Allowed

Canara Bank v. Messers Khushbu Garments

DRT24 Oct 2024OA/278/2023

Case brief

AI extract

What is this about?

In an original application for recovery of debts, the DRT allowed the bank's claim against the proprietorship firm and its guarantor. The court issued a recovery certificate for the outstanding amount and directed enforcement against secured and personal assets.

What did the court decide?

Recovery Certificate issued for Rs. 22,58,519.06 with interest; charge kept alive on hypothecated properties; applicant entitled to proceed against secured and personal assets.

Canara Bank versus Messers Khushbu Garments — Banking and Recovery | DRT (2024)

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oA 278l2023/DRT-Guwahali

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IN THE DEBTS RECOVERY TRIBUNAL, GUWAHATI

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(North Eastern Region)

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(Tribunal of Assam, Nagaland, Meghalaya, Manipur Mizoram, Arunachal Pradesh & Tripura) Before shti Shiv Sharan Dubey. Presidinq Officer

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O.A. No. 27812023

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ln the matter of - CANARA BANK Kharupetia Branch, Kharupetia, Dist : Darrang, Assam-796001.

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.. ... .Applicant

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-Vs-

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M/S KHUSHBU GARMENTS & ORS Represented by Biki Saha Chandra Complex Mahavir Road, P.O.- Kharupetia, District- Darrang, Assam-7841 15.

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MR BrKr SAHA^(PROPRIETOR) S/o Sunil Saha Residing at Swashanpatty P.O.- Kharupetia, District- Darrang, Assam-784115.

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3, MR SUNIL SAHA (GUARANTOR) S/o lndra Mohan Saha Village- Kheteswar P.O.- Kharupetia, District- Darrang, Assam-784'l 15

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Defen da nts

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Presence of the Counsel : For the Applicant : Mr. Mukesh Sharma, Ms Ellora Bharali, Advocates For the Defendants : None (Ex-parte)

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Oaled .2411012024

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JUDGMENT

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This is an application under seclion 19 of the Recovery of Debts Due to Banks and Financial lnstitutions Act, 1993 tiled by the CANARA BANK, Kharupetia Branch, Kharupetia, Dist: Darrang, Assam-79600'1, with a prayer to issue Recovery

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Certificate for the sum of Rs.22,58,519.06 (Rupees Twsnty-Two Lacs Fifty-Eight Thousand Five Hundr€d Nineben and Pai3a Six) only as on 30.04.2023 against the defendants with pendontelite and future intorest at contractual rate till realization, along with cost and other relief.

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A few facts giving rise to the present application are as under.

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The Oefendant no.1 is a proprietorship firm of Defendant No.2 who had borrowed the loan from the applicant bank and defendant no.3 stood as the guarantor before the aforesaid bank and availed the same.

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The Defendant No.2 as Proprietor of the Defendant No.1 firm had approached the Applicant Bank and applied for financial assistance for its business by submitting a Letter for Loans/Advances against Term Deposits dated 17.06.2014 and the Applicant Bank vide its Sanction Memorandum dated 17.06.2014 had sanctioned a OCC Credit Facility of Rs.5,00,000.00 (Rupees Five Lacs) only to the Defendant No.1 firm, at rate of interest @ Base Rate + 0.75% per annum, rate of interest being subjected to changes as decided by the Bank from time to time. The cash credit facility was payable on demand. The aforesaid Credit facility was secured by a Hypothecation of Stock and Term Deposit of Rs.2,00,000.00/- only. The Defendant had also executed a Request for Overdraft Facilities daled 17.06.2014. The Defendant No.2 as Proprielor of Oefendant No.l had signed on the said Sanction Memorandum thereby accepting all the terms and conditions mer ioned therein.

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ln connection wilh the sanction of the Cash Credit Loan Limit of Rs. 5,00,000.00/- Lacs, sanctioned by the Applicant Bank and availed of by the Defendant, a Cash Credit Agreement dated 17.06.2014, Pronote dated 17.06.2014 has been signed and executed by the Oefendant in favor of the Applicant Bank as security for repaymant of the loan, thereby agreeing to all the terms and conditions laid down in the said Agreement and also charged/ hypothecation of^present and future Stocks in favor of the Applicant Bank. lt is^pertinent to mention herein that at present there are no stocks available as the business has become defunct.

