Partly allowed

Ulhas Shivajirao Gapat v. Osmanabad Janata Sahakari Bank Ltd.

DRT27 Sept 2022SA/317/2022

Case brief

AI extract

What is this about?

An applicant seeking recovery of penal interest claimed to have been illegally levied without proper demand in the Section 13(2) notice. The Tribunal held that penal interest not specifically claimed in the notice cannot be recovered, though simple interest at 14% is owed.

What did the court decide?

Decision to recover approximately ₹9,62,471 as penal interest was declined; applicant directed to pay balance dues based on 14% simple interest.

Ulhas Shivajirao Gapat versus Osmanabad Janata… — Contract and Commercial Disputes | DRT (2022)

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Presented on: 04.04.2022 Registered on: 12.04.2022 Decided on: 27.09.2022 Duration: Y M D 00 05 23

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IN THE DEBTS RECOVERY TRIBUNAL, AT AURANGABAD

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SECURITIZATION APPLICATION No.317/2022

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Ulhas Shivajirao Gapat , Proprietor of Yedeshwari Stone Metals, Age: 48 years, Occ: Business, R/0: 24/1721, Shivtej, DIC Road, Osmanabad 413501.

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… Applicant

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Versus

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The Osmanabad Janta Sahakari Bank Ltd., Osmanabad, Having its head office at Solapur Road, Osmanabad, Through its Chairman PIN :- 43501

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The Osmanabad Janta Sahakari Bank Ltd. Osmanabad Through its Chief Executive officer PIN- 413501.

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… Respondents

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APPEARANCE For the Applicant Mr. S.V.Adwant - Advocate For Respondent Nos.1 & 2 bank Mr. S.B.Choudhari – Advocate

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^{Shri Vimal Gupta} Presiding Officer

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JUDGEMENT PRONOUNCED ON : 27.09.2022

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JUDGMENT

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This is an application under sub-section (1) of Section 17 of The Securitization and Reconstruction of Financial

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[APK] (SA No.317/2022) Page 1 of 19

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Assets and Enforcement of Security Interest Act, 2002 (for short “the 2002 Act”) and the Security Interest (Enforcement) Rules (for short “the said Rules”).

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The factual matrix of the case is as under:-

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(i) The applicant submits that, the applicant has availed a Cash Credit facility of Rs.150 lacs by executing the necessary documents in favour of the bank on 26^th February, 2019.

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(ii) The sanction letter issued by the respondent No.1 is an offer, which is accepted by the applicant. The respondents are under obligation to follow the terms of the sanction letter, which is a contract, and have no right to alter, modify, change, substitute, add any of the terms in it, till a fresh consent and concurrence for the changed terms is given by the applicant.

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(iii) The applicant submits that, the respondent bank has not maintained any transparency in charging, levying and recovering the amount under the head of 'interest' and other heads, thus the claim of the bank is preposterous. It is further submitted that the respondents have not maintained the loan account properly in due course of business, as per the

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[APK] (SA No.317/2022) Page 2 of 19

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directions issued by the Reserve Bank of India and unauthorized debits to his loan accounts and charged interest on the said debits as well.

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(iv) The applicant submits that, the respondent No.1 has classified the loan account of the applicant as NPA and has issued the demand notice on 18^th October, 2019 for Rs.1,55,45,245/-, however the said notice is not served on the applicant. It is submitted that the authorized officer of the bank has issued a letter on 4^th January, 2022, intimating the applicant that he would take possession of the properties of the applicant on the very date.

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(v) The applicant submits that, on 7^th March, 2022, the applicant has given a letter to the respondents that he has paid Rs.1,65,00,000/- and has requested to waive penal interest, other charges and apply simple interest at the contractual rate. The respondent No.1 has on 14^th March, 2022, informed the applicant that the bank will not consider the request and he will have to repay the entire amount.

