Madhukar R Bhangay versus State Bank of India and Ors.

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Reportable/Non-Reportable

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Diary No. 195 of 2019-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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Diary No. 195 of 2019

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(Arising out of O.A. 123 of 1997 in DRT-I, Hyderabad)

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Madhukar R Bhangay, son of Late Ramachandra Rao, Presently residing at Flat No. 307, Lumbini Rock Castle, Road No. 6, Banjara Hills, Hyderabad - 500 034.

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… Appellant

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-Versus-

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State Bank of India, Agri Business Branch, D. No: 3-5-784/A/2, Opposite Parda Gate, King Koti Road, Hyderabad, Telangana - 500 001;

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… Respondent

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J. Sridhar Reddy, Son of J. Gopal Reddy, H.No. 8-2-601/P/21 Road No. 10, Banjara Hills, Hyderabad-500 034 ;

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M. Sreedhar, Flat No.2, Bhaskar Aptmts, Rajbhavan Road, Somajiguda Hyderabad -500 041 ;

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J. Gopal Reddy, H. No. 26-455, Postal Colony, Α. Κ. Nagar, Nellore – 524 004.

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… Proforma Respondents

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Counsel for Appellants … Mr. Nemani Srinivas Counsel for Respondents … Mr. Soudip Pal Chaudhuri Ms. Saswati Sikder JUDGMENT : 15^th May, 2024

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THE APPELLATE TRIBUNAL :

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Instant appeal has arisen against judgment and order dated 11.7.2019, passed by Learned DRT-I, Hyderabad, in O.A. 123 of 1997 (State Bank of India -vs- M/s. Auriferous Aqua Farms Limited & Others). 2. An O.A. under Section 19 of the Recovery of Debts Due To Banks And Financial Institutions Act was filed by the Respondent No. 1 Bank against Defendants for issuance of Recovery Certificate of Rs.1,78,48,687.80p with pendente

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Diary No. 195 of 2019-DRAT-Kolkata lite and future interest at the rate of 18.75% per annum with quarterly rests. Pending proceedings, Part Satisfaction Memo for Rs.1.60 lac was filed by the Bank on 26.2.2003. Thereafter, Learned DRT allowed the O.A. for recovery of Rs.18,48,687.80p against Defendants No. 1 to 5 with pendente lite and future interest at the rate of 18.75% per annum with quarterly rests.

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3. As per the pleadings of the parties it appears that the proceedings were contested by the Appellant/Defendant No. 5 only; other Defendants did not file the written statement. Learned DRT recorded a finding that the O.A. application is filed within limitation, financial facilities to an extent of Rs.379.00 lac was granted. From the statement of account it appears that total outstanding against the Defendant was Rs.1,78,48,687.80 out of which an amount of Rs.1.60 lac is realised by sale of Schedule ‘A’ property belonging to Defendant No. 2. Accordingly, O.A. was allowed for recovery of Rs.18,48,687.80p with pendente lite and future interest at the rate of 18.75% per annum with quarterly rests. Feeling aggrieved by the judgment, Appellant preferred the appeal.

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I have heard the Learned Counsel for the parties and perused the record.

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4. At the very outset, Learned Counsel for the Appellant would submit that he is not pressing the appeal on merits rather he is pressing the appeal on the quantum of interest as well as on the ground that delay, due to pendency of the O.A., could not be attributed to the Appellant; accordingly

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Diary No. 195 of 2019-DRAT-Kolkata he is not liable to pay the interest for whole of the period when the O.A. was pending.

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5. Per contra, Learned Counsel for the Respondent Bank would submit that O.A. was pending due to the laches of the Defendants. Appellant is not entitled for any benefit in the appeal.

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6. As would appear from the record that O.A. was filed on 18.12.1996 for recovery of Rs.1,78,48,687.80p with 18.75% interest with quarterly rests. In the O.A. proceedings only Defendant No. 5, Appellant herein, appeared but further did not prosecute the case by filing written statement. Accordingly, O.A. was decided ex parte on 14.5.1999. In the meantime on 26.6.2023 an amount of Rs.1.60 lac was recovered by the Bank by auctioning the secured assets of Defendant No. 2.