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ln connection with the sanctioning of the cash credit facility of Rs.5,00,000.00/- Lacs^(Rupees Five Lacs) only sanctioned by the applicant bank

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s[.il P0r,.r"r,u,2+.lo.L\ 0 Presiding Offcei ORT, Guwahati

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and availed off by the Defendant No.1 firm, a Guarantee^{Agreementdated} 17.06.2014 was executed by the Defendant No. 3 who stood as the^personal guarantor to the said loan facility. The said Guarantee Agraement was covered by a Guarantee Covering Letter daled 17.06.2014 duly executed by the Defendant No. 3 whereby the Defendant No. 3 in his capacity as lhe^{personalguarantor} had not only confirmed the execution of the Guarantee^{Agreement,but alsoacknowledged his} obligation as the^{personal guarantor} to the^{loan facility availed by the Defendant} No.'l firm.

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The Defendant No.2 as Proprietor of the Defendant No.1 firm had again approached the Applicant Bank and applied^{for financialassistancefor its business} and the Applicant Bank vide lts Sanction^{Memorandumdated 17.06.20'15had} sanctioned an Working Capital Facility^{of Rs.5,00,000.00/-(Rupoes Fivs Lacs) only} to the Dofendant No.'l firm, at interest rate of BR^{+.75o/ogq annum, rateof interest} being subiected to changes as decided by the Bank^from time to^{time. Thecash} credit facility was^payable on demand. The aforesaid Credit facility was secured by a Term Deposit of Rs.2,00,000.00/- only. The Defendant No.2^had also executed^a Letter of Renewal dated 17.06.2015. The Defendant^No.2 as^Proprietor of^Defendant No.1 had signed on the said Sanction Memorandum thereby accepting all the terms and conditions mentioned therein.

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A Letter from the^guarantor whenever limits are to be renewed dated '17.06.2015 was duly executed by the Oefendant No. 3 whereby ihe Defandant No. 3 in his capacity as the^{personal guarantor} had not only confirmed the execution of the Guarantee Agreement, but also acknowledged his^obligation as the^personal guarantor to the loan facility availed by the Oefendant No.l firm.

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The Oefendant No.2 as Proprietor of the Defendant No.1 firm had approached the Applicant Bank and applied for financial assistance for its business and the Applicant Bank vide its Sanction: Memorandum dated¹ 1.03.2016 had sanctioned an working Capital Facility of Rs. 10,00,000.00/-^(Rupees Ten Lacs) only to the Defendant No.'l firm, at interest l,ale of 10.20o/o^per annum, rate of interest being subjected to changes as decided by the Bank from time to time. The cash credit

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Letter of Renewal dated 31.03.2017 thereby^{accepting all the terms and conditions} mentioned therein.

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ln connection with the renewal of the cash credit^{facilityavailad} by^the dafendant, ths defendant had signed^{and executed a SupplementalAgreement} dated 31.03.2017 and a Pronote dated 31.03.2017^{for availing and enhancing the} loan amount on tha same terms and^conditions to secure^{the financial} accommodation availed by the defendant.^{The defendanthad also signedand} exscuted a Link Letter of Enhancement^{dated 31.03.2017for enhancementof credii} limit from Rs. 10.00 Lakhs to 15.00 Lakhs^{in favour of Bank thereby agreeingto the} terms and conditions.

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ln connection with the sanctioning of the cash credit facility^{of Rs.} 15,00,000.00/- Lacs^{(Rupees Fifteen Lacs)only sanctionedby the applicantbank} and availed off by the^{DefendantNo.1 firm, a Guarantee Agreementdated} 31.03.2017 was executed by the^{DefendantNo.3, who stood as the personal} guarantor to the said loan facility. The said Guarantee Agreement^{was covered by a} cuarantee Covering Letter dated^{31.03.2017 dulyexecuted by the DefendantNo3} whereby ihe Defendant No. 3 in his capacity^{as thepersonalguarantor had not only} conlirmed the execution of the Guarantee^{Agreement,but also acknowledgedhis} obligation as the^{personal guarantorto the loan facilityavailedby the Defendant} No.1 firm.

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The Oefendanl No.2 had again approached^{the Applicant Bank and applied for} overdraft facilities/financial assistance^{and the ApplicantBank vide its Sanction} Memorandum dated 09.05.2018^{had sanctionedan Open Cash Credil Facility of} RS.2O,OO,O00.00|^(Rupees Twenty Lacs) only^{to theDefendantNo.'l firm, at interest} rate of 10.600/o^per annum, rate of^{lnteresl being subiectedto changes as decidedby} the Bank from time to time.^{The cash creditfacility was payableon demand.The} Defendant No.2 as Proprietor of^{Defendant No.1had also signed and execuleda} Letler of Renewal dated 09.05.2018^{thereby accepting all the terms and conditions} mentioned therein.

