Allowed

Union Bank of India v. Ms Sree Lakshmi Engineering Co. and Ors.

DRAT29 Jan 2025REGULAR APPEAL/88/2019

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal allowed the appeal against an order that reduced the contractual interest rate. The court held that without material evidence of flood damage or insurance claims, the interest could not be reduced, and directed interest to be paid at the contractual commercial rates.

What did the court decide?

The impugned order is set aside; interest modified to be charged at 10.90% p.a. for term loan and 10.50% p.a. for OD until 17.12.2018, and 6% p.a. thereafter.

Union Bank of India versus Ms Sree Lakshmi Engineering Co… — Banking and Recovery | DRAT (2025)

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 29^th day of January, 2025

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PRESENT: HON’BLE MR. JUSTICE G. CHANDRASEKHARAN CHAIRPERSON

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RA 88/2019

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(arising out of OA 347/2017 on the file of DRT-II, Chennai)

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Between

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Union Bank of India Whites Road Branch, Rep. by its AGM, No.38 & 39, Whites Road, Royapettah, Chennai 600 014.

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…..Appellant Bank

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And

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1. M/s Sree Lakshmi Engineering Company, Rep. by its Partners, Plot No.118, R.R. Nagar, 4^th Cross Street, Ayyappanthangal, Chennai 600 056.

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2. Mr. R. Krishnamurthy, S/o Ramachandran, No.15/24, Yogambal Street, T. Nagar, Chennai 600 017.

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3. Mr. V. Satheesh, S/o Venugopal, Plot No.118, R.R. Nagar, 4^th Cross Street, Ayyappanthangal, Chennai 600 056.

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4. Mr. R. Naveen Kumar, S/o M. Rajkumar, AP 1738, 102^nd Street, 14^th Sector, K.K. Nagar, Chennai 600 078.

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5. Mr. S. Singaravelu, S/o Sundra Vadhanam, F3, Salma Flats, No.47, Chakrapani Street, Chennai 600 053.

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…..Respondents

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Counsel for Appellant Bank : M/s A. Arun Babu Counsel for R1, R2 and R5 : M/s G. Peranban & Co. Counsel for R3 : Shri G. Sanjeevi Counsel for R4 : None

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ORDER

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This appeal is filed under Section 20 of RDDB & FI Act challenging the order dated 17.12.2018 passed in OA 347/2017 on the file of DRT-II, Chennai mainly the reduction of contractual rate of interest to 6% p.a. (simple) from the date of OA till the date of realization.

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Ld. Counsel for the appellant bank submitted that the nature of loan sanctioned in favour of first respondent firm represented by its partners, is commercial. The contractual rate of interest is 10.90% p.a. in respect of Term Loan Facility of Rs.13,78,074/- and 10.50% p.a., in respect of Overdraft Facility of Rs.22,17,897.67p. It is further submitted that first respondent was sanctioned a total sum of Rs.35,95,971.67p comprising of Rs.13,78,074/towards Term Loan with interest at 10.90% p.a. and Rs.22,17,897.67p towards Overdraft Facility with interest at 10.50% p.a. Without any justification, this interest rate was reduced to 6% per annum (simple) from the date of application till the date of realization. It is further submitted that the reason for reduction of rate of interest as per paragraph 12 of the order is that defendants sought insurance claim from the applicant bank and also movables of defendants were damaged in December 2015 flood.

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It is further submitted by Ld. Counsel for appellant bank that there is no material produced to show that movables of the defendants were damaged in December, 2015 flood and they were seeking insurance claim, therefore, reduction of interest without any legal basis cannot be sustained.

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Ld. Counsel for R3 submitted that OA was dismissed against R3 and therefore

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R3 has no grievance.

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I have considered the rival contentions and perused the record.

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Admittedly, the facts are that the loan sanctioned in favour of first respondent firm is a commercial loan and rate of interest for term loan was 10.90% p.a. and for OD facility was 10.50 p.a. In a commercial transaction, it is no doubt the bank is entitled to claim commercial rate of interest. It is seen that there is no material produced in support of the finding of the Ld. Presiding Officer that defendants sought insurance claim from the bank and their movables were damaged in 2015 flood. In the said circumstances, reduction of interest to 6% p.a.(simple) from the date of OA till the date of realization is not proper and legal.

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In that view of the matter, the said part of the order alone is set aside and it

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is modified as follows:

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“Appellant bank is entitled to claim contractual rate of interest i.e., at 10.90% p.a. for Term Loan Facility of Rs.13,78,074/- and at 10.50% p.a.

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for Overdraft Facility of Rs.22,17,897.67p from the date of application till the date of the order i.e., 17.12.2018 and at 6% per annum (simple) for

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both loans from the date of order till the date of realization. “

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In the result, Appeal is disposed of, accordingly. Parties are directed to bear

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their own costs.

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Pending IAs, if any, stand closed.

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[Dictated to Steno(SN), transcribed by him, corrected, signed and pronounced by me in open court, this 29^th Day of January, 2025)

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Sd/ - (JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON

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Union Bank of India v. Ms Sree Lakshmi Engineering Co. and Ors.

Case brief

What is this about?

What did the court decide?

Union Bank of India v. Ms Sree Lakshmi Engineering Co. and Ors.

Case brief

What is this about?

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What the court decided

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