KARNATAKA GRAMIN BANK vs SRI. ANJINEYA on 10 November 2023

FINAL ORDER

The present Application was originally filed before the Debts Recovery Tribunal-I, Bengaluru on 17.09.2012 under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act 1993 and numbered as OA 122/2013, to recover a sum of Rs.44,54,750/- (Rupees forty four lakh fifty four thousand seven hundred fifty only) with further interest thereon and costs from the Defendants jointly and severally.

2. Subsequently, in view of the Government of India Gazatte Notification dated 30.01.2017, the Application was transferred to this Tribunal and re-numbered as TA No.1612/2017.

Brief facts of the case:

3. The case of the Applicant Bank is that the Defendants are residents of Aijapura, Manvi Taluk, Raichur District approached the Applicant bank for sanction of Credit facility/Pledge Loan of Rs.46 lakh against the security of 4600 Paddy Bags. Applicant bank sanctioned the Pledge Loan/Warehouse Loan of Rs.46,00,000/- (Rupees forty six lakh only) repayable in 12 months from the date of first disbursement along with interest @ 13% p.a. compounded half-yearly. The interest was subject to change as per the Reserve Bank of India notifications.

4. Defendants executed necessary loan and security documents on 08.01.2010 which include, Application for Pledge Loan/Ware House Loan, Produce Loan Agreement, Pronote for Rs.46,00,000/- & Take Delivery Letter, Godown/Building on Lease Agreement, Specimen Signature Card and Certificate of Loan papers obtained, Letter of Access and Proforma of the Letter to be obtained from the borrower. As security for repayment of the credit facility, Defendants pledged 4600 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 dated 22.05.2011 & 20.03.2012 to Defendants 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 on 12.09.2014. Thereafter, the case was posted from time to time for further proceedings and later, the case was posted for arguments on 22.02.2022, 18.07.2022, 20.10.2022 and 27.02.2023 but there was no representation for Defendants. On 01.06.2023, the case was posted for Orders - when the matter was heard.

7. Written Statement filed by Defendant Nos.1 & 2, in brief:

(a) The defendants appeared and filed written statement contending defendants availed the financial facility from applicant bank on 08.01.2010 against the pledge of 4600 old Paddy Bags of old Sona Masuri. The loan was repayable in 12 months. The paddy bags were to be deposited and stored in the godown of K.V.Krishna Rao Godown, Askilhal Village, Taluk, and Dist Raichur. 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 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 4600 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 of Rs.44,54,750/-. 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) There is no basis for the Claim made by Applicant bank. Bank took signatures of the Defendants on blank documents and had filled later as evident from the copies of documents enclosed to the application. The ledger extract produced by bank does not give the particulars of the amounts paid, payable and recovered by Applicant bank.

Defendants prayed that the Application (TA) may be dismissed with exemplary costs.

Heard and perused the records.

8. To prove the case of the Applicant Bank, its Manager Sri.G.R. Deshpande S/o. Sri Raghavendra Rao 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.A10.

9. Defendant No.2 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.

9.1 Though the Defendants filed a petition (memo) as early as 28.11.2016 for cross examination of AW-1 and a detailed counter filed by applicant bank and the case was posted to various dates from time to time, there was no follow-up on the side of Defendants. Later, the case was posted for arguments. Proceedings dated 22.02.2022, 18.07.2022, 20.10,2022 and 27.02.2023 reveals that there is no representation for Defendants and the Tribunal heard the arguments of applicant bank on 01.06.2023 and the case was finally posted for orders.

10. 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. Therefore, the allegation is liable to be rejected.

11. 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”

12. It is alleged by Defendants that the Application is barred by time. The Application was filed before the Tribunal on 14.09.2012. The Defendants executed various loan and security documents on 08.01.2010. Further, the Applicant bank has filed a copy of Godown/Building on Lease Agreement dated 08.01.2010 along with the Application. Therefore, a perusal of the Application and the documents filed by the Applicant Bank clearly reveals that the application is not barred by time and the allegation fails.

13. 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 has been executed by Defendant No.2 Sri K.

Naveen kumar in favour of the Bank with the details of godown where the pledged goods are stored. 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.

14. Regarding the details of disposal of paddy stock, the applicant bank has filed a detailed Memo on 23.04.2014 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.

15. 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 A10. Ex.A10 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.44,54,750. 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.

15.1 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.

16. On going through the proceedings of the case, submissions of both sides and the documents produced by applicant bank, this Tribunal comes to the conclusion that the applicant bank is entitled to get a final order on the following lines:-

ORDER

17. The TA is allowed with costs, a) The applicant bank is allowed to recover a sum of Rs.44,54,750/- (Rupees forty four lakh fifty four thousand seven hundred fifty only) along with future interest @ 16.25% (14+2%) p.a. compounded half yearly from the date of filing the Application (17.09.2012) till the date of realization from the Defendant Nos.1 & 2 jointly and severally;

b) Applicant bank is directed to give credit to the amount realized out of the sale of pledged paddy bags to the loan account of Defendants after deducting the expenses incurred; c) In the event of failure of the Defendants to pay the aforesaid amount, the bank is at liberty to proceed against the personal assets of the Defendants (both movable and immovable) to recover the balance dues, as required under law; d) The applicant bank shall file the latest memo of calculation of OA amount together with interest, cost etc., to be paid by the Defendants, duly considering the amounts, if any, paid by the Defendants and/or amount realized by sale of assets etc., (including the sale proceeds of the pledged paddy bags) during the intervening period after the filing of the TA, enabling the Registry to prepare Recovery Certificate for the amount to be paid by Defendants to the applicant bank; e) The applicant bank shall file memo of costs within ten days from the date of this final order; f) Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of the final order and g) Interim Application pending, if any, stands disposed of with the final order. h) The Registry is directed to issue Recovery Certificate in terms of final order as sought in the OA under Section 19 (22) of RDDB Act.

18. A copy of this order be communicated to the parties concerned. [Dictated to the Stenographer (CS), after its transcription, corrected and signed by me on this the 10th day of November, 2023]. Sd/- PRESIDING OFFICER DRT-II, BENGALURU ANNEXURES WITNESSES EXAMINED FOR THE APPLICANT BANK: AW-1: Sri G.R. Deshpande S/o. Sri Raghavendra Rao, Manager of Applicant bank.

Exhibits on the part of the Applicant:

Exhibit

Documents A1 Applicant’s Evidence

A2 List of documents A3 Application for Pledge Loan/Ware House Loan dated 08.01.2010 submitted by the Defendants A4 Sanction Memorandum dated 08.01.2010 A5 Produce Loan Agreement dated 08.01.2010 A6 Pronote dated 18.06.2009 for Rs.46,00,000/- & Take Delivery Letter to DPN dated 08.01.2010 A7 Godown/Building on Lease Agreement dated 08.01.2010 executed by Defendants A8 Specimen Signature Card A9 Recall Letter dated 20.03.2012 sent by the Applicant Bank. A10 Certified Statement of Account pertaining to the Loan Account of Defendants Witness Examined for the Defendants: DW-1: Sri K. Naveen Kumar S/o. Sri K.V. Krishna Rao, Defendant No.2

Exhibit

Documents D1 Defendant’s Evidence

Sd/- PRESIDING OFFICER DRT-II, BENGALURU