Allowed

The Federal Bank Ltd., v. D. Murali

DRT28 Dec 2023TA/692/2023

Case brief

AI extract

What is this about?

The Tribunal allowed the bank’s application for a recovery certificate against two borrowers. The bank claimed dues following default on a cash credit facility secured by pledged agricultural commodities. The Tribunal found the claim established and fixed interest at 10% p.a.

What did the court decide?

Issuance of Recovery Certificate for Rs.57,19,185/- with 10% per annum simple interest from filing till realization.

The Federal Bank Ltd., versus D. Murali — Contract and Commercial Disputes | DRT (2023)

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BEFORE THE DEBTS RECOVERY TRIBUNAL –II AT CHENNAI

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Dated this 28^th day of December, 2023

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PRESENT: SHRI T. RAJESH PRESIDING OFFICER

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TA No.692 of 2023

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(Originally filed before DRT-I Chennai as OA No.414 of 2018 and thereafter Transferred to this Tribunal and renumbered as TA No.692 of 2023)

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The Federal Bank Ltd., Ranipet Branch Rep. by its Manager & Branch Head Ranipet, Vellore District

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…Applicant

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Versus

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D. Murali S/o Mr. Durai No.12/28, Lakshmi Nagar, Esudas Apartment, Polichalur Chennai – 600 074

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Mrs. T. Divya W/o Mr. Raj Kamal No.9, Phase 1A, May Flower Karnabut, Vellore District – 632 519

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M/s National Collateral Management Services Ltd., ***** Having Registered Office at Gayatri Towers 954, Appasaheb Marathe Marg Prabhadevi, Mumbai – 400 025 Represented by its Authorised Signatory …Defendants *3^rd defendant given up Recorded vide proceedings of this Tribunal dated 14.07.2022

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Counsel for the Applicant Bank : M/s P.V. Murlidhar Counsel for Defendants 1 &2 : M/s T.P. Prabakaran

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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’ seeking issuance of a

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Recovery Certificate for an aggregate sum of Rs.57,19,185/- with further interest at the rate of 10.75% per annum with yearly rests from the date of filing of the application till the date of realisation along with costs of the application.

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It is the case of the applicant that the defendants 1 and 2 approached the applicant for grant of Cash Credit Facility to the tune of Rs.50 lakhs against pledging of their Warehouse Agricultural Commodity viz., Red Gram (Toor Dhal Whole) of 1,31,200/- Kgs stored in Rajkamal Godown No.2, No.1, New Road, Lakshmi Nagar, Sathoor Village, Arcot Taluk subject to the Commodity Arrival Report on verification by the 3^rd defendant, which was entrusted with the job of verification of quantity and value of the commodities being received from time to time from defendants 1 and 2 and take custody and security of these commodities as per the Standard Agreement dated 10.07.2013 between the applicant and the 3^rd defendant.

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It is also the case of the applicant that based on the Commodity Arrival Reports dated 30.05.2017 issued by the 3^rd defendant, the applicant sanctioned Cash Credit Facility of Rs.50 lakhs against the warehouse receipts Nos. 698167 and 698158 dated 30.05.2017. It is stated that the defendants 1 and 2 failed to repay the loan facility availed and committed default resulting in the applicant issuing a demand notice dated 18.12.2017 evincing no reply.

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It is the further case of the applicant that the applicant visited the warehouse on 2.5.2018 and found that there were huge shortages of stocks kept in the godown and on the 2^nd inspection of the applicant with Panel Auditor, it was found that

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only few bags contained 40-50 kgs of Red gram and remaining bags are filled with cashew shells instead of 100 kgs of Red Dal in the bags. Hence the applicant lodged a criminal complaint with the Superintendent of Police, Vellore on 16.7.2018.

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It is the further case of the applicant that as the defendants failed and neglected to repay the outstanding dues despite repeated demands the applicant classified the loan account as NPA on 30.05.2018. It is stated that the requests of the applicant to the defendants to clear the outstanding dues were in vain and hence the present application is filed for recovery of its dues.

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The 2^nd defendant filed her reply statement contends that the application is liable to be dismissed. This defendant states that based upon the confirmation of the arrival of the agricultural commodities given by the 3^rd defendant vide its Commodity Arrival Reports (CAR) dated 30.05.2017, the applicant bank sanctioned cash credit facility against the warehouse receipts to the tune of Rs.50 lakhs to the defendants 1 & 2 on 30.05.2017 through their Ranipet Branch Vellore. The third defendant is entrusted with the job of verification of quantity, quality and values of the commodities sent through commodity arrival reports and intimate the same to the applicant and the applicant based on the said report disbursed the loan amount. It is stated that the pledged goods are kept at Rajkamal Godwon-II, Sathoor Village, Arcot Taluk, Vellore district under the custody of 3^rd defendant. This defendant submits that he was not put on notice before the said inspection of the commodities stored in the godown by the applicant and therefore the 2^nd defendant had nothing to do with the same. It is

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false to state that the 2^nd defendant and the 1^st defendant colluded with the 3^rd defendant by giving a false report of the earlier commodities to the applicant bank and thereby committed criminal breach of contract. It is stated that the 3^rd defendant is a Private Limited Company and the stocks were kept in storage under the control of the said company, which had issued the storage receipt to the applicant. It is stated that even today the stocks are under the custody of the 3^rd defendant and this defendant does not any access to the same. It is stated that the 3^rd defendant alone is responsible for the stocks certified by them and kept by them under lock and key and therefore the prayer for issuance of Recovery Certificate against the defendants is legally unsustainable and liable to be dismissed.