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(vi) The applicant submits that, on 17^th March, 2022, the respondent No.1 bank has issued a letter to the applicant informing that as his loan account has

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been classified as NPA and further without complying with the statutory obligations the respondents have arrogated to themselves, the powers which are not vested in them. Moreover, the respondents have failed to register the alleged charge created over the property of the applicant with the Central Registry under section 22 of the Securitisation Act.

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(vii) The applicant submits that, if a manner of doing a particular act is prescribed under any special statute, the act must be done in that manner or not at all and all other methods of performance are necessarily forbidden. The applicant relied on Taylor V/s Taylor' [1875] 1 Ch.D 426, which is followed in plethora of decisions thereafter. Tested on this anvil, it is urged to hold that the recent threats by the respondents to take possession of the properties of the applicant, are illegal.

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(viii) The applicant submits that, whenever any action of the respondents is in violation of the provisions of the Securitisation Act or the action is constitutionally illegal, the respondents cannot claim any sanctity in law and there is no obligation on the part of the law court to sanctify the illegal acts of the

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respondents, therefore the indulgence of this Hon'ble Tribunal is solicited in the given situation and circumstances.

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(ix) The applicant submits that to consider the observations of the Hon'ble High Court, bench at Nagpur, in L.P.A.No.131/2003, decided on 17^th June, 2003, which read thus - there is no presumption in law that the bank documents and the bank officers are always truthful and the citizens or the borrowers are always false or liars. The tribunals must change such presumptive approach in favour of the banks and financial institutions, which are also manned by the frail human beings. There is nothing sacrosanct about them and their documents which are the subject to the law of evidence."

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(x) The applicant submits that, on 14^th July, 2011, the bank has advanced educational loan of Rs.3,50,00,000/- to Shri Swami Samarth BUSSK Mandal, Osmanabad. The bank has taken the decision to settle the loan account of the said borrower, thereby granting settlement discount of Rs.3.82.65.951/- and the status of the account dated 5^th June, 2021, shows Nil balance. The applicant

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further submits that the applicant is ready to pay the amount after granting the settlement discount as is extended to various borrowers/ account holders, by the respondents.

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(xi) The applicant submits that, the respondents have acted arbitrarily, unreasonably and without regard to the relevant considerations and the statutory requirements, rendering the claim of the respondents ultra vires. The respondents are misusing their dominant position and are trying to corner the applicant, when he has repaid more than 95% of the amount of debt raised, as per the loan ledger and is not liable to pay any amount under the heads of compounded interest and penal charges, as claimed by the respondents.

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(xii) The applicant submits that, while advancing the loan, the respondents have put onerous conditions of creating mortgage over 2 properties of the applicant worth running in crores and are thus depriving the applicant from his properties. Furthermore, the mother of the applicant is neither a borrower, nor a guarantor or mortgagor, a charge of the bank has been created over her property.

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[APK] (SA No.317/2022) Page 6 of 19

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(xiii) The applicant relied upon the judgment passed by the Hon'ble Supreme Court in the matter of Sultan Sadik V/S Sanjayraj Subba, reported in AIR 2004 SC Page 1377 , observed that the law courts cannot become a silent spectator to such an illegality and it becomes the solemn duty of the law court to deal with such respondents.

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(xiv)The applicant humbly prays to take cognizance of the illegalities and irregularities committed by the respondents while exercising their powers under the special statute as such illegality goes to the very root of the matter, thereby vitiating the entire process adopted by the respondents under Section 13 of the said Act, which action deserves to be set aside.

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By the present Securitization Application, the applicant has prayed for the following reliefs:

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(i) The Securitisation Application filed under section 17 of the Securitisation and Reconstruction of financial Assets and Enforcement of security interest, 2002, by the Applicant against the measures sought to be taken under section 13(4) by respondents by taking possession of the properties of the applicant under the pre-possession notice dated 4^th January, 2022 and

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the oral threat given by the officers of the bank on 17^th March, 2022, when they issued the letter filed at Exh-D, be allowed.

