BANK OF BARODA vs M/S SHREE DURGA KHANDSARI UDYOG on 22 March 2019

JUDGMENT

1. Applicant Bank had filed this Original Application on 04.08.2015 under section 19(1) of the Recovery of Debts Due to Banks & Financial Institutions Act, 1993 (as amended from time to time) against the Defendants before Debts Recovery Tribunal, Lucknow for recovery of Rs.3,83,12,684/- (Rupees – Three Crore, Eighty-Three Lacs, Twelve Thousand, Six Hundred Eighty- Four only) alongwith pendente-lite and future interest @11.40% per annum with monthly rests plus penal interest @2.00% per annum w.e.f. 01.08.2015 till the date of realization and costs.

2. The brief facts of case are that the Defendant No.1 is a Proprietorship Firm. The Defendant No.2 is Proprietor of the Defendant No.1 Borrower Firm. The Defendants No.3 to 5 & 9 stood guarantors for the Defendant No.1. Further, the

Defendants No.6 to 8 has also been arrayed being legal heir of deceased Late Sh. Vipin Kumar Goel who was guarantor & mortgagor. The Defendant No.1 through its proprietor approached Applicant Bank for grant of financial assistance in the shape of Cash Credit Limit of Rs.32,00,000/- for Working Capital & Term Loan of Rs.3,40,000/- for business purpose. Applicant Bank after considering the request sanctioned a Cash Credit Limit of Rs. 32,00,000/- for Working Capital & Term Loan of Rs.3,40,000/- (now closed) for business purpose to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, Plant & Machinery, personal guarantee of the Defendant No.3, 6 & Pramod Kumar Goel, Arun Kumar Goel, Smt. Sunita & Late Sh. Vipin Goel (now deceased and represented through his legal hiers) and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.1 to 3, 6 & Parmod Kumar Goel, Arun Kumar Goel, Smt. Sunita and Late Sh. Vipin Kumar Goel in favour of Applicant Bank. They executed and signed various loan and security documents on 10.01.2001 in favour of Applicant Bank. The rate of interest was agreed between the parties @3.50% above BPLR, applicable at that time @15.50% per annum for Cash Credit Loan with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

3. The Defendant No.1 through its proprietor again approached Applicant Bank for grant of more financial assistance in the shape of enhancement of existing Cash Credit Limit. Applicant Bank after considering the request enhanced existing Cash Credit Limit to Rs. 40,00,000/- for Working Capital for business purpose to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 & 4, 6 & Pramod

Kumar Goel, Arun Kumar Goel, Smt. Sunita & Late Sh. Vipin Goel (now deceased and represented through his legal hiers) and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.1 to 4, 6 & Parmod Kumar Goel, Arun Kumar Goel, Smt. Sunita and Late Sh. Vipin Kumar Goel in favour of Applicant Bank. They again executed and signed various loan and security documents on 08.12.2001 in favour of Applicant Bank. The rate of interest was agreed between the parties @3.50% above BPLR, applicable at that time @14.50% per annum with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

4. The Defendant No.1 through its proprietor again approached Applicant Bank for grant of more financial assistance in the shape enhancement of existing Cash Credit Limit of Rs.40,00,000/-. Applicant Bank after considering the request enhanced existing Cash Credit Limit to Rs. 60,00,000/- for Working Capital to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 & 4, 6 & Pramod Kumar Goel, Arun Kumar Goel, Smt. Sunita & Late Sh. Vipin Goel (now deceased and represented through his legal hiers) and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.1 to 5 & Sh. Late Vipin Kumar Goel in favour of Applicant Bank. They executed and signed various loan and security documents on 08.03.2004 in favour of Applicant Bank. The rate of interest was agreed between the parties @0.50% above Base Rate, applicable at that time @11.00% per annum with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

5. The Defendant No.1 through its proprietor again approached Applicant Bank for grant of more financial assistance in the shape enhancement of existing Cash Credit Limit of Rs.60,00,000/-. Applicant Bank after considering the request on 26.09.2005 enhanced existing Cash Credit Limit to Rs. 80,00,000/- for Working Capital to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 to 5 & Late Sh. Vipin Goel (now deceased and represented through his legal hiers) and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.1 to 5 & Sh. Late Vipin Kumar Goel in favour of Applicant Bank. They executed and signed various loan and security documents on 22.10.2005 in favour of Applicant Bank. The rate of interest was agreed between the parties @0.50% above Base Rate, applicable at that time @10.00% per annum with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

