Allowed

The Federal Bank Limited v. M/s M.K.R. Traders Private Limited

DRT20 Feb 2024TA/493/2023

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed the bank's application to issue a Recovery Certificate, confirming the debt claim of over Rs. 21 crores. The court rejected defenses based on blank documents and lack of evidence for payments, ordering interest at 10% p.a. until realization.

What did the court decide?

Recovery Certificate issued for aggregate sum of Rs.21,21,39,992.60 plus 10% p.a. simple interest till realization from defendants jointly and severally, Plus sale of schedule properties (except Sched

The Federal Bank Limited versus M/s M.K.R. Traders Private… — Banking and Recovery | DRT (2024)

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BEFORE THE DEBTS RECOVERY TRIBUNAL –II AT CHENNAI

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Dated this 20^th day of February, 2024

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PRESENT: SHRI T. RAJESH

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PRESIDING OFFICER

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TA No.493 of 2023

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(Originally filed before DRT-I Chennai as OA No.38 of 2019 and thereafter

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transferred to this Tribunal and renumbered as TA No.493 of 2023)

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The Federal Bank Limited Vellore Branch 66/1, Dr. Padma Samarasam Complex Arni Road, Kosapet Vellore – 632 001 ….Applicant

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Versus

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M/s M.K.R. Traders Private Limited

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Represented by its Directors, Defendants 2 to 5 17, Sannathi Street, Sholinghur Walajah Taluk, Vellore – 631 102

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Sri Jagannathan R S/o K. Ravichandran No.17/48, Arjuna Reddy Street Sholinghur, Vellore – 631 102

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Smt. J. Manjula W/o R. Janakiraman No.16, Kamarajar Nagar Sholingur, Walajah Taluk Vellore – 631 102

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Also at

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No.33, Arjuna Reddy Street Sholingur, Walajah Taluk Vellore – 631 102

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Sri K. Ravichandran S/o Kuppusamy No.17/48, Arjuna Reddy Street Sholinghur, Vellore – 631 102

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Janakiraman R

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S/o Kuppusamy No.17/48, Arjuna Reddy Street Sholinghur, Vellore – 631 102

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Also at

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No.33, Arjuna Reddy Street Sholinghur, Walajah Taluk Vellore – 631 102 …Defendants Counsel for the Applicant Bank : M/s S. Sathiyanarayanan Counsel for Defendants : Mr. M. Gopi

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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 an aggregate sum of Rs.21,21,39,992.60p comprising a sum of Rs.20,46,85,952.79p together with interest at the rate of 12% per annum with monthly rests being the amount due under Cash Credit facility; a sum of Rs.28,19,478.32p together with interest at the rate of 10.25% per annum with monthly rests being the amount due under Term Loan-I Account; a sum of Rs.10,36,870.90p together with interest at the rate of 10.25% per annum with monthly rests and a sum of Rs.35,97,690.59p together with interest at the rate of 10.25% per annum with monthly rests being the amount due under Term Loan-II Account plus 2% penal interest from the date of filing till the date of realisation along with the costs of the application and for sale of schedule mentioned properties.

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The brief facts of the case is as follows: -

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(a) The 1^st defendant represented by its Directors, defendants 2 to 5 approached the applicant for grant of credit facilities for the purpose of its business and the applicant considering the said request vide sanction dated 28.7.2017 sanctioned Cash Credit Facility of Rs.1800 lakhs, Term Loan-I of Rs.28 lakhs, Term Loan-II of Rs.10.70 lakhs and Term Loan-III of Rs.33.26

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lakhs totaling to Rs.1871.96 lakhs. The 1^st defendant by its Resolution dated 16.6.2017 authorised the 5^th defendant to execute all the loan related documents in favour of the applicant. The 1^st defendant represented by 5^th defendant executed necessary loan and security documents on 29.7.2017. The defendants 2 to 5 executed agreement of guarantee on 29.7.2017 thereby guaranteeing due repayment of the credit facilities availed by the 1^st defendant.

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(b) The defendants 2 to 5 created equitable mortgage over the Schedule mentioned properties in favour of applicant by executing Memorandum of Deposit of Title deeds dated 23.08.2017 registered as Doc. No.2077 of 2017, SRO, Sholinghur.