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7. I.A. 523 of 2004 and M.A. 49 of 2006 were filed by the Appellant/Defendant No. 5 to set aside the ex parte order. There was a delay of 1790 days. However, the delay was condoned on 26.4.2006 by the Learned DRT. A Review Petition No. 02 of 2006 to review the order dated 26.4.2006 was filed by the Bank which was dismissed on 31.7.2008. Against the said order, Bank filed appeal before the Learned DRAT, Chennai which was in due course transferred to DRAT Mumbai. Appeal was disposed of by not pressing the same by the Bank on 26.8.2015. Thereafter, M.A. 49 of 2006 was allowed with certain conditions which were complied by the Appellant/Defendant No. 5 and the ex parte order was set

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Diary No. 195 of 2019-DRAT-Kolkata aside; thereby O.A. was restored to its original file and number vide order dated 7.3.2019.

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9. Learned Counsel for the Appellant would submit that the delay in O.A. proceedings could not be wholly attributed to the Defendant No.5/Appellant as appeal was filed by the Bank against the order dated 31.7.2008 before DRAT which was ultimately withdrawn on 26.8.2015. Hence this delay was consumed on account of the appeal having been filed by the Bank and such delay period should not be accounted towards the Appellant.

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10. I am not in agreement with the statement made by the Learned Counsel for the Appellant. Whole issue arose when the Defendant No. 5, Appellant herein, has put in appearance in O.A. proceedings but did not prosecute the same and the O.A. proceedings was decided ex parte on 14.5.1999. Thereafter, in 2004, Appellant moved an application for setting aside the ex parte order along with an application for condonation of delay which was allowed and assailed by the Bank in appeal. Ultimately, appeal was disposed of as withdrawn and the O.A. got restored to its original file and number. This all shows that due to non-appearance of the Appellant/Defendant No. 5 before the DRT in O.A. proceedings, whole controversy arose and an ex parte order was passed. Although no doubt it was ultimately set aside by the Learned DRAT. But the time consumed in the O.A. proceedings was due to the fault of the Appellant /Defendant No. 5. Hence, he cannot take the advantage of the fact that the appeal filed in 2008 was

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Diary No. 195 of 2019-DRAT-Kolkata decided in 2015 and this period should not be reckoned for calculation for period of payment of interest pendente lite.

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11. Learned Counsel for the Appellant further submits that the rate of interest as allowed by the Learned Tribunal is 18.75% per annum with quarterly rests. Learned Counsel places reliance upon Section 34 of the C.P.C. reads as under:

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“ (1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate a s the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, [with further interest a t such rate not exceeding six per cent. per annum as the Court deems reasonable on such principal sum], from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit:”

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12. The use of word ‘may’ in Section 34 confers discretion on the Court to award or not to award interest or to award interest at such rate as it deems fit. Such interest, so far as future interest is concerned, may commence from the date of the decree and may be made to stop running either with payment or with such earlier date as the court thinks fit. In a Constitution Bench of the Hon’ble Apex Court in Central Bank of India -vs- Ravindra & Others [(2002) 1 SCC 367 it was held in paragraph 55 Sub-para (8) that :

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“(8) Award of interest pendente lite and post-decree is discretionary with the court as it is essentially governed by Section 34 CPC dehors the contract between the parties. In a given case if the court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of the principal sum actually advanced the court may exercise its discretion in awarding interest pendente lite and post-decree interest at a lower rate or may even decline awarding such interest. The

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Diary No. 195 of 2019-DRAT-Kolkata discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner.”

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Discretion vested with the Court has to be exercised fairly judicially and for reasons.