6. The Defendant No.1 through its proprietor again approached Applicant Bank for grant of more financial assistance in the shape enhancement of existing Cash Credit Limit of Rs.80,00,000/-. Applicant Bank after considering the request on 23.04.2009 enhanced existing Cash Credit Limit to Rs. 1,00,00,000/- for Working Capital to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.1 to 5 & Late Sh. Vipin Goel (now deceased and represented through his legal hiers) and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.1 to 5 & Sh. Late Vipin Kumar Goel in favour of Applicant Bank. They executed and signed various loan and security documents on 23.04.2009 in favour of Applicant Bank. The rate of interest was agreed between the parties @0.50% above Base Rate, applicable at that time @11.50% per annum with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

7. The Defendant No.1 through its proprietor again approached Applicant Bank for grant of more financial assistance in the shape enhancement of existing Cash Credit Limit of Rs.1,00,00,000/-. Applicant Bank after considering the request on 03.03.2010 enhanced existing Cash Credit Limit to Rs. 1,25,00,000/- for Working Capital to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 to 5, 9 & Late Sh. Vipin Goel (now deceased and represented through his legal hiers) and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.1 to 5 & Sh. Late Vipin Kumar Goel in favour of Applicant Bank. They executed and signed various loan and security documents on 10.03.2010 in favour of Applicant Bank. The rate of interest was agreed between the parties @2.00% above Base Rate, applicable at that time @10.00% per annum with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

8. The Defendant No.1 through its proprietor again approached Applicant Bank for grant of more financial assistance in the shape enhancement of existing Cash Credit Limit of Rs.1,25,00,000/- & fresh sanction of Term Loan of Rs.40,00,000/- & Term Loan of Rs.18,00,000/- for business requirement. Applicant Bank after considering the request on 03.11.2010 enhanced existing Cash Credit Limit to Rs. 2,50,00,000/- for Working Capital & sanctioned fresh Term Loan-I of Rs.40,00,000/- & Term Loan-II of Rs.18,00,000/- to

the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.3 to 5, 9 & Late Sh. Vipin Goel (now deceased and represented through his legal hiers) and collateral security by way of extension of already created equitable mortgage of immovable properties owned by the Defendant No.1 to 5 & Sh. Late Vipin Kumar Goel in favour of Applicant Bank. They executed and signed various loan and security documents on 15.11.2010 in favour of Applicant Bank. The rate of interest was agreed between the parties @2.00% below Base Rate, applicable at that time @10.50% per annum for Cash Credit Limit, @2.00% above Base Rate, applicable at that time @10.50% per annum for Term Loan-I & @1.75% above Base Rate, applicable at that time @10.25% per annum for Term Loan-II with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

9. However, after availing the aforesaid Loan/Credit Facilities, the Defendant No.1 & 2 failed to maintain financial discipline as per terms and conditions of the loan agreement due to which loan accounts became irregular. Despite repeated reminders and persuasion, the Defendant No.1 & 2 failed to regularize the loan accounts. Consequently, the said accounts of the Defendant No.1 & 2 were classified as NPA and recalled by Applicant Bank. Thereafter, Applicant Bank served Demand Notice to the Defendants to repay the outstanding dues but the Defendants failed to make the payment of outstanding dues. Hence, the present Original Application has been filed by Applicant Bank against Defendants for recovery of Rs.3,83,12,684/- (Rupees –Three Crore, Eighty-Three Lacs, Twelve Thousand, Six Hundred Eighty- Four only) alongwith pendente-lite, future interest, costs and for issuance of Recovery Certificate for the said amount.

10. The averments of Applicant Bank are set out in detail in its Original Application and therefore, these are not being stated here afresh to avoid a repetition of facts.

11. The summons were issued to the Defendants and after due service none for the Defendants appeared. Thereafter, the Defendants were again ordered to be served by substituted mode of service by way of publication in two Newspapers by the Tribunal. Subsequently, vide order dated 08.03.2018 case was transferred from Debts Recovery Tribunal, Lucknow to this Tribunal in view of change of jurisdiction in pursuance of establishment of new DRT at Dehradun on 16th. February 2017 vide Gazette Notification 411, S.O.454 (E) dated 15.02.2017, 692, S.O.784 (E) dated 23.02.2018 and corrigendum Gazette Notification 719 S.O. 816(E) dated 27.02.2018. The case was re-numbered as T.A. No. 615/2018.

12. Thereafter, the Defendants were again ordered to be served by substituted mode of service by way of publication in two Newspapers by this Tribunal and after due service the Defendants appeared through their counsel but did not file Written Statement. Hence their right to file Written Statement was closed by order.

