Allowed

Indian Overseas Bank v. M/s Sri Ayyappa Enterprises

DRT19 May 2023TA/371/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed an application for recovery of a business loan default. The court found the bank's proof unchallenged and issued a recovery certificate allowing realization of the principal sum, reduced interest, and sale of secured assets. The applicants are permitted to deduct amounts received during pendency.

What did the court decide?

Allowed the application; directed issuance of Recovery Certificate for realization of Rs.36,37,506.76 plus 12% p.a. interest and sale of secured assets.

Indian Overseas Bank versus M/s Sri Ayyappa… — Contract and Commercial Disputes | DRT (2023)

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BEFORE THE DEBTS RECOVERY TRIBUNAL –II AT CHENNAI

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Dated this 19^th day of May, 2023

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PRESENT: SHRI T. RAJESH PRESIDING OFFICER

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TA No.371 of 2022

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(Originally filed before DRT-I Chennai as OA No.215 of 2020 and thereafter transferred to this Tribunal and renumbered as TA No.371 of 2022)

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Indian Overseas Bank Koyambedu Branch Represented by its Authorised Signatory New No.21/ Old No.8, Kaliamman Koil Street Koyambedu, Chennai – 600 097 …Applicant

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Versus

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M/s Sri Ayyappa Enterprises Rep. by its Proprietor No.700, MIG IInd Main Road TNHB Colony, Velachery Chennai – 600 042

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Mr. R. Venkatesan

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S/o Raman No.2/67, Vannanthurai 8^th Street

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Perumbakkam, Chennai – 600 100 …Defendants

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Counsel for the Applicant Bank : M/s C. Sangamithirai Counsel for Defendants : Ex-parte

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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

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Debts and Bankruptcy Act, 1993 against the defendants for recovery of an aggregate sum of Rs.36,37,506.76p with further interest at the rate of 12.45% per annum with monthly rests from the date of the OA till the date of realization in

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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 “Business Loan” availed by the defendants from the applicant.

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It is the case of the applicant that the 1^st defendant is a Proprietorship firm represented by its Proprietor Mrs. V. Kanagapriya and the 2^nd defendant is the guarantor to the loan transaction. It is also the case of the applicant that the 1^st defendant approached the applicant bank for grant of “Business Loan” by request dated 7.10.2014 and considering the said request the applicant vide its sanction dated 10.10.2014 sanctioned business loan of Rs.20 lakhs to the 1^st defendant. It is stated that the 1^st defendant to secure the said facility executed Agreement for Term Loan and hypothecation on 10.10.2014. It is stated that the 2^nd defendant executed guarantee agreement on 10.10.2014 thereby guaranteeing due repayment of the credit facility availed by the 1^st defendant.

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It is also the case of the applicant that the 2^nd defendant deposited the title deeds of his property at No.9, Thalambur Village, Thirupporur Taluk, Kancheepuram District with the applicant bank with an intention create equitable mortgage over the same and confirmed the same by letter dated 9.10.2014 and also executed Memorandum of Deposit of Title deeds dated 7.11.2014 registered as Doc. No.16320/2014 on the file of SOR, Thirupporur.

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It is stated that the defendants having availed the credit facility defaulted in repayments and failed to regularize the loan account despite repeated demands

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and also failed to comply with the terms and conditions of sanction and therefore the loan account was classified the case a NPA on 30.06.2016. It is also stated that as the defendants did not come forward to clear the outstanding dues despite repeated demands, the applicant issued a demand notice on 27.12.2016 calling upon the defendants to clear the outstanding dues but in vain. It is stated that though the defendants did not come forward to clear the outstanding dues, they executed revival letter on 15.03.2017.

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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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Summons were taken out to the defendants and the same were returned unserved with endorsement “Left” and hence were served with notice by way of substituted service by causing paper publication. As there was no representation on behalf of the defendants on 27.06.2022 they were called absent and set exparte on that day. Applicant Bank filed Proof Affidavit along with 14 documents, which were marked as Ex. A-1 to A-14 on 27.03.2023.The Ld. Counsel for Applicant Bank made his submissions on 19.04.2023 and thereafter the matter stood till this date for passing final orders.

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The following issues arise for consideration in the matter: -

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(a) Whether the applicant had succeeded in proving the liability of the defendants?

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(b) What order as to cost of the proceedings need be passed?

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These issues are considered together.

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Heard the Ld. Counsel for the applicant, perused the OA averments and the record placed before the Tribunal.

