Allowed

Mahesh Bank v. v. Ravi Kumar

DRAT10 May 2024MISC APPEAL/35/2023

Case brief

AI extract

What is this about?

Appellant bank challenged the DRT order reducing interest rates without recording reasons. The Tribunal held the order unsustainable as it lacked reasoned justification and distinguished it from an educational institution case. Appeal allowed; impugned order set aside.

What did the court decide?

Impugned order dated 05.07.2023 set aside; respondent directed to deposit amount and bank to provide statement of account within 15 days.

Mahesh Bank versus v. Ravi Kumar — Execution and Attachment | DRAT (2024)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Misc. Appeal No. 35 of 2023 (Arising out of I.A. 885 of 2023 in S.A. 425 of 2019 DRT-II Hyderabad)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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10.05.2024

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Andhra Pradesh Mahesh Cooperative Urban Bank Ltd. having office at 8- 2-680/1 & 2, Road No. 12, Banjara Hills, Hyderabad – 500034.

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… Appellant

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-Vs-

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V. Ravi Kumar, 21, Belmont, Lodha Estate, HPHB Colony, Hyderabad – 500072.

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… Respondent

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For the appellants : Mr. Dipanjan Dutta, ld. Advocate Mrs. Subhojit Chowdhury, ld. Advocate

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For the respondents: Mr. Nemani Srivas, Learned Advocate

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THE APPELLATE TRIBUNAL :

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Instant appeal has arisen against the order dated 05.07.2023 passed by learned DRT-II, Hyderabad in I.A. No. 885

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of 2023 arising out of S.A. No. 425 of 2019 whereby I.A. was disposed of with the direction to the respondent bank to charge simple interest at the rate of 10 per cent on reduced balance. In case subsequent recoveries made, from the date of filing S.A. i.e. 30.12.2019 till realization of dues in full, based on such calculation of dues towards principal and interest, the respondent bank shall intimate to the petitioner and also under intimation to DRT, the total amount due, within a week from the date of the order, thereafter petitioner shall pay the entire amount within 30

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days. In case of non-compliance the relief granted shall automatically stand cancelled.

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Feeling aggrieved by the reduced rate of interest from 13.5% to 10% per annum, the appellant bank preferred the appeal.

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As far as facts of the matter are concerned, S.A. No. 425 of 2019 was filed by the SARFAESI applicant (respondent in appeal) challenging the demand notice dated 04.10.2016 issued u/s 13(2) of the SARFAESI Act, 2002. Notice u/s 13(4) of the Act was also issued and possession was taken by the bank. SARFAESI applicant was ready to make deposit of entire amount due to the bank, but with the request to reduce the rate of interest, which was not agreed to by the bank. Respondent prefer the I.A. No. 885 of 2023 pending S.A. proceeding before the learned DRT. This I.A. was allowed by the learned DRT as observed above.

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Learned counsel for the appellant bank would submit that DRT has not recorded any reason while reducing the rate of interest from 13.5% to 10% per annum rather the contentions of the borrower were noted down.

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Learned counsel for the respondent would submit that learned DRT has jurisdiction to reduce the rate of interest. Learned DRT has rightly placed reliance upon the judgement of Hon’ble Madhya Pradesh High Court, Indore Bench, in State

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Bank of India Vs. Patwa Foundation Trust [WP No. 12483 of 2013 – decided on 04.12.2013]. SLP filed against the judgement was also dismissed by the Hon’ble Apex Court. It is further submitted that Hon’ble Apex Court in C.K. Sasankan Vs. Dhanalakshmi Bank Ltd. [AIR 2009 SC 3171] has held that discretionary power lies with the DRT to reduce the rate of interest. Accordingly, learned DRT has rightly reduced the rate of interest to 10% per annum. Although respondent sought 6% interest in the I.A., they have not challenged the impugned order. 6. As far as jurisdiction of the DRT to reduce the rate of interest is concerned, it was held by the Hon’ble Madhya Pradesh High Court in Patwa Foundation Trust case (supra) after considering the case of C.K. Sasankan (supra) in Para no. 8 and 9 as under :