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(ii) It be held and declared that the demand notice dated 18^th October, 2019 and the notices dated 4^th January, 2022, 14^th March, 2022 and 17^th March, 2022, are illegal for want of statutory compliances under the Act of 2002 and the Rules made thereunder.

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(iii) The illegal charge created by the respondent No.1 bank over the property of the mother of the applicant, be directed to be raised.

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(iv) Costs of the Application be awarded.

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(v) Any other equitable relief, to which the applicant is found to be entitled in the circumstances of the case be granted and oblige.

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The respondent bank appeared in the matter and filed it’s written statement at Exhibit-D and thereafter additional say at Exhibit 05 and by denying all the contentions and lastly prayed to reject the securitisation application on the following grounds.

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(i) The respondent bank submits that the Application under reply is filed by the applicant with an ulterior motive to pressurize the Respondent Bank and to

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[APK] (SA No.317/2022) Page 8 of 19

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cause obstruction in the legal and valid action of the Respondent Bank for speedy recovery of its legal dues from the defaulter borrower. The procedure adopted by the Respondent Bank is legal, valid and enforceable under law. The Applicants only wants to make the hurdle in the recovery proceeding and to prolong the same.

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(ii) The respondent bank submits that the Applicant is taking shelter of the dispute between Management and Employee. The Demand notice was issued to the applicant on 10^th February, 2019 and same was served on the Applicant. The Applicant was not depositing the amount as per the demand notice the Respondent Bank has no any other option than to further proceed as per rules.

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(iii) The respondent bank submits that the bank has advanced educational loan to one Swami Saarth Mandal in 2011 and same was declared NPA long Back. It was very difficult to recover the loan and hence the Management Decided to give some discount to that particular account it does not mean that the Applicant is required to be given same treatment. The policy decision taken by the management cannot be taken as parity. The

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[APK] (SA No.317/2022) Page 9 of 19

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representation given by the Applicant was discussed in the meeting of directors and as the applicant is willful defaulter the Management has decided not to give any concession to him. The decision of the Management was promptly communicated to the Applicant.

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(iv) The respondent bank submits that the applicant without giving any evidence making false allegations against the Respondent Bank. It is very strange allegations made about the charge over the property of the Applicant’s mother are not within the knowledge of the Respondent Bank, the Applicant may kindly be directed to produce the evidence of the same.

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(v) The respondent bank submits that the application filed by the Applicants is based on the assumptions and presumptions there is no any legal force in the Application. The Applicant is willful defaulter and he have utilized Rs.1,40,00,000/- for the MAVP Project Ltd. and not for the purpose for which same is obtained.

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(vi) The respondent bank submits that the main ground raised by the Applicant is about the penal interest.

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[APK] (SA No.317/2022) Page 10 of 19

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The Applicant borrowed the loan from the Respondent Bank in the month of February, 2019 by way of Cash Credit facility. After disbursement the Applicant deposited an amount of Rs.1,80,000/- on 29^th June, 2019 & Rs.1,20,000/- on 31^st December, 2019 and beside this there is no any transaction in the account of the Applicant till the intimation to take possession was issued to the Applicant.

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(vii) The respondent bank submits that when the Respondent Bank was intended to take possession of the secured assets, the Applicant deposited an Amount of Rs. 1,65,00,000/- on 02^nd March, 2022 and Rs. 35,50,000/ on 19^th March, 2022 shows that the Applicant is having capacity to repay the loan however with an ill intention to avoid the liability he is not repaying the entire amount.

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(viii) The respondent bank submits that as per the loan agreement the penal interest is to be charged @ 3% p.a., the account declared as NPA on 30^th September, 2019, the penal interest is charged from 01^st February, 2020 As on 31^st July, 2022 the total amount under the head of penal interest is Rs.8,28,559/- and the total outstanding amount as on

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[APK] (SA No.317/2022) Page 11 of 19

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31^st July, 2022 is Rs.18,25,089/-.