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ln connection with the renewal of the cash^{credit facility availedby the}

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facility was^{payable on demand. The aforesaid Credit facility was secured by a Term} Deposit^{of Rs. 2,OO,OOOOO/- only The DefendantNo 2 had also executeda Lefter of} Renewal datsd^{11.03.2016The Oefendant No2 as Proprietorof DefendantNo l} hadsignedonthesaidSanctionMemorandumtherebyacceptingal|thetermsand conditions^{mentionedtherein'}

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ln connection^{with the sanctionof the CashCredit Limit'sanctionedby the} Applicant Bank^{and availedof by the Defendant' a SupplementalAgreoment dated} 11.O3.2O16andaPronotedated11032O16'Linkletterinrespectofenhancement ofcreditfacilitiesdatedll'o3.2ol6hasbeensignedandexecutedbytheDefendant in favor of^{the ApplicantBank as securityfor repayment of the loan' thereby agreeing} toallthetermsandconditionslaiddowninthesaidAgreementandalsocharged/ hypothecation^{of presentand future Stocksin favor of the Applicant Benk'}

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lnconnectionwiththesanctioningofthecashcredit,acilitysanctionedbythe applicant bank^{and availed of by the OefendantNo l firm' a Guarantee Agreement} datedll.O3.2Ol6wasexecutedbytheDefendantNo3'whostoodastheparsonal guarantor to the said^{loan facility The said Guarantee Agreement was covered by a} Guarantee^{Covering Letter dated11.032016duly executed by the DefendantNo3} whereby the^{DefendantNo 3 in his capacityas ihe personalguarantor had not only} confirmedtheexecutionoftheGuaranteeAgreement,butalsoacknowledgedhis obligation^{as the personal guarantorto the loan facility availed by the Defendant} No.1 firm. The^{ApplicantvideLetter dated22 08 2015 conlirmedthe execution of} documents^{in favour of the applicantbank.}

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The Defendant No.2^{had again approached the Applicant Bank and applied for} overdraft facilities/financial^{assistanceby submittinga Letter for Loans/Advances} against Term^{Deposits dated 31.03.2017 and the Applicant Bank vide its Sanction} Memorandumdated3l'03.2o,lThadsanctionedanopencashcreditFacilityofRs. 15,OO,OOO.OO^{(Rupees Fifteen Lacs) only to theDe{endantNo 1 firm, at inlerestrate} of 10.60%^{per annum, rate of interest being subjectedto changesas decidedby the} Bank from time to^{time. The cash credit facititywas payableon damandThe} Defendant No.2 as^{Proprietorof Defendant No l had also signed and executed a}

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defendant, the^{defendant had signedand executeda Pronotedated09 05 2018'} Supplemental^{Agreement dated09.052018 for availingand enhancingthe loan} amount on the same terms^{and conditions to secure the financial accommodation} availed by the defendant^{to the tune of Rs.20,00,00000/-Lacs.The dafandant had} also signed and^{executeda Link Letter of Enhancementdated09 05'2018for} enhancement of credit limit,^{in favour of Bank thereby agreeingto the terms and} conditions.

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ln connection with the^{sanctioning of the cash credit facilityot Rs 20 00 Lacs} (Rupees Twenty Lacs) only sanction^{by the applicant bankand availedoff by the} Defendant No.1^{Iirm, a Guarantee Agreemenl dated09.052018 was executedby} the Defendant.^{No. 3 who stood as the personal guarantor to the saidloanfacility'} The said Guarantee^{Agreement was covered by a Guarantee Covering Letter dated} 09.05.2018 duly executed^{by the DefendantNo 3 whereby the Defendant No 3 in} his capacity as the^{personal guarantor had not only confirmed the execution of the} Guarantee Agreement, but also^{acknowledged his obligation as the personal} guarantor to the loan facility availed^{by the DefendantNo.l firm'}