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The quantum and rate of interest which the appellant in the present case is entitled to would be in accordance with the provisions of Section 34 of the Code. According to the provisions of Section 34 of the Code interest is to be awarded at a reasonable rate and on the principal amount. It is needless to point out that although the amount of interest from the date of filing of the suit till the date of the decree and thereafter till realisation is in the discretion of the court as is confirmed by the use of the word `may' but such discretion has to be exercised by the court properly, reasonably and on sound legal principles and not arbitrarily and while doing so the court is also to consider the parameter, scope and ambit of Section 34 of Code.9. Considering the aforesaid aspect of the case since the Trust is running a school and the loan was applied for the purpose of expanding the educational facilities to the children of the locality therefore, it will be appropriate to direct the appellant to pay 10% simple of rate of interest from the date the S.A. was filed till full liquidation of the dues.

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Considering the facts and circumstances of the present case, we find that the rate of interest as awarded for pendente lite and future interest is exorbitant and thus we direct that pendente lite and future interest at the rate of 9% shall be paid which is found to be just, proper and reasonable.

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Hence, the jurisdiction of the DRT cannot be disputed. However, it was incumbent upon the learned DRT to record the reason for reducing the rate of interest. No doubt, the objects and reasons of the SARFAESI Act, 2002 as well as the Recovery of Debts and Bankruptcy Act, 1993 reveal that the purpose of enacting the Act was to expeditious recovery of loan, which is public money. But at the same time banks are also lending the amount and they are entitled for interest on the loan. In the present case, no ground was mentioned by the learned DRT as to why the rate of interest was being reduced from 13.15% to 10% on reducing balance, while only 30 days’ time was granted to make payment by the respondent. The Patwa Foundation Trust (supra) was the case of educational institution wherein considering the status of the petitioner rate of interest was reduced by the Hon’ble High Court. But in the present case was loan was granted for commercial purpose.

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In the I.A. filed by the respondent before learned DRT it is stated that Rs.3,43,30,750/- was deposited by the respondent on different dates from 04.11.2016 to 22.01.2020. No other ground for reducing the rate of interest is taken in the application moved before the learned DRT. No doubt, the deposits made by the respondent should be honoured and he should be entitled for accrued interest over those amount, but as far as reducing the rate of interest is concerned, since no ground is taken while disposing of the I.A., I do not find any reason as to how and why

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learned DRT reduced the rate of interest, although the bank would not and should not be entitled for charging any penal interest from the respondent when respondent is ready to make the payment.

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As far as reduction of rate of interest is concerned, it is settled legal principle of law that an order should always be a reasoned order. Reasoned order means that the plea taken by the applicant in his petition should be considered by the Tribunal and reasons thereof should also be recorded so that transparency can be maintained. Since in this matter no ground is taken except that the respondent has approached the bank to make payment and the bank was not accepting the same and charging penal interest as stated in Paragraph 05 of the I.A. But that is not enough to reduce the rate of interest. Present case is squarely distinguishable to the fact of the Patwa Foundation Trust case (supra) as that was a case filed by the education institution, but in the present case no such ground is taken, even the purpose of loan was for commercial. In such circumstances, I am not inclined to accept the impugned order passed by the learned DRT with the rider that bank will not charge any penal interest from the respondent. Further, the deposit made by the respondent after issuance of the notice u/s. 13(2) of the Act should also be considered and interest should only be charged on reducing balance after adjustment of the deposit made by the respondent.

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Accordingly, impugned order cannot sustain and is liable to be set aside. Appeal is liable to be allowed with the observation made in the body of the judgement. Further, if respondent is agreeable to deposit the amount, then bank should provide him a statement of account within a period of 15 days from the date of agreement by the respondent as per the direction made in the body of the judgement and if respondent is willing to make the deposit, he may do so within 30 days from the date of receipt of the statement of account from the bank.

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