FEDERAL BANK LTD vs M/S WOOD HOUSE A Partner ship firm on 24 January 2020

**FINAL ORDER**

1. 1. The present OA has been filed by the applicant Bank under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993, seeking recovery of money of Rs.19,21,035/- besides future interest etc.

2. 2. The case of the applicant bank is that, the 1^st defendant is a Partnership Firm viz. "**M/s Wood House**" carrying on the business of trading in timber and other allied activities and represented by its partners i.e. defendant Nos.2 to 4. The defendants No.2 and 3 along with deceased defendant No.4 had availed a Cash Credit Loan of Rs.5,00,000/- on 18/01/1999 .

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3. Since the defendant No.4 died his Legal Representatives Defendant No.4(a) to (g) who succeeded to the assets of the deceased were brought on record.

The applicant bank further submits that, as security for the above said loan, the defendants No.2,3 and defendant No.4 have hypothecated the stock of timber more particularly described in Schedule 'B' and deceased defendant No.4 had created equitable mortgage of landed property more particularly described in Schedule 'A' hereunder.

The applicant bank further submits that, the defendants agreed to pay interest with variable rate of interest, as applicable from time to time as per the directions of the Head Office/Central Office of the applicant bank and penal interest in case of default and keep the account regular by paying installments as and when due to the satisfaction of the applicant bank, as detailed in the OA by the applicant bank.

It is the further submission of the applicant bank that, since the debt together with interest and other charges agreed to, were not repaid as agreed to by the defendants, the applicant Bank filed a 5TA 773 of 2017

suit (OS No.109/2005) before the Hon'ble Principal Civil Judge(Senior Division) at Hassan, on 25/05/2005 for realization of Rs.9,56,690/- with interest @ 19.38% per annum plus 2% overdue interest compounded with quarterly rests from the date of suit till realization and costs from the defendants jointly and severally and from their assets and by sale of the mortgage property.

It is further submission of the applicant Bank that, the suit was decreed preliminarily on 30/03/2007 with costs allowing the Applicant Bank to realize Rs.9,56,690/- with costs and future interest @ 19.38% per annum from the date of suit till the date of realization in one lump sum from the defendants and their assets and by sale of the mortgaged property. As per the decree and judgment, the defendants No.4(a) to 4(g) are liable to pay the said amount out of the assets of deceased Maqdoon Sheriff if any in their hand. The defendants have not so far paid the amount due as per the decree. An amount of Rs.19,21,035/- is, therefore, due to the applicant Bank as per the decree as on the date of this application.

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It is further submission of the applicant Bank that, the cause of action for the application has arisen on 30/03/2007 the date on which OS No.109/2005 the suit filed by the applicant against the defendants was decreed in favour of the applicant Bank and is continuing thereafter as the defendants have defaulted payment at Hassan, in Karnataka State, which is within the jurisdiction of this Tribunal. Though it is mentioned as application U/s.19 of RDB Act, in fact it is an application U/s.31 of RDB Act seeking Recovery Certificate on the basis of the decree of Civil Court.

4. In support of their case, the applicant bank has produced Certified Copy of judgment and decree in OS No.109/2005 passed by the Hon'ble Principal Civil Judge(Senior Division) at Hassan (Ex.A3 and 4). The applicant bank has filed the evidence affidavit of its Vice President Sri Sabu P.K. as AW1 and came to be marked at Ex.A1, List of documents marked at Ex.A2 and 2 documents came to be produced and marked at Exhs.A3 and A4.

5. After filing the OA, summons were sent and served through RPAD on the defendants No.1 to 3, 4(a) to (e) and when they were called out, they remained absent and placed ex-parte.

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6. Summons were sent and served on the L.Rs. of defendant No.4, i.e. defendant No.4(f) & (g). The defendants No.4(f) and (g) have appeared before the Tribunal through their counsel and filed written statement.

7. In the written statement, the defendants No.4(f) and (g) have contended that, the application filed by the applicant itself is not maintainable and it also barred by limitation against these defendants.

It is further contended that, they were not the parties to the OS bearing No.109/2005 decreed on 30/03/2007 before the learned Principal Civil Judge (Senior Division) Hassan, where the decree was made and on the basis of which the present original application is filed and therefore, the present OA is not maintainable and is liable to be dismissed. Further, they were not served with notice in the above original suit and in any event if they were parties they were not made parties in the above original application until 24/12/2014 i.e. for a period of more than 7 years and is therefore barred by limitation.

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It is further contended that, the failure of the applicant to implead these defendants before the Hon'ble Civil Judge in Hassan, and subsequently in this original application has resulted in abatement and therefore original application as far as these defendants are concerned stands abated and therefore the original application may be dismissed with exemplary costs. Admittedly, the father of these defendants passed away in the year 2002. The applicant Bank in the original suit filed by it did not make these contesting defendants as parties and therefore the suit itself was not maintainable and was liable to be dismissed for non-joinder of necessary parties and therefore these defendants cannot be made parties in the OA without they being parties before the Hon'ble Principal Civil Judge, Hassan in OS No.109/2005.

It is further contended that, in addition the decree passed on the basis of which the present original application is filed did not show these defendants as parties and therefore the decree passed in the said original suit is not binding on these defendants and therefore the original application filed on the basis of the decree 9TA 773 of 2017

in which the defendants were not a party is liable to be dismissed with exemplary costs.

It is further contended that, the decree passed in OS No.109/2005 by the Principal Civil Judge(Senior Division, Hassan on 30/03/2007 is not binding on these defendants since they were not parties to the suit. It is contended that even in the event of the defendants being party to the suit in OS No.109/2005 the original application is barred by limitation since the defendants were not made parties when the original application was filed in the year 2010 and they were made parties only 24/12/2014 which is barred by limitation.