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The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-14 along with the proof affidavit. Exhibit A-1 is the request letter of the 1^st defendant dated 07.10.2014 for Working Capital Limit of Rs.20 lakhs. Exhibit A-2 is proposal for advances below Rs.50 lakhs dated 24.09.2014 by applicant bank. Exhibit A-3 is Credit Sanction Advice dated 10.10.2014 and terms and condition issued by the applicant bank. Exhibit A-4 is the Demand Promissory Note for a sum of Rs.20 lakhs executed by 1^st defendant. Exhibit A-5 is the Agreement of Term Loan and Hypothecation dated 10.10.2014 executed by the 1^st defendant. Exhibit A-6 is the Guarantee for cash credit dated 10.10.2014 executed by the 2^nd defendant. Exhibit A-7 is the sale deed dated 14.03.2012 executed by Ambikapathy in favour of 2^nd defendant registered as Doc. No.5636/2012, SRO, Tirupporur. Exhibit A-8 is the Memorandum of Deposit of Title deeds dated 7.11.2014 executed by the 2^nd defendant registered as Doc., No.16320/2014, SRO, Tirupporur. Exhibit A-9 is the letter dated

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9.10.2014 confirming the creation of equitable mortgage by 2^nd defendant. Exhibit A-10 is the Assets and Liability statement of 2^nd defendant. Exhibit A-11 is the statement of accounts in respect of the loan account. Exhibit A-12 is the revival letter dated 15.3.2017 executed by the 1^st defendant. Exhibit A-13 is the valuation report dated 26.8.2014. Exhibit A-14 is the demand notice dated 27.12.2016 issued by the applicant.

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Exhibit A-1 evidences that the 1^st defendant by request letter dated 7.10.2014 approached the applicant bank for sanction of business loan (Working Capital Limit) of Rs.20 lakhs. Exhibit A-2 and A-3 evidences that the applicant based on proposal dated 24.9.2014 for Rs.50 lakhs had sanctioned the same by Credit Sanction Advice dated 10.10.2014. Exhibit A-4 and A-5 evidence that the 1^st defendant executed necessary loan documents on 10.10.2014 in favour of applicant bank. Exhibit A-6 evidences that the 2^nd defendant executed guarantee thereby guaranteeing the credit facility availed by the 1^st defendant. Exhibit A-7 to A-10 evidences that the secured asset belonged to the 2^nd defendant and he deposited the title deeds of the property with the applicant and confirmed the same by letter dated 9.10.2014 and created equitable mortgage over the same in favour of applicant by executing Memorandum of Deposit of Title deeds dated 7.11.2014 registered as Doc. No.16320/2014, SRO, Tirupporur. Exhibit A-11, the statement of accounts in respect of the loan account produced and certified under the Banker’s Book Evidence Act, clearly indicates that the amount claimed by the applicant is due from the defendants. It is clear from the statement of accounts that penal interest is not capitalized. Exhibit A-12 evidences that the 1^st

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defendant revived the loan by executing revival letter dated 15.03.2017. Exhbit A-13 evidences the valuation of the property. Exhibit A-14 evidences that the defendants defaulted in repayment and hence the applicant recalled the loan advising the defendants to clear the outstanding dues.

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The proof affidavit of the applicant bank remained unchallenged and unrebutted. Therefore, on careful consideration of proof affidavit along with Exhibits filed on behalf of the applicant bank, besides the material placed before the Tribunal, the Tribunal is satisfied that the applicant bank has successfully proved the OA claim against the defendants. Point is answered accordingly.

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In view of the foregoing, it is clearly evident that the application filed by the applicant bank is well within the period of limitation and this Tribunal possesses the territorial and pecuniary jurisdiction to entertain this OA.

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In view of the fact that the instant loan are availed by the defendants for the business and also that the applicant had calculated and claimed interest at contractual rates, this Tribunal is of the view that the pendent lite interest can be awarded at reduced rates and therefore proceeds to award interest at the rate of 12% per annum (simple).

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In view of the afore mentioned discussions, the only conclusion this Tribunal can draw is that the applicant had clearly proved the disbursement of the loan, which the applicant is entitled to realize. Hence, OA is disposed off in the following manner: -

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(a) TA No.371 of 2022 stands allowed.

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(b) Applicant is permitted to realize a sum of Rs.36,37,506.76p -with further interest at the rate of 12% per annum (simple) from the date of filing of the application till date of realization from the defendants jointly and severally, after deducting all the amounts received by them during the pendency of OA, and also by selling the secured asset, if any, and other assets of the defendants.

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(c) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant Bank, the defendants 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 19^th day of May, 2023)

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

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Indian Overseas Bank v. M/s Sri Ayyappa Enterprises

Case brief

What is this about?

What did the court decide?

Indian Overseas Bank v. M/s Sri Ayyappa Enterprises

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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