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The Defondant No.2 had^{again approached the Applicant Bank and applied for} overdraft facilities/financial^{assistanceby submittinga Loan Applicationdated} 08.09.2020 and the^{Applicant Bank vide its Sanction Memorandum dated 08 09 2020} had sanctioned an^{Open Cash Credit Facility of Rs.19.00 (Rupees NineteenLacs)} only to the Oefondant^{No.1 firm, at interest rate of 9.05% per annum, rate of interest} being subjected to changes^{ss decidedby the Bank from time to time. The cash} credit facility was^payable on^{demand.The DefendantNo.2 as Proprietorof} Defendant No.1 had^{also signed and executeda Letter of Renewal dated 08 09.2020} thereby accepting all the^{terms and conditions mentioned therein.}

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ln connection with the renewal of the^{cash credit facilityavailedby the} defendant, the defendant had signed^{and executeda Pronotedated08 09.2020'} Supplemental Agreement dated 08.09.2020^{for availing and enhancingthe loan} amount on the same terms and conditions to secure^{the financial accommodation}

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J,i, 2J,"Pr63iding Officer 24- { DRT, Guwahalr

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O A 278l2023/DRT-Guwahati

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availed by the defendant to the tune of Rs.'19,00,000.00/- Lacs. The defendant had also signed and executed a Link Letter of Enhancement dated 08.09.2020 for enhancement of credit limit in favour of Bank thereby agreeing to the terms and conditions

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ln view of the Circular of the Reserve Bank of lndia for the prevailing COVID19 situation, the Applicant Bank on 29.10.2020 had applied for GECL Loan of Rs. 1,70,000.00/- (One Lakh Seveniy Thousand) only and the Applicant Bank vide Sanclion Letter dated 29.10.2020 had sanctioned a GECL Loan of Rs.1,70,000.00/to the defendant with rate of interest @ 7.50o/o^per annum. The Term Loan was repayable in 48 Monthly installment of Rs.5288/-. The aforesaid Term Loan was disbursed lhrough the Loan Account No.4159755000210 standing in the name of Defendant No.1. That in connection with the sanction of the GECL loan availed by the defendant, the defendant had signed and executed a Pronote dated 29.10.2020, Agreement cum Deed of Hypothecation dated 29.10,2020 for availing the loan amount on the same terms and conditions to secure the financial accommodation availed by the defendant to the tune of Rs.'1,70,000.00/-.

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The Applicant Bank on 11.08.2021 had again applied for OCC Loan of Rs.19,00,000.00^^(Rupees Nineteen Lakhs) only and the Applicant Bank vide Sanction Letter daled 22.09.2021 had sanctioned an OCC Loan of Rs. 19,00,000.00^ under CGTMSE coverage to the defendant with rate of interest @ 9.'15%^per annum, rale of interest being subjectEd to changes as decided by the Bank from time to time. The cash credit facility was^payable on demand.^The Oefendant No.2 as Proprietor of Defendant No.l had also signed and executed a Letter of Renewal daled 22,09.2021 thereby accepting all the^{terms and conditions} mentioned therein.

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Since the defendants have failed and/or neglected to^remit the^overdue amount, the loan account becomes NPA on 09.08.2022^{as per the guidelines of} RBserve Bank ot lndia. As such the^{Applicant Bank} on^{10.09.2022had issued} a Recall Notice, thereby demanded^{the defendantto discharge his liabilities in lull}

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c0,ilrfuorg,a,? - z4.ltQ+ I Prdiding ffic6r DRT, Guwahali

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within 7 days from the date of receipt of this notice. But the Defendant failed to discharge his liabilities within the stipulated period.

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The Statements of Account maintained by the Applicant Bank in the usual and ordinary course of business shows that there is an oulstanding balance of Rs. 22,58,519.06/- in the Loan account Nos.4159261000014 and 4159755000210, i.e. (Rs.21,74,409.00/- and Rs.84,110.06/r. The account became N.P.A. on 09.08.2022. Therefore, the claim amount in the Loan account of Defendant is Rs. 22,58,519.06^ as on 30.04.2023 and the Defendant is legally bound liable to repay the said amount to the Applicant Bank with interest till realization with cost and charges.

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The applicant bank thus became constrained to file the present Original Application for the recovery of Rs. 22,58,519,06 (Rupees Twonty-Two Laca FiftyEight Thousand Five Hundrod Nineteen and Paisa Six) only as on 30.04.2023 along with interest and cost ofthe application.

