Allowed

Punjab National Bank v. Khandaka Sons Jewellers

DRT29 Aug 2025OA/1068/2023

Case brief

AI extract

What is this about?

Debts Recovery Tribunal allowed the Bank's recovery application against five respondents but exempted the sixth, an expired guarantor. The Court recalculated the principal to Rs. 6.15 crores from the NPA date of 2020, fixed interest at 8%, and approved a compromise settlement of Rs. 2.70 crores to be paid by September 2025.

What did the court decide?

Decree passed for Rs. 6.15 crores + 8% interest; defendants ordered to pay Rs. 2.70 crores by 30.09.2025 to discharge dues and release properties.

Punjab National Bank versus Khandaka Sons Jewellers — Banking and Recovery | DRT (2025)

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“ORIGINALAPPLICATION” No. 1068 of 2023

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BEFORE THE DEBTS RECOVERY TRIBUNAL, JAIPUR PRESENT- SHRI VIMAL GUPTA

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PRESIDING OFFICER

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O.A. NO. 1068 OF 2023

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DATE OF DELIVERY OF ORDER 29.08.2025

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PUNJAB NATIONAL BANK , A body corporate constituted and existing under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (Act No.V of 1970) having its Head Office at Plot No.4, Sector 10, Dwarka, New Delhi110075 and a Branch, amongst other places, at MCC 2,PNB House, Nehru Place, Jaipur (Rajasthan) -302015.

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…..Applicant Bank…..

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VERSUS

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1. M/s Khandaka Sons Jewellers (Through Partners Shri Kuber Khandaka& Smt. Alka Khandaka), Shop No. 377 & 378, MI Road, Jaipur (Raj.)-302001.

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Also At:-

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D-178, Hathi babu Marg, Kanti Chandra Road, Bani Park, Jaipur (Raj.)302016.

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2. Shri Kuber Kumar Khandaka S/o Shri Padam Prakash Khandaka, (Partner M/s Khandaka Sons Jewellers)Add: - D-178, Hathi babu Marg, Kanti Chandra Road, Bani Park, Jaipur (Raj.)-302016

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Also At:-

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D- 192, Jagdish Marg, Bani Park, Jaipur (Raj.)- 302016

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3. Smt. Alka Khandaka W/o Shri Kuber Kumar Khandaka (Partner M/s Khandaka Sons Jewellers) D-178, Hathi babu Marg, Kanti Chandra Road, Bani Park, Jaipur (Raj.)-302016.

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Also At:-

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D- 192, Jagdish Marg, Bani Park, Jaipur (Raj.)- 302016

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4. Shri Abhishek Khandakа S/o Shri Kuber Kumar Khandaka D-178, Hathi babu Marg, Kanti Chandra Road, Bani Park, Jaipur (Raj.)-302016

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5. Shri Rishabh Khandaka S/o Shri Kuber Kumar Khandaka, D-178, Hathi babu Marg, Kanti Chandra Road, Bani Park, Jaipur (Raj.)-302016

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6. Shri Padam Prakash Khandaka S/o Lt. Shri Sardar Mal Khandaka D- 178, Hathi babu Marg, Kanti Chandra Road, Bani Park, Jaipur (Raj.)302016

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Also At:-

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A-22, Ambabadi, Chomu Puliya, Jaipur- (Raj.)……Defendants…..

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Counsel for the Applicant Bank Sh. Vikas Jain, Adv

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Counsel for the Defendants Sh. K. K. Jain,Adv

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Securitisation Application No. 611/2023,

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title

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M/s Khandaka Sons Jewellers & others

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V/s

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Authorised Officer, Punjab National Bank ,

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Counsel for the Applicant Bank Sh. K K Jain, Adv Counsel for the Defendants Sh. Vikas Jain

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JUDGMENT

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This Original Application was filed by the applicant bank on 28. 06. 2023 for recovery of outstanding amount of Rs. 5, 09, 65, 431/-from the Defendants. SA was filed by the Defendants of this O.A. on 23.08.2023. This said S.A. was filed against the notice dated 17.08.2023 under Rule 8 (1) of SARFAESI invoking provisions of section 13(4) of the Act with regard to symbolic possession of the property.

