Allowed

Tamilnad Mercantile Bank Limited v. M/s Vel and Co.

DRT20 Mar 2024TA/374/2022

Case brief

AI extract

What is this about?

The Tribunal allowed an application for a Recovery Certificate filed by Tamilnad Mercantile Bank Limited. The debt was claimed to be Rs.4.29 crore plus interest. The Tribunal found the bank's affidavit and documents unchallenged due to the defendants' failure to file a counter-affidavit. Interest was reduced to 10% p.a. after accounting for partial realization of secured assets.

What did the court decide?

Recovery Certificate issued for Rs.4,29,01,548.05 plus 10% p.a. simple interest till realization, enforceable against defendants jointly and severally.

Tamilnad Mercantile Bank Limited versus M/s Vel… — Contract and Commercial Disputes | DRT (2024)

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BEFORE THE DEBTS RECOVERY TRIBUNAL –II AT CHENNAI

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Dated this 20^th day of March, 2024

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PRESENT: SHRI T. RAJESH

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PRESIDING OFFICER

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TA No.374 of 2022

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(Originally filed before DRT-I Chennai as OA No.220 of 2021 and thereafter transferred to this Tribunal and renumbered as TA No.374 of 2022)

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Tamilnad Mercantile Bank Limited Represented by its Branch Manager 112, TRS Towers, Sholingur Road Arakonam – 631 001 Vellore District, Tamilnadu …Applicant

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Versus

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M/s Vel and Co Rep. by its Partners No.27/16, Nehruji Nagar 7^th Street, Jothi Nagar Arakonam – 631 003

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Also at

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Sy. No.75/3, Gunduraju Kuppam Village Nagari Mandal, Chittoor District Andhra Pradesh

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Mr. J. Gajendran S/o Mr. Jeevan Naidu No.6/175A, Gandala Street Nagari Mandal, Nagari Chittoor District Andhra Pradesh – 517 590

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Mr. Jaikrishna S/o Gajendran No.968/1, Nagamma Nagar Vadamambakkam Post Thanigaipolur, Arakonam …Defendants

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Counsel for the Applicant Bank : M/s S. Sethuraman Counsel for Defendants : M/s L. Thiyagaiya

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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‟ seeking issuance of a Recovery Certificate for recovery of a sum of Rs.4,29,01,545.05p together with further interest at the rate of 14.75% per annum with monthly rests from the date of filing of this application till the date of realisation along with costs of the application and for sale of schedule properties.

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The subject matter of the case is the Cash Credit Facility availed by the defendants from the Applicant Bank.

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The brief facts of the case may be stated as follows: -

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(a) The 1^st defendant a Partnership firm represented by defendants 2 and 3 as its Partners had availed a Cash Credit Facility of a sum of Rs.3,50,00,000/- vide sanction dated 14.03.2018 and to secure the same the defendants created mortgage over their properties in favour of the applicant. To secure the said facility the defendants executed various loan documents on 27.07.2018. Apart from executing loan documents on behalf of 1^st defendant, the defendants 2 and 3 also executed guarantee agreement on 27.7.2018 thereby guaranteeing due repayment of the credit facility availed by the 1^st defendant.

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(b) The defendants 2 and 3 deposited the title deeds of their properties morefully described in the schedule to the TA with the

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applicant bank on 27.07.2018 with an intention to create equitable mortgage over the same in favour of the applicant.

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(c) At the request of the 1^st defendant the applicant renewed the credit facility vide its sanction letter dated 30.09.2019 and the defendants duly accepted the terms and conditions of sanction. Further, the defendants executed the loan documents on 06.11.2019. The defendants 2 and 3 executed mortgage extension letters on 6.11.2019 thereby extending the mortgage to secure the renewed facility.

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(d) The defendants defaulted in repayments and failed to regularize the loan account despite repeated demands and hence the loan account was classified as NPA on 31.03.2021. The applicant issued a demand notice on 26.04.2021 under Section 13(2) of the SARFAESI Act demanding a sum of Rs.4,05,75,960.55p from the defendants. Despite the same the defendants did not come forward to clear the outstanding dues. Hence, the applicant is constrained to file this application.

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The defendants filed a common reply statement stating therein that the application is not maintainable either in law or on facts. It is stated that the defendants approached the applicant for grant of Working Capital of Rs.1,50,00,000/- in 2014, which was sanctioned by the applicant by way of Cash Credit Facility and the said facility was enhanced to Rs.3,50,00,000/- on 14.3.2018. The defendants are running rock quarries in Nagari Mandal, Andhra Pradesh and factory for making

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mixture materioals for laying the road situated at Arakonam. The defendants were regularly making payments till August 2021, however, due to COVID-19 pandemic the defendants were unable to procure any contract of laying roads. The defendants informed the situation of them prayed further time for repayments, but the same was not considered by the applicant. While so, the loan account was classified as NPA and actions were initiated under SARFAESI Act including e-auction sale, which had drastically brought down the reputation of the defendants. Further, the applicant took steps to take physical possession of the property by filed Section 14 petition befor Chief Metropolitan Magistrate, Chittoor, Andhra Pradesh in Crl. M.P. No.18 of 2022 and the same was allowed on 16.3.2022. Aggrieved by the same the defendants approached Hon‟ble High Court of Andhra Pradesh and obtained stay of proc till 30.06.2022. It is stated that the applicant had got signed various blank documents at the time of sanction of loan and the same have now been utililsed for the purpose of filing this application. It is also stated that the applicant has charged interest contrary to the contractual obligations. The amount claimed by the applicant is not correct and supported by documentary evidence. It is further stated that the statement of accounts is not supported by mandatory certificates.