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The applicant has filed counter affidavit at Exhibit -06 in compliance of order dated 09^th September, 2022 and submits as under:

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(i) The applicant submits that after having gone through the documents filed by the respondent No.1, it is sensed and realized that the officers of the bank have gone to the extent of manipulating the facts and preparing forged documents and seeking to rely on such documents in a judicial proceeding. The postal acknowledgement receipts placed on record bearing outward Nos.1815, 1816 and 1817 dated 18^th October, 2019, do not bear the signatures of the addressees named therein.

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(ii) The applicant submits that the signatures appearing on the Kararnama if compared with the acknowledgement receipts, it would be vivid to the naked eye that the theory propounded by the respondents, is absolutely false and fake. The inter letter, inter word and inter line spacing of the two signatures are distinct and different, the size and proportion of the letters is also different and the rhythm and flow of writing is different as well, thus

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[APK] (SA No.317/2022) Page 12 of 19

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the claim of the respondents to have served the notices to the applicant and other addressees, is a forged claim and deserves no consideration. The acknowledgement receipts produced by the respondents are bogus and fabricated documents

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(iii) The applicant submits that the officials of the respondent bank are misusing their statutory powers under the Securitization Act by preparing false documents to cover up their misdeeds and to entangle the applicant and his alleged guarantors in false cases, which is absolutely despicable and beyond constitutional and statutory tolerance.

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(iv) The applicants rely upon the judgment passed by the Hon'ble Supreme Court in the matter of S.P. Chengalvaraya Naidu V/s Jagannath reported in (1994) 1 SCC 1 .

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(v) The applicant submits that, the applicant is ready to deposit the amount after excluding the amounts of penal interest, unauthorized debts and compounded interest and lastly prayed to allow the securitisation application.

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Heard the matter at length by all the parties. I have gone through the record and contents therein and observed as

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[APK] (SA No.317/2022) Page 13 of 19

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follows:

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(i) The applicants case is that the demand notice was issued apparently for Rs.1,55,45,245/- aggregating including interest of the liability as on 30^th November, 2019. Apparently after issuance of the notice under section 13(2) an amount of Rs.1,20,00,000/- were paid in December, 2019 and thereafter on 2^nd March, 2022 an amount of Rs.1,65,00,000/- and on 19^th March, 2022 an amount of Rs.35,50,000/- were deposited by the applicants with the respondent bank so as against the demand notice of Rs.1,55,45,245/total amount of Rs.2,01,70,000/- has been deposited by the applicant.

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(ii) The applicant has placed various documents on record to show that he has never received the notice under section 13(2) against which the respondent bank has placed the acknowledgments and one agreement. According to the applicant the signature on the agreement does not tally with the acknowledgment receipts. The learned counsel for the respondent bank submits that though the signature does not tally but at page no.3 there is a postal stamp. On question to the learned counsel for the respondent bank as to why there is only one

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[APK] (SA No.317/2022) Page 14 of 19

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postal stamp on one account and not for others, there is no answer. Apparently and definitely the signature on that acknowledgment does not match with the signatures on the loan documents.

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(iii) The agreement placed on record shows that the interest was be charged @ 14% p.a. and if we take liability of Rs.1,50,00,000/- then the yearly interest is also Rs.21,00,000/- and from the date of issuance of the notice till the date of the payment, the time comes to 2½ year meaning thereby total interest would be somewhere around Rs.46,00,000/-. By adding that amount, the total liability will come approximately around Rs.2.12 corers. Admittedly an amount of Rs.2,01,70,000/- has been already paid. The entire notice amount of Rs.1,55,45,245/- was already paid.

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(iv) Now the question and dispute is only for the interest. The respondent bank is asking for the interest @ 3% and according to the applicant the said penal interest has not been asked to be paid in the demand notice. The learned counsel for the respondent bank is relying upon the agreement saying that even if the amount is not demanded in the demand notice, it can be claimed on the basis of the agreement. The

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[APK] (SA No.317/2022) Page 15 of 19

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provisions under Order II Rule 2 of the Code of Civil Procedure which stated that Relinquishment of part of claim: Where a plaintiff omits to sue in respect of, or intentionally relinquishes, any portion of his claim he shall not afterwards sue in respect of the portion so omitted or relinquished.

