STATE BANK OF MYSORE vs K.B.R SHELTERS P LTD & ORS (BLR) on 5 November 2026

:FINAL ORDER:

1. This application has been originally filed before DRT-I Bengaluru and got numbered as OA.No.1886/2016, got transferred to this Tribunal and numbered as above is filed by the applicant seeking recovery of Rs.9,43,99,280/- with further interest claimed to be due in three Term loans availed by the defendant No.1 for the development activities, wherein defendant Nos.2, 4 and 5 are the mortgagors. It is also contended that, the credit facilities have been availed from the erstwhile State Bank of Mysore which brough amalgamated with the applicant bank resulting the substitution of the applicant herein State Bank of India as the Original Applicant in the OA initiated by erstwhile State Bank of Mysore.

2. The case of the applicant as stated in the OA is as follows: Based on the request made by the defendants three term loan for Rs.3.5 Crores, Rs.4.5 Crores and Rs.1.7 Crores were sanctioned respectively on 21.09.2012, 21.09.2012 and 25.06.2014 respectively out of which the 1st facility was availed for the construction of the Villas at Trissur and other facilities were availed for construction of Apartments in Thiruvananthapuram as projects muted by 1st defendant. It is contended that, the mortgage was created by the respective owners of the property and apart from execution of loan agreements. The applicant further contends that, the 3rd credit facility of Rs.1.70 Crores has been availed by getting amount Rs.89.00 lakhs disbursed on 26.06.2014. the applicant though had initially given NOC for three apartments in the Thiruvananthapuram project, the defendant failed to adhere to repayment schedule even after rephasement of the repayment schedule resulting the account 2 and 3 becoming NPA on later state and the first-time term loan has been declared as NPA on 28.07.2015. Since the earlier facility of Rs.3.5 Crores has been declared as NPA on 28.07.2015 all the accounts were categorized as NPA with that date. It is also contended that the bank had adverted to SARFAESI and resorted to take the possession of the property and attempted to sell the property where in the pleading to the OA, it is stated that the sale could not take place.

3. The defendant Nos.1 and 2 had originally filed their written statement not admitting the availment of three facilities as stated in the OA. Apart from filing a written statement barely denying the averments as made in the OA and an additional written statement came to be filed by defendants 1 to 3 contending as follows:

4. Though the term loan agreement specified for a holiday period for 12 months which was agreed to be extended by the bank. the bank had resorted to recall the facilities without even waiting for the holiday period. Another contention taken in the written statement is that, the loan amount was not released on time resulting the delaying the execution of project. The subscription of signature on the loan documents is not under serious dispute. The defendant Nos. 1 to 3 further contends that, the applicant had merged the account with Trissur Term loan account only to cover up the banks laps and the third facility has been thrust upon the defendants as a cover up of the lapses from the bank. in respect of the claim of the bank as to the release of Rs.89.00 lakhs, it is contended that only Rs.15.00 lakhs was been disbursed to the defendants as balance Rs.74.00 lakhs has been adjusted to the interest relating to Thiruvananthapuram project, which the defendant contends that without their consent. Despite, the repeated request of the defendants to appropriate the amounts in respective of the accounts, the bank failed to do so. Another contention in the written statement is that, the bank failed to mention the proper rate of interest and interest has been charged whimsically.

5. The defendant further contends that, the defendants have already communicated to the bank denying their liability and that the bank failed to provide the statement of accounts. The defendants further alleging only partial disbursement of the amounts sanctioned by the bank, as in respect of the first facility, the defendants contend that, only an amount of Rs.1.00 Crore has been released and out of which Rs.80.00 lakhs have been disbursed adjusting the balance Rs.20.00 lakhs to the bank fee and transaction charges. The alleged failure of the bank in providing NOC

preventing the defendant from generating revenue out of sale of two villas as only 10 out of 30 villas NOC were issued by the bank and the failure in issuance of NOC in respect of three villas, resulted the revenue loss to the defendants. In respect of the apartment in the Thiruvananthapuram, it is stated that, due to the failure of the applicant in disbursing the amount promptly only 7 floors were could be completed. The defendants further alleged that out of the amount sanctioned a large portion of the amount was adjusted to a various charge thereby the defendant has been deprived of the fruits of the sanctioned amount thereby impairing their capacity to complete the projects on time.