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As per the pleadings, M/s. Khandaka Sons Jewellers is a partnership firm MSME Unit dealing in Gold, Kundan, Meena, Polki Jewellery having Showroom at M. I. Road, Jaipur. Defendant No. 1 is a partnership firm and Defendant No. 2 and 3 are partners of Defendant No. 1 had approached the applicant bank for availing Cash Credit facility. Defendant No. 2 to 6 have executed guarantee agreement in favour of the Applicant Bank. After due consideration, Cash Credit facility was sanctioned by the Applicant Bank in favour of Defendants in the year 2015 vide sanction letter dated 21. 09. 2015 for a sum of Rs. 5 Crore. Defendants approached the Applicant Bank to enhance the Cash Credit limit from 5 Crore to Rs. 6 Crore and same was sanctioned by Bank on 07. 01. 2016.

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Defendants approached the Bank and requested and applied for renewal cum reduction of the Cash Credit facility from existing limit of Rs. 6 Crore to Rs. 5 Crore and the Bank was agreed that the cash credit limit will be gradually reduced to the extent of Rs. 5 Lac per month so as to same can be brought to the limit of up to Rs. 5 Crore from present outstanding amount of Rs. 5. 50 Crore, w. e.f. May 2022 to Feb 2023 vide sanction letter dated 29. 03. 2022. The Defendants failed to maintain financial discipline and therefore, their loan account was classified as NPA on 20. 05. 2023. Applicant Bank has therefore, filed this original application for recovery of its dues against the Defendants.

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It is submitted that credit facilities were secured primarily by hypothecation of stocks and Book Debts and collateral by personal guarantee of 1) Kuber Kumar Khandaka 2) Smt. Alka Khandaka 3) Sh. Padam Prakash Khandaka 4) Abhishek Khandakaand 5) Rishabh Kumar Khandaka. Secured by equitable mortgage of immovable properties i. e. residential and commercial property at Shop No. 379 & 380 (admeasuring land area 82. 74 sq. mtr. on ground floor, first floor, second floor and third floor at M. I. Road, Jaipur in the name of Shri Padam Prakash Khandaka, Shri Abhishek Khandaka and Shri Rishabh Khanda. Extension of charge on residential & commercial property situated at Shop No. 377 (admeasuring 39. 90 sq. mtr.) and shop No. 378 (admeasuring 45. 83 sq. metr) on ground floor, first floor, second floor and third floor at M. I. Road Jaipur in the name of Kuber Kumar Khandaka and Smt. Alka Khandaka. It is also pertinent to mention here that the charge on the said mortgaged properties is also extended to secure the credit facilities sanctioned to M/s. Raj Ratan Jewellers, associate firm also being classified as NPA wherein the outstanding dues are approximately Rs. 10-12 lacs.

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Counsel for the Defendants submitted that O.A. has been filed by the Applicant Bank for recovery of Rs. 5,09, 65, 431/- against the Defendants, including Co-Mortgagor of one of the properties and Guarantor namely Padam Prakash Khandaka, who has expired on 03. 12. 2024, yet no amended cause title is filed and no notices to the legal heirs have been issued, hence the O.A. in itself is not maintainable in the given facts and circumstances.

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It is submitted that Cash Credit limit of Rs. 500 lacs was sanctioned and the rate of interest payable stipulated was 12% p. a. with monthly rests. The existing cash credit limit was enhanced to Rs. 600 lacs with a proviso of rate of interest payable remained same i. e. 12% p. a. with monthly rest on 07. 01. 2016.

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It is submitted that subsequently due to adverse market scenario there could not be adequate turnover in the account commensuration to the sales but the stock level was maintained at level of Rs. 800 lacs and the reasons for inadequate turnover were explained from time to time including through the letter dated 20. 09. 2021.

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It is submitted that subsequently in the year 2020 in view of the precarious financial developments emerged out of COVID 19 the Applicant requested for subordinate debt limit of 15% of capital and unsecured loan as on 31. 03. 2020 in terms of RBI Guidelines and Union of India guidelines issued specially which was for MSME Units/Enterprise which despite compliance of required norms and process including Resolution Plan given on 16. 03. 2021 in the meeting, was regretted orally in March 2021 that since the account had become substandard they cannot extend this subordinate debt whereas till that time the account was standard. Thereafter the existing limit was reduced per sanction dated 29. 03. 2022.

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The Applicant firm could not achieve the projected sales turnover due to plight in the business but continued to make sincere efforts for depositing the interest accrued from time to time.