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(v) If the same analogy is applied to the present case, if the bank has not demanded the said amount of penal interest from the applicant herein they are not entitled to get the same. This Tribunal do not wish to go into the averments made in the securitisation application and reply regarding the dispute between the management and the employees because that is not in relation with the cause in hand.

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(vi) The respondent bank has filed the calculations of interest from 01^st October, 2019 to 31^st August, 2022 and they are asking for interest @ 14% p.a. they are asking for Rs.79,65,281/- and 3% penal interest i.e. Rs.9,62,471/-. The applicant is also disputing the advocate fees, ICICI Lombard Insurance charges and expenses for loan recovery aggregate an amount of Rs.10,77,797.20/-.

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(vii) The judgment in the matter of Rammurty Payaralal

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[APK] (SA No.317/2022) Page 16 of 19

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V/s Central Bank of India the Hon’ble Delhi High Court and the judgment in the mater of Arvindkumar Sharma V/s Standard Chartered Bank of Hon’ble Delhi Debts Recovery Appellate Tribunal are placed before me in which it is submitted that this Tribunal has got the power to adjudicate the amount due under section 17 of the Securitisation Act. The learned counsel for the respondent bank do not dispute the powers of the Tribunal to adjudicate the quantum of the amount due.

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(viii) Looking into the overall averments made by both the parties this Tribunal is of the considered view that penal interest charged by the respondent bank cannot be recovered from the applicant, once the specific has not been specifically demanded. The respondent bank had an opportunity to amend the notice issued under section 13(2) but the same was not done and the bank has lost the opportunity.

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(ix) The Securitization Act permits the lenders to modify the notice issued under section 13(2), if any mistake is found. But in this case here it has not been done.

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(x) In this facts and circumstances, the respondent bank is not entitled to recover any penal interest and as

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[APK] (SA No.317/2022) Page 17 of 19

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such the penal interest demanded by the respondent bank approximately an amount of Rs.9,62,471/- is liable to be declined. Though the notices were not in tune with the settled law but since the entire amount under 13(2) notice has been already paid and interest thereon has also been paid, the respondent bank is entitled for interest only @ 14% p.a. simple from the date of demand notice. Accordingly, the applicant shall pay the balance amount to the respondent bank and upon receipt of the same the respondent bank shall release the property within two weeks thereafter and issue no dues certificate.

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(xi) The Tribunal is not touching upon the amount stated in the demand notice. The calculation of interest @ 14% p.a. simple has to be made from the date of demand notice on reducing balance as and when the amounts has been paid. If there is any excess amount the applicant shall be entitled to get back the same.

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In view of the above facts and circumstances and the observations noted herein above, I pass the following order:

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ORDER

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A. Securtisation Application No.317/2022 is allowed with no order as to cost.

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B. The respondent bank is not entitled to recover any penal interest which approximately demanded an amount of Rs.9,62,471/- is hereby declined.

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C. The respondent bank is entitled for interest only @ 14% p.a. simple from the date of demand notice on reducing balance as and when the amounts has been paid. The applicant is directed to pay the balance amount if any to the respondent bank and if there is any excess amount, the applicant shall be entitled to get back the same. The respondent bank is directed to release the property within two weeks after receipt of the payment and issue no dues certificate.

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D. All pending IAs stand disposed off.

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E. All interim orders stand vacated.

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F. File be consigned to record room.

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(Vimal Gupta) Presiding Officer Debts Recovery Tribunal, Aurangabad.

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Order uploaded on official website on 19^th October, 2022

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[APK] (SA No.317/2022) Page 19 of 19

Ulhas Shivajirao Gapat v. Osmanabad Janata Sahakari Bank Ltd.

Case brief

What is this about?

What did the court decide?

Ulhas Shivajirao Gapat v. Osmanabad Janata Sahakari Bank Ltd.

Case brief

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