6. The defendant Nos.4 and 5 had filed their written statement admitting that, the defendant Nos. 1 to 3 had approached the applicant bank for the loan and the defendant Nos. 4 and 5 are nowhere connected with the Term loan -I and the grouping of the applicant bank three facilities are illegal. The defendant No.4 and 5 are were approached by one Manju Menon with an offer and proposal for the development of the flat situated in Thiruvananthapuram resulting the execution of the Joint Development Agreement with the said person on 05.09.2011 and in pursuant to the said agreement a Power of Attorney came to be executed in favour of 2nd defendant herein. In respect of the above, execution of documents it is the case of the defendant Nos. 4 and 5 that, the documents were executed in personal capacity of the 2nd defendant though the address of the 1st defendant is used for communication purpose. It is further contended by the defendants Nos. 4 and 5 that, they never Authorised the 1st defendant to obtain any loan for the property belongs to them and no authority has been given to the 1st defendant and only Manju Menon and 2nd defendant were given the sanction to develop the property by virtue of Joint Development Agreement and Power of Attorney respectively. Hence, according to the defendant Nos.4 and 5, the 1st defendant was no way connected with the Joint Development Agreement and was never authorized to raise any loans based on the same.

7. The defendants further allege that, the bank without verifying the fundamental aspects had worked hand in glove with the defendant Nos. 1 to 3 by illegally sanctioning the loan and made 4 and 5 defendant scapegoats. It is also admitted that, the in favour of the 3rd defendant another Power of Attorney came to be executed on 30.04.2012. Hence, on the above pleas it is contended that, the defendants No.4 and 5 cannot be made responsible to repay the loan amount as the loan agreement is itself voidable at the option of the defendants 4 and 5. The defendant reiterated the written statement that, the defendant No.1 to 3 never Authorised to seek loan from the bank for construction and development of the property at Thiruvananthapuram and such Authorisation was given expeditiously and unequivocally only to one Manju Menon who is a developer and signatory to the Joint Development Agreement. Hence, according to the said agreement, it is defendant Nos. 1to 3 had willfully mislead the defendant No.4 and 5 about the nature of there involvement in the term loan and had made this situation. Another contention is taken is that, the extension of the mortgage of the schedule properties is bad in law and said defendants cannot be made liable as they had never participated as borrower and guarantors in respect of facilities claimed to have been availed by defendant Nos.1 to 3. On the basis of above, the defendants pray for dismissal of the OA.

8. The applicant had let in evidence and got marked the following documents as Ex.A1 to A42. The defendant Nos. 1 to 3 had in support of there contention had filed their proof affidavit and got marked as Ex.D1 to D5. Despite producing the documents along with the written statement no defense evidence is adduced by the defendants Nos.4 and 5.

9. Exhibits on the part of the Applicant: Sl. No. Date Description of the document Annexure Exhibit No.

21-09-2012 Copy of Arrangement Letter by the Applicant’s MCCPC, Bangalore acknowledged by the Defendants for TL-1

A-3

Copy of Certified extract of the Board Resolution of the Borrower

A-4

04-10-2012 Copy of Term Loan Agreement

A-5

04-10-2012 Copy of Guarantee Agreement

A-6 COPY

Copy of Letter of Confirmation for creation of Mortgage by deposit of title deeds of Thrissur Villa project (*) Copies of Title Deeds are produced in ANNEXURE-A

A-7

Copy of Confirmation letter of Borrower

A-8

Copy of Confirmation letter of Guarantor/s

A-9

Copy of Consent letter of Borrower

A-10

Copy of Consent letter of Guarantor/s

A-11

Copy of charge certificate

A-12

Copy of Registration of property charge

A-13

21-09-2012 Copy of Arrangement Letter by the Applicant’s MCCPC, Bangalore acknowledged by the Defendants for TL-2

A-14 COPY

Copy of Certified extract of the Board Resolution of the Borrower

A-15 COPY

07-11-2012 Copy of Term Loan Agreement

A-16

Copy of Guarantee Agreement

A-17

Copy of Consent letter of Borrower

A-18

Copy of Confirmation letter of Borrower

A-19 COPY

Copy of Confirmation letter of Guarantor/s

A-20 COPY

Copy of Request letter

A-21 COPY

Letter of Confirmation for creation of Mortgage by deposit of title deeds of Thriuvanthapuram project (*)

A-22

(*) Copies of Title Deeds are produced in ANNEXURE-B

Copy of Recital No.7/5

A-23 COPY

Copy of Letter of Applicants’ office

A-24 COPY

Copy of charge certificate

A-25 COPY

25-06-2014 Copy of Arrangement Letter by the Applicant acknowledged by the Defendants for TL-3