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The applicant bank filed its proof affidavit along with 22 documents, which are

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marked as Exhibits A-1 to A-22, the details of which are as under: -

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S. No.	Date	Description of Documents	Exhibit Nos.
1.	10.07.2013	Standard Agreement between the applicant and the 3^rd defendant.	A-1
2.	30.05.2017	Demand Promissory Note for a sum of Rs.50 lakhs executed by defendants1and2.	A-2
3.	30.05.2017	Agreement for Cash Credit (Pledge) executed by defendants1and2	A-3
4.	30.05.2017	Security Delivery Letter executed by defendants1and2.	A-4
5.	30.05.2017	Declaration by defendant 1 and2.	A-5
6.	30.05.2017	CommodityArrival Report by the 3^rd defendant	A-6
7.	30.05.2017	CommodityArrival Report by the 3^rd defendant	A-7
8.	16.07.2018	Complaint lodged by the applicant against defendants with Superintendent of Police, Vellore	A-8
9.		Statement of Accounts with certificates under Bankers’ Book EvidenceAct.	A-9

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The defendants did not choose to file their Counter Proof Affidavit despite availing sufficient opportunities and therefore the defendants were called absent and set ex-parte on 14.12.2023.

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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. 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-9. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-9 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 defendants have not denied availing of credit facility, execution of documents and as such the said admission is sufficient enough to

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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 contend that the contention of the defendants that it is only the third defendant who is liable for repayment cannot be acceded to as the defendants 1 and 2 having availed the loan are duty bound to repay the same. Ld. Counsel would also contend that the defendants though filed their reply statement they did not choose to file the Counter Proof Affidavit 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, adjudicate and decide the claim/counter claim. Therefore, in the absence of Counter Proof Affidavit, the claim of the applicant stands unrebutted. Further, the applicant 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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As regards the contention of the defendants that it is only the third defendant who is liable for repayment of the dues under loan account is concerned it is to be stated that though the applicant disbursed the loan funds based on the Commodity Arrival Report issued by the third defendant, the said funds were

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utilized by the defendants 1 and 2. The defendants 1 and 2 having availed the loan facilities are bound to repay the same, however, the defendants did not choose make the remittances and hence the defendants 1 and 2 are equally liable for the entire OA claim as that of the 3^rd defendant. Dehors the pendency of the criminal proceedings initiated by the applicant, the defendants 1 and 2 are liable for repayment of the dues under the loan accounts.

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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-9 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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In terms of Sec. 19 (20) of the RDB Act, the Tribunal has been empowered to pass an order regarding payment of interest from the date on or before which payment of the amount is found due, up to the date of realisation or only payment, as it think fit to meet the ends of justice. Further, Hon’ble Supreme Court, in the judgement (reported in II 2009 BC pg. 696) in the matter of State Bank of India – vs – Sarath Textiles, held that “ Sec. 19 (20) of the RDDB & FI Act confers discretion on the Tribunal to award interest on the applicant being as it thinks fit to meet the ends of justice. ”. Further, Hon’ble Supreme Court of India in the matter of Central Bank of India – vs – N. Raveendra (reported in 2002 [1] SCC pg. 367) held that “ Sec. 34

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of CPC confers discretion on the Court to award or not to award interest or to award interest at such rate as it deems fit de-horse notwithstanding the contract between the parties. ” Sec. 19 (20) of the RDDB & FI Act is akin to Sec. 34 CPC.

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While it is the case of the applicant that the applicant bank is entitled for contractual rate of interest till discharge of the entire outstanding dues, however, it is also to be noted that it would be fair that in so far as pendente lite and future interest is concerned, the contractual rate of interest may not be applied. It is to be stated that the claim of the applicant bank includes the rate of interest and other charges payable as per the contract due till the date of OA. The Tribunal already held that the applicant bank is entitled for the amount claimed in the TA. As already stated, the Tribunal has awarded contractual rate of interest as claimed by the applicant bank till the date of filing the OA and in view of the fact that the instant loan is a loan against the commodities, this Tribunal is of the view that the defendants are entitled for a reduced rate of interest. Therefore, under these circumstances, the Tribunal is inclined to grant pendente lite and future interest @ 10% p.a. simple on the OA claim amount from the date of filing till the date of realization. Point No.2 is answered accordingly.

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During the pendency of the OA the applicant filed a memo stating therein that the 3^rd defendant remitted a sum of Rs.43,20,700/- on 26.09.2019 towards the loan dues and the same was appropriated to the said loan account and hence the 3^rd defendant was given up in the OA. It is stated that after crediting the said amount on 26.09.2019, the balance amount due as on 27.09.2019 is Rs.21,62,429.11p with further interest and the defendants 1 and 2 are liable to pay the applicant the

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said amount further interest as claimed. This Tribunal took the said memo on record and by its proceedings dated 14.07.2022 recorded part satisfaction of the OA claim and recorded the contention of the applicant that upon payment of the said sum the 3^rd defendant is given up. This Tribunal also permitted the deletion of the 3^rd defendant from the cause title and directed the applicant to file amended OA. Accordingly, the applicant also filed amended TA on 06.07.2023..

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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.432 of 2023 stands allowed.

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(b) Applicant is permitted to realize an aggregate amount of Rs.57,19,185 /- with further interest @10% per annum (simple) from the defendants 1 and 2 jointly and severally from the date of filing of OA till realization in full, after deducting all the amounts received by them during the pendency of OA, including the sum of Rs.43,20,700/- remitted by the 3^rd defendant on its respective date, and also by selling the other assets of the defendants 1 and 2.

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(d) Applicant is permitted to realize cost of the proceedings and shall file cost memo within 15 days from the date of receipt 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

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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 28^th day of December, 2023)

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

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The Federal Bank Ltd., v. D. Murali

Case brief

What is this about?

What did the court decide?

The Federal Bank Ltd., v. D. Murali

Case brief

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