Allowed

M/s Kotak Mahindra Bank Limited v. M/s. Kfj Gold and Diamonds Private Limited

DRT29 Dec 2023TA/319/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed the bank's application for recovery of a loan defaulting account. The Tribunal found the bank's claim established through unchallenged affidavits and documents, rejecting the defendants' contentions regarding blank signatures and calculation errors. A recovery certificate was directed, accounting for previous realization of collateral.

What did the court decide?

Recovery Certificate issued directing defendants to pay Rs.16.35 crore plus interest at 11.30% p.a. jointly and severally; costs awarded to applicant.

M/s Kotak Mahindra Bank Limited versus M/s. Kfj… — Contract and Commercial Disputes | DRT (2023)

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BEFORE THE DEBTS RECOVERY TRIBUNAL –II AT CHENNAI

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Dated this 29^th day of December, 2023

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PRESENT: SHRI T. RAJESH

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PRESIDING OFFICER

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TA No.319 of 2022

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(Originally filed before DRT-I Chennai as OA No.354 of 2018 and thereafter

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transferred to this Tribunal and renumbered as TA No.319 of 2022)

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M/s KOTAK MAHINDRA BANK LIMITED Registered Office at No.27BKC, C27, G Block Office Bandra Kurla Complex Bandra (E), Mumbai -4000512

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Branch Office at Nungambakkam Represented by its Chief Manager Mr.A.Senthil Kumar At No.402,403, Pantheon Road Egmore , Chennai - 600002

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...Applicant

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Versus

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M/s. KFJ Gold and Diamonds Private Limited, AC/3, 2^nd Avenue, Anna Nagar Chennai 600040

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Mr. Sujith Cherian, New No: 30, Old No: 50, Sterling Road, Nungambakkam, Chennai 600040.

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Mr. Sunil Cherian, New No: 30, Old No: 50, Sterling Road, Nungambakkam, Chennai 600040.

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Mrs. Dhanya Sujith, New No: 30, Old No: 50, Sterling Road, Nungambakkam, Chennai 600040.

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Mrs. Aniamma Valsa Cherian New No: 30, Old No: 50, Sterling Road, Nungambakkam, Chennai 600040 …Defendants

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Counsel for the Applicant Bank : M/s Ananda Gomathy Counsel for Defendant : M/s Aiyar & Dolia

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FINAL ORDER

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This application is filed by the applicant bank under Section 19(1) of Recovery of Debts and Bankruptcy Act, 1993 against the defendants for recovery of a sum of Rs.16,35,40,378.70p with interest at the rate of 11.30% per annum with monthly rests plus penal interest at the rate of 1.70% per annum from the date of filing of the OA till the date of realization in full along with costs of this application and for sale of schedule mentioned properties.

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The subject matter of the case is the “Overdraft Facility” availed by the defendants from the applicant bank.

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It is the case of the applicant that the 1^st Defendant is a Private Limited Company with Defendants 2 to 5 as its Directors and is engaged in the business of running showrooms with Gold, Silver, Diamond & Platinum Jewelry articles. It is also the case of the applicant that the 1^st defendant approached the applicant bank for grant of credit facilities for the purpose of its business and the applicant considering the said request vide Sanction Memorandum dated 22.06.2015 sanctioned Over Draft - Stocks in trade/ Book Debts – Rs.15.00 crores for the purpose of meeting Working Capital Requirements which included a takeover of Rs.9.50 crores from State of Bank India.

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It is also the case of the applicant that having availed the credit facility, the 1^st defendant represented by defendants 2 to 5 executed various loan and security

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documents on 23.06.2015. It is stated that subsequently on 20.03.2017, the applicant bank renewed working capital facility at the existing level of Rs.15.00 crores and the first Defendant Company, represented by Defendants 2 to 5 as Directors, executed the loan and security Documents in favour of the Applicant Bank on 11.06.2017. It is also stated that the defendants 2 to 5 guaranteed the loan facility availed by the 1^st defendant in their individual capacity by executing Guarantee Agreements on 23.06.2015 and 11.06.2017 respectively.