A-26

Copy of Certified extract of the Board Resolution of the Borrower

A-27

25-06-2014 Copy of Term Loan Agreement

A-28

Copy of Guarantee Agreement

A-29

10-11-2014 Copy of Letter of Confirmation for extension of Mortgage

A-30

Copy of Continuation Entry of Equitable mortgage

A-31 COPY

Copy of Consent letter is executed by the Borrower and guarantors

A-32

Copy of Registration of property charge

A-33 COPY

Copy of Charge Certificate

A-34 COPY

Copy of Certificate by CA

A-35

Copy of Request letter of Defendant

A-36

Copies of Notice u/s 13(2) – demand notice and receipts

(“Colly”) A-37 COPY

Copy of Reply of the Applicant Bank to the Defendants, regarding their representation dated 21-10-2015

(“Colly”) A-38 COPY

Copy of Copy of Notice u/s 13(4)- possession notice and receipts

(“Colly”) A-39 COPY

Copy of Judgement of the Hon’ble High Court of Kerala at Ernakulam, in the WP No.34029 of 2015 ©

A-40

Copies of letters, sale notice and publication

(“Colly”) A-41 COPY

Statement of Accounts is relating to term loans duly certified under the Bankers’ Books Evidence Act

(“Colly”) A-42

10. Exhibits on the part of the Defendant Nos.1 to 3: Sl.No Description Annexures

Sanction letter dated 10.05.2012 D1

Letter dated 20.10.2012 written by the defendants to the bank requesting to release the amounts D2

Letter dated 14.01.2015 written by defendants to release the Thrissur Security D3

Reply dated 21.10.2015 by the defendants No.1 to 3 to the demand notice D4

Letter dated 30.11.2015 written by the defendants to the applicant bank D5

11. Heard the submissions of respective counsels and perused the records.

12. The following issues arise for consideration in this matter: i) Whether the applicant had succeeded in proving the OA claim as against the defendants? ii) What order are to be passed?

Both these issues are gone into and decided together

13. In the case in hand the applicant’s case as to the disbursement of the credit facilities though in dispute need not be gone into in view of the admitted fact that the defendant had subscribed their signatures to the documents. As far as the contention of the defendant Nos.1 to 3 that, the third facility has been entrusted upon them by the bank without any request, this Tribunal is of the view that, having availed the amount so disbursed and utilized the same, the defendants cannot turn back and say that the amount was disbursed without their consent. In respect of the facilities the copy of the arrangement letter produced as Ex.A3 and Board of Resolution of the 1st defendant as Ex.A4, along with term loan agreement guarantee agreement Ex. A5 and Ex.A6 evidences that the defendant had approached the applicant seeking the disbarment of the facility mentioned as Term loan – I. Ex.A8 to Ex.A11 the confirmation letters and consent letter by the borrower and guarantors also supports the case of the applicant in this regard. In respect of the Term loan facility – II, the applicant had produced Ex.A14 and Ex.A15, the copy of the arrangement letter and the Board of Resolution which in turn leads the fact that the defendant had approached the applicant the bank for availing the said facilities. The Term loan agreement Ex.A16 and the Guarantee Agreement Ex.A17 coupled with the confirmation letter of the borrower and guarantors produced as Ex.A18, A19 and A20 respectively, evidences the disbursement of the facility and obligation of the defendants to pay back the amount. In respect of the Term loan – III Ex.A26 and A27 are the arrangement letter and Board of Resolution which in turn proves the intend of the defendant to avail the facility. The copy of the guarantee agreement and the term loan agreement Ex.A9 and A28 respectively evidences that the defendant had agreed for the terms and conditions of the agreement.

14. The case of the applicant as to the creation of mortgage in lieu of the facilities are proved by Ex.A30 , A31 and A33 which evidences the creation of mortgage and continuation of the entry of equitable mortgage and copy of the registration of property charges.

15. Going by the documents so produced by the applicant and in the absence of any challenge as to the validity of the said document, it can be safely concluded that the applicant had successfully proved their case as to the facts about the application made by the borrower for the disbursement of the loan and sanctioning of the same and execution of loan documents.

16. The defendants 1 to 3 had contended that even though the amounts were sanctioned the facilities were not fully disbursed to them impairing their completion of work on time. This contention even if correct, is not supported by any evidence. At no point of time the defendants had raised any objections as to the alleged non disbursement of the full amount which in turn leads to the conclusion that, the defendants had accepted the disbursement amount against the execution of loan documents in favour of the applicant. Even though the defendant had produced their evidence, Ex.D2 a letter claimed to be issued by the company to the bank requesting to release the Rs.100.00 lakhs and Ex.D3 and request for the release of the original document for raising funds for the Thiruvananthapuram project, the said documents are not admitted by the applicant and the said document does not contain any signature evidencing its service on the applicant bank. Even assume that the said documents were served on the applicant, it will not alter the situation as no follow up action had been taken by the defendant from 21.10.2012 against the alleged non-release of Rs.100.00 lakhs. The defendants have failed raise their little finger at appropriate time regarding the alleged non disbursement of the entire amount, if any, cannot turn back at later stage that too after years that only because of the non-release of the sanctioned amount their constructions could be completed thereby disentitling the bank to recover the amount disbursed pursuant to the execution of the loan documents.