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The applicant bank filed Proof Affidavit along with 43 documents and got them marked in evidence as Exhibits A-1 to A-43.

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The defendants did not choose to file Counter Proof Affidavit despite availing sufficient time and hence the chance for filing Counter Proof Affidavit was closed on 01.02.2024.

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Heard the Ld. Counsel for the Applicant Bank and the defendants. Perused the records.

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Having heard the Ld. Counsels for the parties 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 defendant examined its official as AW1 and got marked exhibits Ex. A-1 to A-43. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides Exhibits A-1 to A-43 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 contend that even as per the Reply Statement filed, the defendants have not denied availing of credit facility, execution of loan and security documents and as such the said admission is sufficient enough to allow the claim of the applicant. Ld.

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Counsel would contend that the statement of accounts filed is proper and supported by appropriate certificate under Bankers‟ Book Evidence Act and Information Technology Act and hence the contention of the defendants regarding the amount claimed cannot be countenanced. It is further contended that the contention of the defendants that they had made to sign in blank unfilled documents is also false and the said contention is made by every defaulting borrower. It is further contended that the defendants though filed their reply statement did not choose to file the Counter Proof Affidavit and therefore the contentions of the applicant in the above OA stands unrebutted.

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As rightly contended by the Ld. Counsel for Applicant, barring filing of reply statement, the defendants did not choose to file Counter Proof Affidavit substantiating the pleas taken in reply statement. 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 any Counter Proof Affidavit, as rightly contended by the Ld. Counsel for Applicant, the defense put forth by the defendants remain unsubstantiated hence cannot be considered, thus the claim of the applicant stands unrebutted.

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As regards the contention of the defendants that the applicant had charged excessive interest, capitalized penal interest and failed to give

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due credit the several remittances made by the defendants is concerned, the same cannot be believed for the reason that the defendants failed to provide any documentary evidence in support of their claim and further the applicant bank had filed the statement of accounts accompanied by certificates under Bankers‟ Book Evidence Act, which evidences that no penal interest has been capitalized.

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The applicant bank has filed the statement of accounts accompanied by certificates under Bankers‟ Book Evidence Act and therefore the claim of the defendants that the amount claimed is not proper, applicant has claimed usurious interest and the statement of account is not supported by documents fails.

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In so far as the contention of the defendants that the applicant had obtained the signatures of the defendants in blank unfilled document and had filled them later to suit their case in filing this application also cannot be sustained for the reason that the said claim is made by every defaulting borrower. Further, Hon’ble DRAT, Mumbai in the matter of

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Sangli Bank Ltd. Vs. Prabha K.Maheshwari and others reported in

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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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Therefore, this defence taken by the defendants also fails.

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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 defendant. Further, the Tribunal on careful perusal of the unrebutted Proof Affidavit of AW-1 besides Exhibits A-1 to A-46 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 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, the defendant would contend 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. The Tribunal already held that the applicant bank is entitled for the amount claimed in the OA. As already stated, the Tribunal has awarded contractual rate of interest as claimed by the applicant bank till the date of filing the TA and in view of the fact that the subject loan being is a loan for business purpose and the lending rate had considerably come down, the 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 TA 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 TA, the applicant filed a memo stating therein that the applicant had realized a sum of Rs.2,33,00,000/- by selling the Item No.1 & 2 of the Schedule „B‟ property and the same was duly credited to the loan account.

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

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(a) TA No.374 of 2022 stands allowed.

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(b) Applicant is permitted to realize an amount of Rs.4,29,01,548.05p with further interest @10% per annum (simple) from the date of filing of the application till the date of realization in full, from the defendants jointly and severally after deducting all the amounts realized / received by them during the pendency of OA, and also by selling the schedule properties (except Item No.I and II of Schedule „B‟) and other assets of the defendants. It is made clear that the sum of Rs.2,33,00,000/realized by sale of the secured assets be given credit to the loan account on its respective date.

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(c) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant, the defendants 2 and 3 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 20^th day of March, 2024

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

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Tamilnad Mercantile Bank Limited v. M/s Vel and Co.

Case brief

What is this about?

What did the court decide?

Tamilnad Mercantile Bank Limited v. M/s Vel and Co.

Case brief

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