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It is the further case of the applicant that the 5^th defendant deposited the title deeds of her property more fully described in Schedule „B‟ to the OA with the applicant on 10.07.2015 with an intention to create equitable mortgage over the same and confirmed the same by executing Agreement relating to Deposit of Title deeds dated 10.7.2015 and also by Memorandum of Deposit of Title deeds dated 18.1.2006, 7.12.2007, 13.5.2010 and 05.1.2012 registered as Doc. Nos.90 of 2006, 2964 of 2007, 1178 of 2010 and 18 of 2012 respectively.

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It is alsothe case of the applicant that the defendants defaulted in repayments and failed to regularize the loan account despite repeated demands and hence the applicant issued several letters including the Recall Notice dated 11.6.2018 calling upon them to regularize the loan accounts.

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It is further contended that the applicant that the loan account was classified as NPA on 29.5.2018 and the applicant issued the demand notice under Section 13(2) of the SARFAESI Act on 14.7.2018, to which the defendants sent a reply but did not come forward to regularize the loan account.

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It is the case of the applicant that after availing the loan, the defendants were irregular in remitting the loan amount. The efforts of the applicant bank to make the defendants to settle the loan did not yield any result, and hence the applicant approached this Tribunal seeking issuance of a Recovery Certificate allowing recovery of the amount due in the account.

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The defendants filed written statement contending therein that the claim of the applicant is illegal, unsustainable, baseless and exorbitant and that the defendants are not liable to pay the said exorbitant amount. The Recovery Proceedings is neither maintainable in law nor on facts and the application is not in conformity with the mandatory provisions of Section 19 of the RDB Act. The application has been filed with frivolous and fictitious claims and on the basis of illegal, invalid and unenforceable documents. The application is very vague, lacking in particulars, unsupported by documents and is therefore liable to be rejected in limine. It is also contended that claim of the applicant is barred by limitation. The application is liable to be dismissed for suppression of material facts. It is stated that the defendants originally availed Cash Credit Facility of Rs.9 crores from State Bank of India, which was subsequently taken over by ING Vysya Bank with an assurance to enhance the said loan to Rs.15 crores. Though the said bank sanctioned Rs.15 crores, the amount of Rs.5.50 crores was not disbursed in one go and disbursed the same in piece meal and lastly on 17.03.2016, because of which the defendants sustained heavy loss in business which was carried forward in subsequent years. It is also stated that the applicant has classified the account as NPA without taking into account the repayments

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made by the defendants. It is stated that the applicant obtained signatures of the defendants in various printed and blank documents and later on filled the same for the purpose of filing this application. The documents alleged to have been signed on 23.6.2015, 30.06.2015, 11.06.2017, 09.07.2015 and 10.07.2015 are not valid and enforceable in law. It is also stated that various remittances made by the defendants have not been given due credit to and had the said payments were accounted for the account would have regular. The statement of accounts is not proper and supported by valid certificates. The applicant bank has charged usurious interest and against the various guidelines of the RBI. Thus contending the defendants prayed for dismissing the OA.

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The applicant bank filed its proof affidavit along with 9 documents, which are

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marked as Exhibits A-1 to A-38, the details of which are as under: -

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S. No.	Date	Description of Documents	Exhibit Nos.
1.	22.06.2015	Sanction Communication	A1
2.	01.07.2015	Letter to SBI- Take over with acknowledgement	A2
3.	23.06.2015	Board Resolution	A3
4.	23.06.2015	Demand Promissory Note for Rs.15.00 crores	A4
5.	23.06.2015	Demand Promissory Note Take delivery letter	A5
6.	23.06.2015	Deed of General hypothecation	A6
7.	23.06.2015	Facility Agreement	A7
8.	23.06.2015	Company declaration for non-payment of consideration	A8
9.	23.06.2015	Undertaking letter for keep the lease in force	A9
10.	23.06.2015	Undertaking letter not to borrow from other institutions	A10
11.	23.06.2015	Undertaking letter to abide by various terms and conditions	A11