Ex.D4 is the reply stated to have been issued by the defendants 1 to 3 in response to a demand notice issued under the provisions of SARFAESI act. Taking note of the fact that, the measures taken by the SARFAESI act, are beyond the scope of enquiry in this OA, this Tribunal is not adverting to the same. The Ex.D5 letter produced in the evidence even if admitted only evidences that the defendants are claiming substantial repayment and seeking one time settlement by waiver of interest charged and other charges. Whether the defendants are entitle to waiver is something for the bank to decide at appropriate times and having served the request on 30.11.2015 to the erstwhile State Bank of Mysore, it is evident that, no proper follow up action had been taken by defendant No.1 to 3 to pursue the said request or even to make any repayment in accordance with the said request.

17. In view of the discussions as held above this Tribunal is of the considered opinion that, the defense putforth by defendant Nos.1 to 3 are liable to be rejected against the claim of the applicant.

18. In respect of the defense set out by the defendant Nos. 4 and 5, it is to be noted that, the defendant Nos. 4 and 5 are contending that they had nothing to do with the term loan in respect of facility as they have only executed the Joint Development Agreement with one Manju Menon. Even though, no defense evidence is adduced, the said Joint Development Agreement which produced along with the written statement. Even though nomenclature of the said documents evidences that, it is a Power of

Attorney executed in favour of Manju Menon, the recitals of the same evidences that the purpose for which the executed is for development of property and the said Manju Menon got executed the same as the CEO of the 1st defendant company. Having executed the Power of Attorney in favour of said Manju Menon and later in favour of defendant Nos. 2 and 3 for the development of the project and empowering the said person to raise loan and borrowing from bank and other financial institutions, the defendants cannot turn back and say that whatever has done by the said person are without their consent.

16. Even though, a serious dispute raised in respect of the competency of the power agents namely the said Manju Menon and defendant Nos.2 and 3 in respect of acting on behalf of the defendant, the documents produced along with the written statement by the defendant Nos. 4 and 5 though not found the part of the evidence clearly indicates that the said documents were executed with said persons in their capacity as the employees representatives of the 1st defendant, which in turn can only lead to the conclusion that, the defense set out by the defendants Nos. 4 and 5 is without any base and is liable to be rejected.

17. Taking view of the above discussion, this Tribunal is convinced that the applicant is entitled to get the recovery certificate allowing them to recover the amount due in the loan accounts. The statement of account produced by the applicant evidences the amount as claimed in the OA is outstanding in the account and there is no capitalization of penal interest.

18. Taking note of the fact that, this Tribunal is convinced that there is some force in the defendant that they were defrauded by third party, whether the convenes of the Bank Manager or not, this Tribunal is inclined to take a lenient view in respect of the interest awarded at reduced rate of interest @8.00%p.a. (simple).

19. In the result, TA.No.845/2017 stands allowed,

i) The applicant is allowed to recovery an aggregate sum of Rs.9,43,99,280/- (Rupees Nine Crore Forty Three Lakh Ninety Nine Thousand Two Hundred and Eighty only) with further interest of 8.00% p.a.(simple) from the date of filing OA till the realization from the defendants, after giving credit to all the amounts recovered and received during the pendency of the OA and allowed the same to be recovered by proceeding against defendants jointly, severally and personally and also by proceeding against the schedule property in respect of housing loan if it is available. The schedule property to the OA be the schedule property to the Recovery Certificate.

ii) If the sale proceeds are not found sufficient to cover the amount due and payable to the applicant bank, the defendants jointly, severally and personally and their other assets are liable for all such amounts due under the loan account.

iii) The applicant bank is allowed cost of the proceeding which applicant to file cost memo within 14 days from the date of the order.

iv) The Recovery Certificate to be drawn in terms of this order and transferred to Recovery for execution.

v) Interim Application pending, if any, stands disposed of with this Final Order.

20. 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 the Stenographer (PR), transcribed by her, corrected and signed and pronounced by me in the Open Court, this the 05th Day of November 2026].

(T. RAJESH) PRESIDING OFFICER