STATE BANK OF INDIA vs KRISHNA KANT KUNIYAL on 25 May 2019

J U D G M E N T

1. Applicant Bank had filed this Original Application on 16.11.2016 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.76,91,441.46Ps. (Rupees Seventy-Six Lacs Ninety-One Thousand Four Hundred Forty- One and Paisa Forty-Six only) alongwith pendente-lite and future interest @14.55% per annum with monthly rests plus penal interest @2.00% per annum till the date of realization and costs.

2. The brief facts of case are that that the Defendant No.1 is principal borrower and the Defendants No.2 stood guarantor for the Defendant No.1. On 27.12.2005 the Defendant No.1 being principal borrower approached Applicant Bank for grant of financial assistance in the shape of Cash Credit Limit of Rs.40,00,000/- for Working Capital and submitted loan application. Applicant Bank after considering the loan application sanctioned a Cash Credit Limit of Rs.40,00,000/- for Working Capital to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.2 and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.1 & 2 in favour of Applicant Bank. The Defendants executed and signed various loan and security documents on 23.09.2006 in favour of Applicant Bank. The rate of interest was agreed between the parties @0.25% below SBAR, applicable at that time @10.75% per annum with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

3. Further, on 23.09.2008 the Defendant No.1 being principal borrower again approached Applicant Bank for grant of more financial assistance in the shape of enhancement of existing Cash Credit Limit and submitted loan application. Applicant Bank after considering the loan application enhanced existing Cash Credit Limit to Rs.55,00,000/- for Working Capital to the Defendant No.1 against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of the Defendant No.2 and collateral security by way of equitable mortgage of immovable properties owned by the Defendant No.1 & 2 in favour of Applicant Bank. The Defendants again executed and signed various loan and security documents on

20.10.2008 in favour of Applicant Bank. The rate of interest was agreed between the parties @0.50% above Base Rate, applicable at that time @13.50% per annum with monthly rests plus penal interest @2.00% per annum subject to change from time to time as per RBI Guidelines.

4. However, after availing the aforesaid Loan/Credit Facility, the Defendant No.1 failed to maintain financial discipline as per terms and conditions of the loan agreement due to which loan account became irregular. Despite repeated reminders and persuasion, the Defendant No.1 failed to regularize the loan account. Consequently, the said account of the Defendant No.1 was classified as NPA on 26.07.2014 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. Applicant Bank has also initiated action under the S.A.R.F.A.E.S.I. Act, against the secured assets/mortgaged properties but no secured asset has been sold till date. Hence, the present Original Application has been filed by Applicant Bank against Defendants for recovery of Rs.76,91,441.46Ps. (Rupees Seventy-Six Lacs Ninety-One Thousand Four Hundred Forty-One and Paisa Forty-Six only) alongwith pendente-lite, future interest, costs and for issuance of Recovery Certificate for the said amount.

5. 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.

6. The summons were issued to the Defendants. Subsequently, vide order dated 06.03.2018 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. 92/2018.

7. 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 Defendant No.1 appeared through their counsel and filed Written Statement denying various averments made in Original Application. However, despite service none appeared for Defendant No.2. Hence, Defendant No.2 proceeded ex- parte vide order dated 31.01.2019. The contentions of the Defendant No.1 are set out in detail in his Written Statement. Therefore, they are not being stated here afresh to avoid a repetition of facts.

8. Applicant Bank filed its evidence by way of affidavit of Sh. Inder Singh Solanki, Chief 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-1/25.

9. The Defendant No.1 also filed evidence by way of written statements & Affidavit as DW-1/1. The Defendant No.1 also relied upon documents in support of evidence in his defence as Exhibit- DW-1/1 to Exhibit- DW-1/1. However, no document has been relied upon in support in their defence in evidence.

10. I have heard the arguments of Ld. Counsel for the Applicant Bank, Ld. Counsel for the Defendants or considered the written statement of Defendant No.1 as their arguments, ex- parte against Defendant No. 2 and perused the material on record.

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

12. Section 17(1) of the RDB 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 financial institutions stands ousted by the Act. 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.

13. Though the Defendant No.1 has contested the case in his written statement but failed to prove through any document, cogent evidence or otherwise his 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. Inder Singh Solanki, Chief 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-1/25. On a careful scrutiny of the evidence on affidavit and exhibits marked as Exhibit- AW-1/1 to Exhibit- AW-1/25, it is proved that Defendant No.1 had availed the Cash Credit Limit facility from the Applicant Bank against primary security of hypothecation of entire stocks, Book Debts, personal guarantee of Defendant No.2 and collateral security by way of equitable mortgage of immovable property owned by Defendant No.1 & 2 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 had utilized the above loan facility as granted to him.

14. However, after availing the aforesaid Cash Credit Limit facility, Defendant No.1 failed to maintain financial discipline as per terms and conditions of the loan agreement. Consequently, the said account was rightly classified as NPA on 26.07.2014 and recalled by Applicant Bank. Thereafter, Applicant Bank served final Legal Notice dated 27.07.2016 Exhibit- AW-1/23 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.

15. Further, on perusal of Exhibits AW-1/25 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-1/25.

16. Moreover, Applicant Bank has been able to prove that the Defendant No.1 availed the Cash Credit Limit 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 16.11.2016 i.e. within three years from the date of execution of last Revival Letter on 08.03.2014 as Exhibits AW-1/22 as well as last deposit being made on 27.12.2014 admitting debt liability for the purpose of limitation as reflected from Account Statement Exhibit AW-1/25. 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. The hypothecated assets & mortgage properties are liable to be sold for recovery of amount due alongwith the personal movable & immovable properties/assets of the Defendants.

17. Applicant Bank has claimed interest @14.55% per annum with monthly rests plus @2.00% Penal interest 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 @14.00% per annum with monthly rests from the date of filing of the O.A. till the date of realization with costs.

18. 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.76,91,441.46Ps. (Rupees Seventy-Six Lacs Ninety-One Thousand Four Hundred Forty-One and Paisa Forty-Six only) to Applicant Bank alongwith pendente- lite and future interest @14.00% per annum with monthly rests from the date of filing of the O.A. i.e. 16.11.2016 till the date of realization with costs.

(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. 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-I, 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-I, DRT, Dehradun on 10.07.2019.

(vi) The Defendants are hereby restrained by means of injunction from depleting, transferring, encumbering, alienating, selling or otherwise dealing with their properties/estates without first paying the above claim of Applicant Bank.

(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.

19. 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 pronounced in the open court on this 25th Day of May, 2019.

(SHAMMI KHAN) Presiding Officer, DRT, Dehradun