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12.	30.06.2015	Undertaking cum indemnity Bond	A12
13.	20.03.2017	Sanction Letter	A13
14.	11.06.2017	Demand Promissory Note	A14
15.	11.06.2017	Deed of hypothecation	A15
16.	11.06.2017	Master facility Agreement	A16
17.	11.06.2017	Letter of continuing security	A17
18.	11.06.2017	Letter of undertaking against credit facilities	A18
19.	29.06.2017	Sanction communication	A19
20.	11.06.2017	End use undertaking	A20
21.	09.07.2015	Declaration	A21
22.	23.06.2015	Deed of Guarantees	A22
23.	11.06.2017	Personal Guarantee	A23
24.	10.07.2015	Agreement relating to Deposit of title deeds	A24
25.	10.07.2015	Memorandum from Guarantor (Mrs. Valsa Cherian)	A25
26.	11.06.2018	Loan Recall notice	A26
27.	14.07.2018	Demand Notice under sec 13(2)	A27
28.		Reply to Demand Notice	A28
29.	20.12.2005	Certificate of Incorporation KFJ	A29
30.	16.12.2005	Memorandum of Association	A30
31.		Articles of Association	A31
32.	23.03.2017	Board Resolution	A32
33.	29.08.1981	Sale Deed document number 3362 of 1981	A33
34.	18.01.2006	Certified copy of Memorandum of Deposit of title deeds document number 90 of 2006	A34
35.	07.12.2007	Certified copy of Memorandum of Deposit of title deeds document number 2964 of 2007	A35
36.	13.05.2010	Certified copy of Memorandum of Deposit of title deeds document number 1178 of 2010	A36
37.	05.01.2012	Certified copy of Memorandum of Deposit of title deeds document number 18 of 2012	A37

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Statement of Accounts and BBE certificate A38

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The defendants filed their Counter Proof Affidavit reiterating their contentions raised in the Reply Statement, however, did not choose to file any documents in support of their claim.

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Heard the Ld. Counsel for the applicant. There was no representation on behalf of the defendants continuously and hence the Tribunal proceeded to pass order based on the averments in the Reply Statement and Counter Proof Affidavit. Perused the records.

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Having heard the Ld. Counsels for the applicant and after perusing the records, the Tribunal framed the following points for consideration: -

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1. Whether the applicant bank has established its claim against the defendants? If so, for what amount?

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2. Whether the applicant bank is entitled for pendent lite and future interest, if so, at what rate ?

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Point No.1

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Whether the applicant bank has established its claim against the defendants? If so, for what amount?

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The applicant bank in its endeavor to establish its claim against the defendants examined its official as AW1 and got marked exhibits Ex.A-1 to A-38. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-38 strenuously contended that the claim of the applicant stands established, as such, the applicant is entitled for a recovery certificate.

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Ld. Counsel for Applicant Bank would further submit that even as per the Reply Statement filed, the defendant has not denied availing of credit facility, execution of documents and creation of mortgage and as such the said admission is sufficient enough to allow the claim of the applicant. Ld. Counsel would also submit that the amount claimed by the applicant is proper and the applicant has charged interest only at contractual rates and the applicant bank has also produced the statement of accounts duly certified under Bankers‟ Book Evidence Act to substantiate the amount claimed by the applicant. Ld. Counsel would also contend that the contention of the defendants that the applicant obtained the signatures of the defendants in blank unfilled documents and later on filled the same for the purpose of filing this application is a usual ground taken by every defaulting borrower and hence the contention that the said documents are not valid is unsustainable. The Ld. Counsel would also contend that defendants though filed their reply statement and Counter Proof Affidavit they did not choose to file the documents in support of their contention and as such the claim of the applicant stands unrebutted and is sufficient enough to allow the claim of the applicant.

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Here it is to be stated that as per the scheme of adjudication of a claim/counter under the RDB Act, parties shall file their respective affidavits/counter affidavits in support of their claim or counter claim as the case may be and the Tribunal shall on the basis of the affidavits filed along with supporting documents, adjudicate and decide the claim/counter claim. Therefore, in the absence of any supporting documents, the claim of the applicant stands unrebutted. Further, the applicant

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bank has filed the statement of accounts accompanied by certificates under Bankers‟ Book Evidence Act and therefore the claim of the applicants remains unrebutted.

