Allowed

Canara Bank v. M/s Selakshan Contractors

DRT22 Feb 2024TA/477/2023

Case brief

AI extract

What is this about?

The DRT allowed the bank's recovery certificate application against contractors and guarantors. The Tribunal upheld the bank's claim of Rs.23,37,667.96p, rejecting defense arguments due to lack of substantiation. The recovery is authorized at 12% p.a. simple interest until realization.

What did the court decide?

Issuance of Recovery Certificate for Rs.23,37,667.96p plus interest @12% p.a. simple, collectible jointly and severally from defendants or via sale of assets.

Canara Bank versus M/s Selakshan Contractors — Banking and Recovery | DRT (2024)

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BEFORE THE DEBTS RECOVERY TRIBUNAL –II AT CHENNAI

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Dated this the 22^nd day of February, 2024

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PRESENT: SHRI T. RAJESH

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PRESIDING OFFICER

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TA No.477 of 2023

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(Originally filed before DRT-I Chennai as OA No.363 of 2019 and thereafter transferred to this Tribunal and renumbered as TA No.477 of 2023)

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Canara Bank (Erstwhile Syndicate Bank) Neyveli Branch Represented by its Branch Manager Kamaraj Road, Block-10 Neyveli – 607 801 … Applicant

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Versus

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M/s Selakshan Contractors Represented by its Proprietor Mr. S. Jayakumar No.74, Sapthagiri Nagar Near Pachankuppam Railway Cuddalore – Vrithachalam Main Road Cuddalore – 607 803

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Also at

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M/s Selakshan Contractors Unit No.2, Bay No.3 and 4 Shopping Complex, Block-8 Neyveli – 607 801

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Mr. S. Jayakumar S/o Mr. Selvaraj No.74, Sapthagiri Nagar Near Pachankuppam Railway Cuddalore – Vrithachalam Main Road Cuddalore – 607 803

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Also at Mr. S. Jayakumar S/o Mr. Selvaraj C-43, Mines Road, Block 24 Neyveli Town – 607 801

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Mr. K. Muthuraman No.388, Kombadikuppam Uthangal P.O. Virthachalam Taluk, Cuddalore – 607 804 …Defendants

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Counsel for the Applicant Bank Counsel for defendants 1 and 2 Counsel for 3^rd defendant

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: M/s K.V. Subramanian Associatez : M/s D. Jaganathan : ….

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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.23,37,667.96p together with further interest at the rate of 17.55% per annum with monthly rests plus 2% penal interest 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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It is the case of the applicant that the 1^st defendant approached the erstwhile Syndicate Bank vide application dated 6.7.2012 for grant of credit facility to meet the Working Capital Requirement. Considering the said request the applicant sanctioned Term Loan of Rs.8 lakhs. It is stated that the 1^st defendant executed necessary loan and security documents on 18.7.2012. It is also stated that the defendants 2 to 4 executed guarantee agreement on 28.2.2018 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 more fully described in schedule to the OA with the applicant bank on 12.10.2009 with an intention to create equitable mortgage over the same and confirmed the same by executing Memorandum of Deposit

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of Title deeds dated 23.10.2009 and 23.10.2009 and confirmed the same on 18.07.2012.

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It is the case of the applicant that the defendants defaulted in repayment despite repeated demand and hence the account was classified as NPA on 18.04.2013. It is stated that the defendants did not come forward to clear the outstanding dues despite repeated demands and hence the applicant invoked the provisions of SARFAESI Act and issued the demand notice under Section 13(2) of the Act on 27.11.2013 and a legal notice on 20.10.2018 calling upon the defendants to clear the outstanding dues and hence the applicant has filed the present application.

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The defendants 1 and 2 filed reply statement stating that the application is not maintainable and is barred by limitation. The availment of credit facilities and execution of loan documents and also creation of security interest are not disputed by the defendants. It is stated that the defendants have been making the repayments regularly, however, due to Thane Cyclone in 2011 and Nilam Cyclone in 2013, the unit was totally damaged and hence there was a huge loss in business. It is stated that the request of the defendants for settlement of the dues under OTS was not considered by the applicant. It is stated that the amount claimed by the applicant is not proper and this Tribunal has no jurisdiction to entertain the application. The defendants denied execution of acknowledgement of debt dated 3.2.2015 and 02.02.2018 and contended that the OA is not maintainable. It is contended that the applicant has not filed proper statement of accounts and has claimed higher rate of interest. The defendants thus contending prayed for dismissing the OA.