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After filing of the OA the Tribunal issued notices upon the defendants through registered post and the applicant bank filed service report on 19.09.2023 and brought on record the postal receipts along with track consignment report which shows that notice has been served upon the defendant No. 1 by name and notices have not been served upon the defendants No. 2 & 3. Thereafter the Tribunal ordered paper publication of notice upon the defendants No. 2 & 3 and the applicant bank issued notice to the defendants No. 2 & 3 through Paper Publication in two newspapers namely "Ihe Times of ldia" and "Dainik Assam" both dated 16.'11.2023. lnspite of proper service of notice upon the defendant No.^'l and even after issuance of noti@ upon the defendants No.2 & 3 through^{paper publication} also there was no representation on behalf of the defendants No. 1, 2 & 3 either by the counsel or the person and hence the defendants No.^'1, 2 & 3 were set ex-parte on 05-02-2024 and their right to file written statement cum evidence on affidavit was closed and the matter was^posted for hearing on behalf of the applicant bank.

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Supporting the claim of the applicant bank Mr. Romeo Kuki Lhongdim, Officer

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of the Applicant Bank has filed evidence on afiidavit coupled with the security.ri,@gfr

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ORT, Guwahali

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O.A 278l2023/DRT€uwahalr

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documents marked as Exhibit-P, Exhibit AW-'l/l to AW-1/48, supporting the claim of the applicant bank.

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Heard the learned counsel for the applicant bank who prayed for issuance of Recovery Certificate against the defendants as per pleadings made in the Application, supported by evidence on affidavit of their witness who affirmed on oath the execulion of the security and other documents by the defendants and also execulion of their own documents relied upon, which have been marked 6xhibits.

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Considering the facts and circumslances of the case, I am of the considered view that the documents tiled by ihe applicant bank are supporting the claim of the applicant bank and establishing the liability of the defendants. lt is proved that the defendants are^jointly and severally liable to^pay to the applicant bank the claim made in the Original Application. The loans were obtained and documents have been executed on 17.06.2014, 17.06.20'15, 11.03.2016, 31.03.2017, 09.05.2018. 08.09.2020, 29.'10.2020 &22.09.2021. The accounts became NPA on 09.08.2022 and the OA has been filed on 14.07.2021. Hence, the OA is Iiled well within lhe period of limitation and this Tribunal having a^jurisdiction to adiudicate the OriginalApplication.

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Considering the unchallenged/ unrebutted version of Mr. Romeo Kuki Lhongdim, the applicant's witness and all the documents marked as exhibits, including duly certitied copy of the statement of account along with interest calculation sheet maintained by the applicant Bank in it's regular course of business, I hold that the applicant is entitled to get the Recovery Certificate as prayed for.

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ln the result, the^present Original Application No. 278 of 2023 is allowed with cost as under :-

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i) The defendants No. 1, 2 & 3 are^jointly and severally liable to pay to the applicant bank a sum of Rs. 22,58,519.06^(Rupees Twenty-Two Laca FiftyElght Thousand Five Hundred Nineteen and Paisa Six) only with pendentelite and future interest @10.20% per annum with monthly rests from 01.05.2023 till the date of full^{paymenurealization} and also cost of the application.

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Presiding Oficor

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oA 2782023/DRT-G@ahat

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ii) The charge of the certificated amount be^{kept aliveon hypothecated properties,} as described in Schedule-A of the OA^{till the amount is realizedin full.}

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ili) The applicant bank is^{entitledto proceed against the secured items towards} recovery of the debts.

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iy) The applicant bank is also entitled^{to proceed againstthe personal assets and} properties of the defendants towards recovery of the dues

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v) The applicant bank is entitled to the^{costs of the O A. which includes the} advocate fees of the applicant^{bank. Applicant is directed to file the cost memo} within 2 weeks from today.

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vi) lssue Recovery Certificate accordingly^{for a sum R3' 22,58,519.06 (Rupaa3} Twonty-Two L.ca Fifty-Eight Thou3and^{Five Hundred Nlnotoon and Paba} Six) only in favour of the applicant bank against^{the defendants No 'l, 2 & 3}

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viD Communicate copy of this order^{to the concemed parties.} This order is dictated and corrected by the undersigned.

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Judgment dated 24th Octobei 2024,^{signed and pronouncedin the Tribunal}

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today under my signature.

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Copy of the JudgmenUFinal Order be uploaded^{in the Tribunal'sWebsite and lile} consigned to Record Room.Record Room. $r'ryW

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be consigned to Record Room.Record Room.

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(Shiv Sharan Dubey) Pr6siding Officer DRT, Guwahati.

Canara Bank v. Messers Khushbu Garments

Case brief

What is this about?

What did the court decide?

Canara Bank v. Messers Khushbu Garments

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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