Partly allowed

State Bank of India v. Yellamma Motors and seven Ors.

DRAT4 Sept 2025REGULAR APPEAL/39/2014

Case brief

AI extract

What is this about?

The DRAT granted interest at 6% per annum (simple) despite the bank's lapse in seizing hypothecated goods, while denying interest for the appeal pendency period. The court also clarified liability limits for legal heirs.

What did the court decide?

Awarded 6% p.a. simple interest on the claimed sum from OA filing date; denied interest for 546-day appeal delay period.

State Bank of India versus Yellamma Motors and seven Ors. — Banking and Recovery | DRAT (2025)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 04^th of September, 2025

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PRESENT: Hon’ble Mr. Justice G. Chandrasekharan CHAIRPERSON

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RA 39/2014

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(OA No.893/1999 on the file of DRT-I, Bangalore)

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Between

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State Bank of India, Nehru Road, Giri Nagar Branch, P.B.No.8505, No.140, Nehru Road, Giri Nagar, Banshankari, Bangalore – 560 085.

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… Appellant

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And

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M/s. Yellamma Motors No.2/1, 3^rd Cross, Huriyapet, Jayanagar, Bangalore – 560 053.

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G.M.Sekar (Deceased)

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2 (a) Poornima 2(b) Jairath 2(c) Nagarjuna

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All the above are residing at – No.54, 1^st Floor, 12^th Cross, 22^nd Main Road, Raghavendra Layout, Padmanabhanagara, Bangalore – 560 070.

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Chandra No.24, Nanjappa Cross Road, Shanti Nagar, Bangalore – 560 027.

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Muniswamappa (deceased)

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4(a) Lakshminarasamma (deceased) 4 (b) Harish 4 (c) Sekar

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All the above are residing at -

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No.2/1, 3^rd Cross, Huriyapet, Jayanagar, Bangalore – 560 053

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Chayakala,

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Door No. 12/1, Mosque Street, Chickballabur, Karnataka- 562 101

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Shasikala, Door No.11, 1^st Floor, 7^th Cross, Lakshmi Sagar Layout, Mahadevapura, Bengaluru – 560 048.

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Seethalakshmi, No. 2 A, Nanjappa Cross Road, Shanti Nagar, Bangalore – 560 027.

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…. Respondents

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Counsel for Appellant : Mr. O. Padmaprakash Counsel for 2(a) to 2(c) and 4(a) and(b): Mr. Anil Kumar for Mr. S. R. Rajagopal

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ORDER

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This Appeal is filed under Section 20 of RDB Act, 1993, against the order dated 20.02.2009 passed in OA 893/1999 by the Learned Presiding Officer, DRT, Karnataka. This Appeal is mainly filed against the refusal of interest on the amount claimed in OA 893/1999.

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Learned Counsel for Appellant Bank submitted that Appellant filed OA for recovery of a sum of Rs.37,16,460.65p with pendent lite interest at 19.38% per annum compounded quarterly and for sale of schedule properties for recovery of the said amount with interest and costs. The Learned Presiding Officer though accepted the claim of Rs.37,16,460.65p, denied the interest on the ground that Appellant Bank failed to take appropriate action in seizing the hypothecated movables and it clearly discloses lapses on the part of the bank officials. The refusal to grant interest on this ground is not appropriate and legal. Therefore, this Appeal is filed.

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Learned Counsel for Respondents R2 (a) to (c), R4 (a) &

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(b), submitted that the Bank has not produced any documents before the Tribunal to justify the rate of interest claimed on the total amount claimed in the OA. These Respondents are the LRs of deceased Respondents 2 and 4. First Respondent is M/s. Yellamma Motors. No documents have been produced here in this Tribunal also to justify the claim. Not only that, within the period of 15 months i.e. from the date of sanction of loan on 12.08.1998 and till the date of filing of OA, i.e. 03.11.1999, the loan amount of Rs.26 Lakhs swelled into Rs.37,16,460.65p. Only if the interest is calculated at 30% p.a., this increase is possible, and therefore, interest charged is usurious and excessive. The hypothecated goods were not proceeded immediately so as to avoid the loss. In the said circumstances, the denial of interest by Learned Presiding Officer is just and proper.

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In support of his contentions, Learned Counsel for Respondents R2 (a) to (c), R4 (a) & (b), relied on the judgement of Hon’ble Supreme Court in the case of Central

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Bank of India Vs. Ravindra and Ors. reported in (2002) 1 SCC 367, for the proposition as to award of interest on pre suit, pendentelite and subsequent interest. He also relied on the order of this Tribunal in Canara Bank Vs. Arbeit Platz (India) Pvt. Ltd. and Ors. reported in IV(2004) BC 109 , for the proposition that the Tribunals are empowered to reduce the rate of interest pendentelite and future interest by exercising the discretion judiciously.

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Considered the rival submissions and perused the records.

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The perusal of the OA proceedings shows that the first Respondent and its partners availed loan of Rs.26 Lakhs on 12.08.1998. It was pleaded that within a short time i.e. from October, 1998, the borrowers failed to provide stock statement and the account became irregular. The interest rate claimed was 4% above the SBT PLR with minimum of 7% p.a. plus interest tax applicable from time to time, with quarterly rests, and pendentelite and future interest was

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claimed at 19.38%. It is seen from the records summoned

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from the Tribunal below, the statement of account is not available. The statement of account is also not produced here before this Tribunal. The Respondents have not filed any Appeal against the order of determination of debt due. It is only the Bank that has filed the Appeal challenging the denial of interest alone. In so far the submission that the hypothecated goods were not disposed earlier to minimize the loss, the disposal of the hypothecated goods can only be possible after the determination of debt due. During the pendency of OA, it is not possible unless an Application is filed on the ground that the hypothecated goods are liable to be deteriorated during the pendency of the proceedings. Both the parties have not taken any initiative to dispose of the hypothecate goods. Therefore, this issue cannot be considered.

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It is seen from the judgement of the Hon’ble Supreme

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Court referred above that the Courts have the discretion to

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reduce the rate of interest during pendency of litigation and post decree, or may even decline awarding such interest, the discretion shall be exercised fairly, judiciously, and not in an arbitrary or fanciful manner.

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The order of this Tribunal, reported in IV(2004) BC 109, shows that the same discretion is available to the Tribunal, what is required is that the Tribunal has to exercise the discretion judiciously..

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Considering the fact that within 15 months, the amount borrowed Rs.26 Lakhs swelled into Rs.37,16,460.65 p, this Tribunal is of the view that awarding pendentelite and future interest at 6% p.a. (simple) would be just and fair in the facts and circumstances of the case. At the same time, the Appellant Bank is not entitled for interest for the delay period of 546 days in filing the Appeal, before DRAT. Accordingly, the order passed by Learned Presiding Officer, DRT, Bangalore, declining to award of interest is alone set

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aside. The interest is awarded at 6% p.a. (simple) from the

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date of filing of OA till the date of realization.

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In the result, the following order is passed.

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i. The Appeal in RA 39/2014 is partly allowed modifying the order dated 20.02.2009 passed by Learned Presiding Officer, DRT, Bangalore;

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ii. The Appellant Bank is entitled to recover the amount claimed in the OA, i.e. Rs.37,16,460/- with interest at 6% p.a. (simple) from the date of filing of the OA till the date of realisation.

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