It is further contended that, the applicant Bank had filed the above original application claiming a sum of Rs.19,21,035/- together with interest at 19.38% which is usurious and is liable to be rejected. It is further contended that, the statement of accounts and other documents have not been furnished to these defendants and therefore they had no occasion to contest the case on merits and the said loan documents and interest charged are illegal and also the statement of accounts are fudged to include the amounts which are not payable by these defendants. The said 10TA 773 of 2017

interest at the rate of 19.38% p.a. is not only usurious but is in violation of the Reserve Bank of India guidelines and rules and therefore the application is liable to be dismissed. Hence, the defendants No.4(f) and (g) prayed for dismissal of the application with exemplary costs.

8. In spite of sufficient opportunities, the defendants No.4(f) and (g) did not file the evidence affidavit.

9. Based on the above pleadings and after going through the documents filed and marked as exhibits by the applicant bank in this case and after hearing the submissions made by the Ld. Counsels for the respective parties, the following points that arise for my consideration:- POINTS

1. 1) Whether the applicant bank has made out a case to allow the O.A.; and

2. 2) What order?

10. For the following reasons, I answer the above referred points in the following manner:

11TA 773 of 2017 In OA No.465/2010**REASONS**

11. The learned counsel for the applicant Bank would argue that, the present original application when it was pending before the Hon'ble Principal Civil Judge (Senior Division) at Hassan in O.S. No.109/2005, the defendant No.4 died and his Legal Representatives were brought on record. Further, the Hon'ble Principal Civil Judge(Senior Division), Hassan, the decree was passed , but for establishment of jurisdiction, the present original application came to be filed on the basis of the decree as per Section-31 of RDB Act.

12. In support of their case, the applicant Bank has filed affidavit evidence of its Vice President Sri Sabu P.K. as AW1 and came to be marked at Ex.A1, and list of documents marked at Ex.A2 and 2 documents i.e. judgment in OS No.109/2005 at Ex.A3 and decree in OS No.109/2005 marked at Ex.A4. Though the defendant No.4(f) and (g) have filed their written statement denying their liability to pay the OA amount, in view of the fact that, there has already been a preliminary decree in a suit for foreclosure on the basis of the mortgage deed executed by defendant No.4. The 12TA 773 of 2017

certified copy of the judgment in OS No.109/2005 came to be marked at Ex.A3 and certified copy of decree came to be marked at Ex.A4. The Hon'ble Civil Judge (Senior Division), Hassan had decreed the suit thereby giving six months time to the defendants to pay the decretal amount as per Preliminary Decree, but the same was not complied to by the defendants herein. As the claims under preliminary decree is above pecuniary jurisdiction of Civil Court, the original application came to be filed before this Tribunal under Recovery of Debts and Bankruptcy Act. In view of the above fact, the applicant Bank by its oral evidence through AW1 and documentary evidence at Ex.A3 and A4 has established the claim over the defendants. Since defendant No.4 died during the pendency of the earlier suit, the liability of DW4(a) to (g) is to the extent of the property inherited by them through deceased defendant No4. The defendants No.4(f) and (g) have not adduced evidence in support of their contentions in spite of sufficient opportunities given to them. Further, defendants No.4(f) and (g) have stated that they are not aware of the loan etc., and therefore, I am of the view that, there is no impediment 13TA 773 of 2017

to allow the application as prayed for. Hence, I answer Point No.1 in the Affirmative.

13. I, therefore pass the following:

ORDER

The claim of the applicant bank stands allowed against the defendants as prayed for besides future interest and costs.

In the event of failure of defendants No.1 to 3 and defendant No.4(a) to (g) to pay the said OA amount, the applicant bank is at liberty to sell the mortgaged properties and hypothecated assets described in the Schedules-A- Item No.2 and Schedule-B of the main petition according to law as sought by the applicant bank in the OA.

In spite of sale of the mortgaged properties and hypothecated assets described in the Schedules-A-Item No.2 and Schedule-B of the main petition, if the OA amount is not fully realized, then the applicant bank is at liberty to proceed against the person and other properties of the defendants No.1 to 3 and defendant No.4(a) to (e) and the properties of deceased defendant 14TA 773 of 2017

No.4, if any inherited by defendants No.4(f) and (g) as required under law and also as advised.

Applicant Bank shall file fresh Memo of calculation of OA amount together with interest, costs etc., to be paid by the defendants No.1 to 3, 4(a) to (g) duly taking into account the amount/s if any paid by the defendants and/or amount realized by sale of assets, etc., during the intervening period after filing the OA, to enable the office to prepare Recovery Certificate for the amount to be paid by the defendants to the applicant bank.

Office is directed to issue Recovery Certificate as sought by the applicant bank in the OA and do the needful as required under law forthwith.

(Dictated to the Steno, transcribed by him and after necessary corrections, signed and pronounced by me in the Open Court on this the 24th day of January, 2020).

**K.RAVINDRAN NAIR** **Presiding Officer** **I/C.DRT-II, Bengaluru**

15TA 773 of 2017 In OA No.465/2010**ANNEXURES****Witness Examined for the Applicant :**

AW1. Affidavit of Sri Basu P.K., Vice President of the applicant bank.

**List of Documents Exhibited for the Applicant :**

Ex.A1 : Affidavit of AW1. Ex.A2 : List of documents. Ex.A3 : Certified copy of judgment in OS No.109/2005. Ex.A4 : Certified copy of Decree in OS No.109/2005.

**Witness Examined for the Defendants :** Nil.

**List of Documents Exhibited for the Defendants:** Nil.

28/1/2020. **K.RAVINDRAN NAIR** Presiding Officer I/C.DRT-II, Bengaluru.

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