13. Applicant Bank filed its evidence by way of affidavit of Sh. Saurav Goel, Branch Manager of Applicant Bank as AW- 1/1 who proved the various loan and security documents by way of admission and denial which are marked as Exhibit- AW-1/1 to Exhibit- AW-1/167.

14. I have heard the arguments of Ld. Counsel for the Applicant Bank, Ld. Counsel for the Defendants and perused the material on record.

15. The point for consideration is whether Applicant Bank is entitled to recover the claim as prayed for?

16. Section 17(1) of the RBD Act of 1993 vests a Tribunal constituted under the Act with the jurisdiction, powers and authority to entertain and decide applications from the Banks and Financial Institutions for recovery of debts due to such Banks and Financial Institutions. 'Debt' is, defined in Section 2(g) of the Act, 1993. The RDB Act, 1993 creates a complete code for the adjudication of matters referred to in Section 17 and provides for the procedure in respect thereof. The jurisdiction of the Civil Courts to try cases in respect of recovery debts of Rs.10.00 Lac and above due to Banks and finical institutions stands ousted by the Act. The criminal case filed by the Applicant Bank would not have any bearing upon the decision of the proceeding before the Tribunal in the facts and circumstances of this case. Hence, Original Application filed U/s 19(1) of the Recovery of Debts and Bankruptcy Act, 1993 is within the jurisdiction and legally maintainable before this Tribunal.

17. Though the Defendants has contested the case in orally but failed to prove through any document, cogent evidence or otherwise their point of challenge to legality, validity, authenticity and correctness of the loan documents/Statements of Accounts and that Original Application is not legally maintainable. On the other hand, Applicant Bank has fully corroborated the averments made in the O.A. against the Defendants through evidence of witness

Sh. Saurav Goel, Branch Manager, of Applicant Bank as AW- 1/1. The Applicant Bank has also established its case through documentary evidence being Exhibit- AW-1/1 to Exhibit- AW- 1/167. On a careful scrutiny of the evidence on affidavit and exhibits marked as Exhibit- AW-1/1 to Exhibit- AW-1/167, it is proved that Defendant No.1 through its Proprietor had availed the Cash Credit Limit & Term Loan facilities from the Applicant Bank against primary security of hypothecation of entire stocks, Book Debts, Plant & Machinery, personal guarantee of Defendant No.3 to 5, 9 & Late Sh. Vipin Goel and collateral security by way of equitable mortgage of immovable properties owned by Defendant No.1 to 5 & Late Sh. Vipin Goel by executing various loan & security documents detailed as above in favour of the Applicant Bank. A perusal of Original Application, evidence and documents relied upon clearly show that Defendant No.1 & 2 had utilized the above loan facility as granted to them.

18. However, after availing the aforesaid Cash Credit Limit & Term Loan, Defendant No.1 & 2 failed to maintain financial discipline as per terms and conditions of the loan agreement. Consequently, the said accounts were rightly classified as NPA and recalled by Applicant Bank. Thereafter, Applicant Bank served Demand Notice dated 20.05.2015 Exhibit- AW-1/164 to the Defendants to repay the outstanding dues but the Defendants failed to make the payment of outstanding dues. The whole case of the Applicant Bank is based on documentary evidence and the witness has duly proved all these documents. In my view there is no question of disbelieving the evidence lead by the Applicant Bank and Applicant Bank has proved its case beyond reasonable doubts.

19. Further, on perusal of Exhibits AW-1/165 & AW-1/166 show that Applicant Bank has maintained the Books of account in the ordinary course of banking business showing disbursal of the loan amounts as per provisions of Bankers Books Evidence Act, 1891 and Guidelines of RBI under Banking Regulation Act, 1949. It further shows that Applicant Bank had regularly credited the amount if any, paid by the defendants in the books of account. Applicant Bank had also charged interest from time to time and the entries are relevant U/s 4 of the Bankers Books Evidence Act, 1891 as reflected from A/c Statements attached with O.A. Exhibits AW-1/165 & AW- 1/166.