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In so far as the contention of the defendants that the applicant obtained the signatures of the defendants in blank printed documents and later on filled the same for the purpose of filing this application is concerned it is to be stated that this is the usual ground taken by every defaulting borrower. In this connection, it will be pertinent to refer to the judgment of Hon‟ble DRAT, Mumbai in the matter of Sangli Bank Ltd. Vs. Prabha K.Maheshwari and others reported in MANU/DM/0025/2005 held in paragraph 8 that;

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“8. The grant of loan as alleged by the Bank and defendant Nos.6 to 10 having signed a guarantee agreement is an admitted position. Their contention is that on 30^th July, 1992, defendant Nos. 1 to 5 had sent blank letter of lien, demand note for grant of Rs.30 lacs to the Bank, which indeed, appears to be correct. However, it has to be pointed out that settled legal position is that the person who signs blank standard documents takes responsibility for the same and the plea of non est factum is not available to him”

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As regards the contention of the defendants that various remittances made by them have not been given proper credit to and had the same is given credit to the account would not have slipped into NPA is concerned, it is to be stated that the applicant has filed the statement of accounts duly certified under Bankers‟ Book Evidence Act to substantiate their claim, but, the defendants have failed to produce the details of the payments made, which have not been given credit to, so that this Tribunal can go into the issue. Hence this contention of the defendants also fails.

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During the pendency of the TA, the applicant filed a part satisfaction memo stating therein that the Schedule „B‟ property was brought to sale on 25.2.2022 and the

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applicant realized a sum of Rs.8,11,00,000/- and prayed for recording part satisfaction of the TA claim. This Tribunal by its proceedings dated 28.3.2022 recorded part satisfaction of the OA claim.

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Therefore, in the light of the discussion as aforesaid, it is clear that the proof affidavit and the documents filed along with by the applicant remain unchallenged by the defendants. Further, the Tribunal on a careful perusal of the unrebutted Proof Affidavit of AW-1 besides Exhibits A-1 to A-38 is fully satisfied that the applicant has established its claim. This point is answered accordingly.

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Point No.2

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Whether the applicant bank is entitled for pendent lite and future interest, if so, at what rate?

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This Tribunal already held that the applicant bank is entitled for the amount claimed in the OA and Tribunal has awarded contractual rate of interest as claimed by the applicant bank till the date of filing the OA. However, in view of the fact that the defendants did not show their bonafides in preserving the hypotheca, this Tribunal is not inclined to interfere with the interest rates claimed by the applicant. Point No.2 is answered accordingly.

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In view of the afore mentioned discussions, the OA is disposed off in the following manner: -

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(a) TA No.40 of 2023 stands allowed.

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(b) Applicant is permitted to realize an amount of Rs.16,35,40,378.70p with further interest @11.30% per annum with monthly rests from the defendants jointly and severally from the date of filing of OA till realization in full, after deducting all the amounts received and recovered by them during the pendency of OA, and also by selling the hypotheca, if any available and other assets of the defendants.

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(c) A sum of Rs.8,11,00,000/- realized by the applicant by sale of Schedule „B‟ property be given credit to the loan account of the defendants on its respective date.

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(d) It is made clear that the defendants 2 to 5 are personally liable for all such amounts due.

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(d) Applicant is permitted to realize cost of the proceedings and shall file cost memo within 7 days from the date of the order.

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(e) The Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of this final order.

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Communicate a copy of the order to the parties concerned in terms of Section 19(21)(i) of the RDB Act, read with Rule 16 of DRT (Procedure) Rules, 1993.

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(Dictated to PS, transcribed by him, corrected, signed and pronounced by me in Open Court on this the 29^th day of December, 2023)

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(T. RAJESH ) PRESIDING OFFICER DRT-II, CHENNAI

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M/s Kotak Mahindra Bank Limited v. M/s. Kfj Gold and Diamonds Private Limited

Case brief

What is this about?

What did the court decide?

M/s Kotak Mahindra Bank Limited v. M/s. Kfj Gold and Diamonds Private Limited

Case brief

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What did the court decide?

What the court decided

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