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(c) The defendants defaulted in repayments and hence the loan account was classified as NPA on 02.05.2018. It is the case of the applicant that as the defendant did not come forward to clear the outstanding dues despite repeated demands, the applicant issued demand notice and possession notice under Section 13(2) dated 23.05.2018 calling upon the defendants to clear the outstanding dues. The defendants did not come forward to clear the outstanding dues, hence the applicant is constrained to file this TA.

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The defendants filed their reply statement denying the averments contained in the TA. It is contended that the defendants have been making the payments regularly, however, the applicant has not given credit to the various remittances made by the applicant. It is stated that the applicant the statement of account is not supported by mandatory certificate and hence the same cannot be relied upon. It is also stated that the applicant had charged

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usurious interest. It is stated that the applicant had obtained the signatures of the defendants on various documents and has now been utilized for the purpose of filing this application. It is also stated that the applicant suddenly withdrew the facilities and the same had resulted in huge loss to the 1^st defendant and hence the default. Thus submitting the defendants prayed for dismissing the application.

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The applicant bank filed its proof affidavit along with 34 documents, which are marked as Exhibits A-1 to A-34, however, Exhibit A-18 is marked subject to proof and relevancy.

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The defendants filed their Counter Proof Affidavit reiterating the contentions made in the reply statement.

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Heard the Ld. Counsel for the parties. Perused the records.

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Having heard the Ld. Counsel 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- 34. Ld. Counsel for Applicant placing reliance on the proof affidavit of AW-1,

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besides Exhibits A-1 to A-34 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 defendant has not denied availing of credit facility, execution of loan and security documents and 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 amount claimed is wrong cannot be countenanced. It is further contended that the defendant though filed the reply statement, and Counter Proof Affidavit did not choose to adduce any rebuttal evidence.

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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 applicant stands proved. Even otherwise no evidence was let in against or no anomaly is pointed out in the statement produced by the applicant.

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Further, though the defendants entered appearance and filed reply statement and counter proof affidavit, no specific denial other than the general denial was put forth and added to they did not produce any evidence in support of their contentions in the reply statement.

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In so far as the contention of the defendants that the various remittances made by them have not been given due credit to is concerned, it is to be stated that the defendants did not file any evidence regarding the payments

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made so as to enable the Tribunal to confirm with the statement of accounts. Hence this claim of the defendants fails.

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In so far as the contention of the defendants that the defendants were made to sign on several blank papers and the same have been now utilized for the purpose of filing this application is concerned, it is to be stated that it is a usual defence taken by every defaulting borrower. Further, Hon’ble DRAT, Mumbai in the matter of Sangli Bank Ltd. Vs. Prabha K.Maheshwari and

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others reported in 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-34 is fully satisfied that the applicant has established its claim. This point is answered accordingly.

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During the pendency of the TA, the applicant filed a memo stating therein that at the request of the defendants for release of the Schedule „B‟ property to a bonafide purchaser on payment of Rs.30 lakhs, the applicant approved the same and the applicant released the said property on remittance of Rs.30 lakhs to the loan accounts by the defendants on 19.12.2019. this Tribunal

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vide proceedings dated 14.2.2020 recorded the same and Exhibit A-18 was

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released to the defendants.

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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

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

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(a) TA No.493 of 2023 stands allowed.

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(b) Applicant is permitted to realize an aggregate amount of Rs.21,21,39,992.60p 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 6 jointly and severally after deducting all the amounts received by them during the pendency of TA, and also by selling the schedule mentioned properties (except Schedule „B‟) and other assets of the defendants. The amount of Rs.30 lakhs deposited by the defendants for release of Schedule „B‟ property be given credit to 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 Bank, the defendants 2 to 5 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 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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(f) In view of the orders passed in the TA, pending interlocutory applications, if any, are closed as infructuous.

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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 February, 2024)

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

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The Federal Bank Limited v. M/s M.K.R. Traders Private Limited

Case brief

What is this about?

What did the court decide?

The Federal Bank Limited v. M/s M.K.R. Traders Private Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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