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The applicant bank filed its proof affidavit along with 13documents, which are

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marked as Exhibits A-1 to A-13 , the details of which are as under: -

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Sl. No.	Date	Description of Documents	Exhibits
1.	06.07.2012	Application of 1^stdefendant for grant of credit facility	A 1
2.	28.02.2018	Deed of guarantee for agricultural advances executed by defendants 2 to 4	A 2
3.	18.07.2012	Loan documents by 1^stdefendant	A 3
4.	18.07.2012	Demand Promissory Note	A 4
5.	03.02.2015	Acknowledgement of debts by 1^st defendant	A 5
6.	02.02.2018	Acknowledgement of debts by 1^st defendant	A 6
7.	12.10.2009	Letter of handing over title deeds	A 7
8.	23.10.2009	Memorandum of mortgage by deposit of title deeds	A 8
9.	18.07.2012	Confirmation of creation of equitable mortgage executed by 2^nddefendant	A 9
10.	20.07.2005	Registered sale deed executed by Mrs. Rajeshwari in favour of Mr. Jayakumar, Doc. No.1447 of 2005	A 10
11.	27.11.2013	Notice under Section 13(2) of the SARFAESI Act issued by the applicant	A 11
12.	20.10.2018	Legal notice issued by the applicant to the defendants	A 12
13.		Statement of accounts along with documents under Bankers’ Book Evidence Act.	A 13

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As the defendants did not choose to file Counter Proof Affidavit despite availing sufficient time the opportunity was closed on 7.12.2023.

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Ld. Counsel for applicant bank advanced his arguments. However, Ld. Counsel for defendants did not choose to put forth their arguments despite availing sufficient opportunities and hence were set ex-parte on 02.02.2024 and this Tribunal therefore proceeded to pass orders based on the reply statement and other documents on record.

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Heard the Ld. Counsel for the Applicant Bank. 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- 13. The Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1, besides on Ex. A-1 to A-13, strenuously contended that the claim of the applicant stands established against the defendants, as such, the applicant is entitled for a recovery certificate as prayed for.

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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,

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execution of loan and security documents and as such the said admission is sufficient enough to allow the claim of the applicant. Ld. Counsel would also 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 defendant though filed the reply statement, did not choose to file any CPA despite sufficient opportunity and therefore the claim of the applicant stand unrebutted.

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Ld. Counsel for the applicant would contend that the contention of the defendants that they did not sign the acknowledgement of debt and security and hence the claim is beyond the period of limitation is concerned, the same is an afterthought and the defendants having accepted that they have signed the documents cannot now turn around and contend that they have not executed the same. Ld. Counsel would also contend that the contention of the defendants that the amounts claimed is not proper and the applicant has charged usurious interest is concerned, the same is also not tenable for the reason that the applicant has filed the statement of account supported by certificates under Bankers’ Book Evidence Act.

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As rightly contended by the Ld. Counsel for Applicant, barring filing of reply statement, the defendant 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

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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 defendant remain unsubstantiated hence cannot be considered, thus the claim of the applicant stands unrebutted.

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Further, the applicant bank has filed the statement of accounts accompanied by certificates under Bankers’ Book Evidence Act and therefore it is clear that the applicant has charged interest at contractual rates only and therefore the claim of the defendants that the amount claimed is not proper and supported by documents fails.

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In so far as the contention of the defendants 1 and 2 that they had not executed the acknowledgment of debt dated 03.02.2015 and 02.02.2018 is concerned, it is to be submitted that the defendants have not disputed their signatures in the said document and a bare perusal of the signatures of the defendants in other documents clearly matches with the signatures in these two documents and therefore this contention of the defendants 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-13 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 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 subject loan is an agricultural loan and the lending rate had

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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 @ 12% 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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In view of the afore mentioned discussions, the TA is disposed off in the following manner: -

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(a) TA No.477 of 2013 stands allowed.

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(b) Applicant is permitted to realize an amount of Rs.23,37,667.96p with further interest @12% 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 received / recovered by them during the pendency of TA, and also by selling the schedule properties 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 2 & 3 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 receipt of the copy 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 22^nd day of February, 2024)

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

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Canara Bank v. M/s Selakshan Contractors

Case brief

What is this about?

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Canara Bank v. M/s Selakshan Contractors

Case brief

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