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13. Further in C.K. Sasankan -vs- Dhanalakshmi Bank Limited [2009 (11) SCC 60] Hon’ble Apex Court held that the discretion under Section 34 of the C.P.C. has to be exercised by the Court properly, reasonably and on sound legal proposition and not arbitrarily and while doing so Court is also to consider the parameters, scope and ambit of Section 34 of the Code. Hon’ble Apex Court in paragraph 14 considered its earlier judgment wherein it was held that

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“14. We are inclined to refer to the decision in Clariant International Limited -vs- Securities & Exchange Board of India (2004) 8 SCC 524 where it was held by this Court that the interest can be awarded in terms of an agreement or statutory provisions and it can also be awarded by reason of usage or trade having the force of law or on equitable considerations but the same cannot be awarded by way of damages except in cases where money due is wrongfully withheld and there are equitable grounds therefor, for which a written demand is mandatory. It was further held that in the absence of any agreement or statutory provision or a mercantile usage, interest payable can be only at the market rate and such interest is payable upon establishment of totality of circumstances justifying exercise of such equitable jurisdiction. It was also held that in ascertaining the rate of interest the courts of law can take judicial notice of both inflation as also a fall in the bank rate of interest. The bank rate of interest both for commercial purposes and other purposes has been the subject-matter of statutory provisions as also the judge-made laws. In the said case reference was made to the decisions in Kaushnuma Begum -vs- New India Assurance Co. Limited, [(2001) 2 SCC 9] H.S. Ahammed Hussain -vs- Irfan Ahammed [(2002) 6 SCC 52] and United India Insurance Co. Limited -vs- Patricia Jean Mahajan [(2002) 6 SCC 281] and it was observed that even in cases of victims of motor vehicle accidents, the courts have upon taking note of the fall in the rate of interest held 9% interest to be reasonable. Direction to pay such a rate of interest is also found to be reasonable and fair as

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Diary No. 195 of 2019-DRAT-Kolkata the plaintiff was deprived to utilise and roll its money in commercial transaction and kept out of it due to wrongful withholding of the same by the defendant.”

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5. Now it is to be seen whether the Learned DRT has exercised its jurisdiction properly in awarding interest at the rate of 18.75% per annum with quarterly rests. 6. O.A. was decided ex parte on 14.5.1999. I.A. 523 of 2004 and M.A. 49 of 2006 were filed by the Appellant/Defendant No. 5 to set aside the ex parte order. Review Petition No. RA 2 of 2006, to review the order dated 26.4.2006, was filed by the Bank which was dismissed on 31.7.2008. Against the said order Bank filed an appeal before the Learned DRAT, Chennai was disposed of by not pressing the same by the Bank on 26.8.2015. Thereafter, M.A. 49 of 2006 was allowed with certain conditions which were complied by the Appellant/Defendant No. 5 and ex parte order was set aside; thereby O.A. was restored to its original file and number vide order dated 7.3.2019. No doubt liability of the Defendant to repay the loan entirely lies upon the Defendants. In the C.K. Sasankan (supra), the Hon’ble Apex Court has observed that the Tribunal has to look into the rate of inflation, if any, coupled with the market rates and the Bank rates of interest. Judicial notice can be taken to the fact that the interest rate even in the Banks has come down drastically. In such circumstances, I find it appropriate that interest at the rate of 9% simple pendente lite and future should be awarded in favour of the Bank.

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Diary No. 195 of 2019-DRAT-Kolkata Accordingly, the impugned judgment and order is partly modified and appeal is liable to be partly allowed.

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O R D E R E D

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Appeal is partly allowed. Impugned judgment and order dated 11.7.2019, passed by Learned DRT-I, Hyderabad, in O.A. 123 of 1997, is modified to the extent that the Bank would be entitled to recover Rs.18,48,687.80p from the Appellant/Defendant No. 5 with pendente lite and future interest at the rate of 9% simple till the date of realisation. Rest of the findings of the Learned DRT are affirmed.

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No order as to costs.

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Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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File be consigned to Record room.

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Order signed, dated and pronounced in open Court.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 15^th May, 2024 ac

Madhukar R Bhangay v. State Bank of India and Ors.

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Madhukar R Bhangay v. State Bank of India and Ors.

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