. iii) The applicant is entailed for cost of this litigation for which cost memo to be filed in 7 days from the date receipt of this order. iv) A Recovery Certificate is to be drawn and issued to the recovery Officer to enable recovery of the as per the above terms. v) Interim application pending, if any, stands disposed of in terms of this final order.

18. 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 28th day of November, 2025)

Sd/- (T. RAJESH) PRESIDING OFFICER

Applicant Witness:

AW1 –Sri. Y Sreenivasulu, Senior Manager, Applicant Bank, Ext. A3 to A49. AW2- Sri. Satish Kumar D, Chief Manager, Applicant Bank, Ext. A50 to A57. Exhibits on the part of the Applicant:

Exhibit Nos. Date Particulars of Documents A1 -- Evidence Affidavit A2 -- List of Documents A3 05.06.2010 Common Application A4 05.06.2010 Bio-data Form A5 -- Credit Report A6 22.07.2010 Application Format CGTSI- Application for Guarantee Cover A7 22.07.2010 Deed of Hypothecation of Machinery A8 22.07.2010 Cash credit Agreement A9 22.07.2010 Pro-note A10 22.07.2010 Sanction Particulars A11 22.07.2010 Certificate of loan papers A12 22.07.2010 Specimen signature card A13 31.12.2010 Particulars of Hypothecation A14 22.07.2010 Particulars of the proprietor A15 22.07.2010 Particulars of the borrower A16 22.07.2010 Letter evidencing execution of Documents A17 23.07.2010 Memo A18 23.07.2010 Memo A19 30.04.2011 Fixed investment certificate A20 -- Request for overdraft facilities A21 05.07.2012 Common Application Form for Retail traders/ business enterprises A22 05.07.2012 Certificate of loan papers A23 05.07.2012 Letter evidencing execution A24 05.07.2012 Letter of proprietorship A25 07.07.2011 Certificate loan paper obtained

A26 07.07.2011 Letter evidencing execution of documents A27 05.07.2012 Letter of renewal A28 05.07.2012 Particulars of proprietor A29 07.07.2011 Particulars of Borrower A30 01.07.2012 Letter A31 07.07.2011 Letter of Revival A32 05.07.2012 Letter of Revival A33 05.07.2012 Letter of Revival A34 15.01.2013 Letter of Revival A35 17.05.2010 Letter A36 20.11.2012 Letter A37 11.11.2013 Letter A38 20.10.2010 Tax invoice No. 669 A39 18.10.2010 Tax invoice No. 236 A40 18.10.2010 Tax invoice No. 235 A41 18.10.2010 Invoice Bo. 231 A42 23.08.2010 Invoice No.80 A43 04.06.2010 Registered Deed of lease A44 -- Certificate issued by Directorate of Industries and Commerce A45 04.06.2010 Encumbrance certificate A46 -- Insurance cover notice A47 10.05.2013 Recall letter A48 -- Certified statement of account A49 -- Statement showing total outstanding in the loan accounts. A50 24.03.2014 Cash paid receipt A51 26.03.2014 Cash paid receipt A52 10.04.2014 Letter A53 24.03.2014 Letter A54 18.03.2014 Letter from the borrower to branch requesting not to seize the machinery A55 -- Letter A56 24.03.2014 Letter A57 11.07.2014 Letter

Witness Examined for the Defendants:

-Nil – List of Documents Exhibited for the Defendants: -Nil -

Sd/- (T. RAJESH) PRESIDING OFFICER