20. Moreover, Applicant Bank has been able to prove that the Defendant No.1 & 2 availed the Cash Credit Limit & Term Loan Facility and failed to repay the same in terms of loan documents. Since, the transactions are of commercial nature between the parties, the Defendants are bound to repay the loan amount with interest as agreed upon and Applicant Bank is entitled to recover suit amount with interest as claimed by it. The Original Application has been presented on 04.08.2015 i.e. within three years from the date of execution of Acknowledgment of Debt & Balance Confirmation Letters on 08.12.2001, 08.03.2004, 03.11.2004, 22.10.2005, 23.04.2009, 10.03.2010, 15.11.2010 & 10.06.2013 as exhibit AW-1/13, AW-1/27, AW-1/47, AW-1/49, AW-1/66, AW-1/67, AW-1/82, AW-1/98 & AW-1/121 as well as last deposit being made on 29.03.2014 admitting debt liability for the purpose of limitation as reflected from Account Statement Exhibit AW- 1/165 & AW-1/166. Thus, it is proved that the Defendants are jointly and severally liable to pay the claim made in the O.A. to the Applicant Bank. However, Defendant No.6 to 8 being legal heir of deceased Late Sh. Vipin Goel are liable to pay only to the extent of estate of deceased guarantor & Mortgagor inherited by them.

21. Applicant Bank has claimed interest @11.40% per annum with monthly rests plus @2.00% Penal interest w.e.f. 01.08.2015 till the date of realization and costs. The contract between Applicant Bank and the Defendants comes to an end and after filing of the O.A. as per the provisions of Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993 (as amended from time to time) which is analogous to Section 34 of the CPC, the Tribunal/Court has discretion in awarding pendente- lite and future interest. I am also supported in my view by the Hon’ble Supreme Court in a case titled Central Bank of India Vs. Ravindra and others reported in AIR 2001 SC page 3095. On the basis of the foregoing discussion, interest of justice will be served if pendente-lite and future interest is granted @11.40% per annum with monthly rests from the date of filing of the O.A. till the date of realization with costs.

22. In the light of above discussion, the Original Application deserves to be allowed against the Defendants with costs.

ORDER

(i) The Original Application is allowed declaring that the Defendants are liable to pay jointly and severally a total sum of Rs.3,83,12,684/- (Rupees –Three Crore, Eighty- Three Lacs, Twelve Thousand, Six Hundred Eighty- Four only) to Applicant Bank alongwith pendente-lite and future interest @11.40% per annum with monthly rests from the date of filing of the O.A. i.e. 01.08.2015 till the date of realization with costs. However, Defendant No.6 to 8 being legal heir of deceased Late Sh. Vipin Goel are

liable to pay only to the extent of estate of deceased guarantor & Mortgagor inherited by them.

(ii) Applicant Bank is entitled to recover aforesaid amount by sale of hypothecated assets & mortgaged properties (if not sold earlier under the provisions of the S.A.R.F.A.E.S.I. Act, 2002). The amount, if any, already recovered by sale of any hypothecated assets & mortgage properties or otherwise shall be adjusted towards the debt and only the balance amount shall be recoverable. If the dues of Applicant Bank still remain unsatisfied, the same shall be recovered by attachment and sale of the personal movable and immovable assets of the Defendants jointly and severally. However, Defendant No.6 to 8 being legal heir of deceased Late Sh. Vipin Goel are liable to pay only to the extent of estate of deceased guarantor & Mortgagor inherited by them. Applicant Bank is at liberty to enforce the claim through due process of law.

(iii) Any other application pending stands disposed of.

(iv) Recovery Certificate be issued forthwith in above terms U/s 19(22) of the Recovery of Debts and Bankruptcy Act, 1993 (as amended from time to time) and be sent to the Recovery Officer-II, DRT, Dehradun.

(v) Applicant Bank is directed to file revised statement of account before the Recovery Officer of this Tribunal. Parties are directed to appear before the Recovery Officer-II, DRT, Dehradun on 03.05.2019.

(vi) The Defendants are hereby restrained by means of injunction from transferring, encumbering, alienating, selling or otherwise dealing with their properties/estates without first paying the above claim of Applicant Bank. However, Defendant No.6 to 8 being legal heir of deceased Late Sh. Vipin Goel are restrained to pay only to the extent of estate of deceased guarantor & Mortgagor inherited by them.

(vii) In case, any of the Defendants expire, the legal representatives shall be liable to pay in proportion to the inheritance.

(viii) Copy of this Judgment and Recovery Certificate be given Dasti to Applicant Bank and be sent to the Defendants free of cost by Registered Post in terms of section 19(21) (i) of the RDB Act, 1993 (as amended from time to time) and Rules as well as to the Recovery Officer and after due compliance, file be consigned to record room.

23. Applicant Bank is directed to file a Memo of Cost, if not filed earlier, for preparing Recovery Certificate U/s 19(22) of the Recovery of Debts and Bankruptcy Act, 1993 (as amended from time to time). Judgment is pronounced in the open court.

Dated: 22.03.2019 (SHAMMI KHAN) Presiding Officer, DRT, Dehradun