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The account was classified NPA for the first time on 29. 01. 2020 and for delay in service of interest and poor turnover but subsequently on depositing the overdue amount the account was upgraded. Second time the account was again classified as NPA on 27. 12. 2022 which was on deposit of overdue amount was upgraded in the same month. Third time the account has been classified as NPA on 20. 05. 2023. First notice was given on 12. 02. 2022, second notice was given on 30. 08. 2022 and third notice was given on 28. 12. 2022. Finally notice is given on 26. 05. 2023 and the symbolic possession is taken on 17. 08. 2023.

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It is submitted that defendants also give Resolution Plan vide our letter dated 16. 03. 2021 to sanction 15% of capital and unsecured loan as on 31. 03. 2020 as per RBI guidelines and Union of India Guidelines issued especially for MSME Units/ enterprises so that the humble applicant could use the same for reduction of CC limit but the same was regretted on flimsy grounds saying the account being substandard contrary to the fact that till then the account was standard. However, since the nature of credit facility was not feasible to the nature of business/ trade the Defendants time and again requested the Bank to change the nomenclature of the credit facility by converting the full/part limit of Cash Credit into Overdraft against property as the value of the properties mortgaged were adequate to cover the required margin to convert part limit /full limit to OD against property but the Bank did not agree. On 29. 03. 2022 the existing Cash Credit Limit of Rs. 600 lacs was proposed to be reduced to Rs. 500 lacs with a provision that DP in the account be reduced to a level of Rs. 550 lacs immediately and further limit to be reduced gradually by Rs. 5 lacs p. m. commencing from May, 2022 as stipulated in Condition No. 2 of the sanction dated 29. 03. 2022. The rate of interest was stipulated as 11. 90% p. a. with monthly rest.

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As per terms of sanction dt. 29. 03. 2022 the DP as on August 2022 should have been RS. 580 lacs and whereas in fact the outstanding level was only Rs. 553 lacs hence why the account should be classified as NPA on 29. 08. 2022. The Interest in the account has been served almost regularly. Now if we look the position of the account as on the date of Demand Notice 26. 052023, the outstanding level of DP in the account should be Rs. 535 lacs whereas the outstanding balance was in fact on the date of classification of account as NPA on 20. 05. 2023 was Rs. 499. 96 lacs, hence again there is no cause of action for classifying the account as NPA and initiating recovery proceedings under the provision of SARFAESI Act.

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It is submitted that if we take the outstanding as mentioned in the Demand Notice being Rs. 506 lacs and see the entries of relevant date in the Account statement it would be revealed that just for bringing outstanding level beyond Rs. 500 lacs, arbitrarily cash handling charges amounting to Rs. 3989/-; SMS charges Rs. 5994/- were debited and also deemed interest in the name of Memorandum dues of Interest in the account Rs. 4,87, 726/- were also debited so as to show the fabricated outstanding level beyond Rs. 500 lacs. It is pertinent to mention that after classification of the account as NPA on 20. 05. 2023 the Defendant has deposited aggregate amount of Rs. 123. 79 lacs on various dates, evident from perusal of the account Statement. Contrary to the set guidelines of RBI for classification of the account as NPA, the Applicant Bank classified the account as NPA intermittently on 29. 01. 2020, 29. 08. 2022, 27. 12. 2022 and 20. 05. 2023.

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This shows their prejudice set of mind for pressurizing Defendant and running their business. After each time classification of the account, no sooner the interest was deposited the account is regularized. Whereas if the account is classified once without passing of intervening period of minimum 12 months how the category of the account could be changed without proper review and assessment based on data and facts and also taking the debtor also in confidence.

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Thus, the classification of the account as NPA is legally not justified and not in accordance to the provisions made therefor under the SARFAESI Act, hence bad in law. In view of this there was no cause for issuing the Recall Notice dated 30. 08. 2022. Since there was no financial reason for classification of the account as NPA on respective dates because for intermittently account going beyond gradually reduced limit for temporary period, the Bank had already a provision of charging maximum panel

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interest @ 2% and not that the Bank resorted to charge 17. 40% instead of 11. 90% .

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There was no cause for initiating legal remedy for recovery of dues since the Debtor was already making gradual repayment as per sanction terms (29. 03. 2022). No legal notice dated 24. 02. 2023 or Recall Notice dated 15. 05. 2023 was received and it was not warranted also because the outstanding balance on 24. 02. 2023 in the account was Rs. 522 lacs against the contemplated DP of Rs. 535 lacs as per sanction dated 29. 03. 2022 and outstanding Rs. 509 lacs as on 15. 05. 2023 as against contemplated DP of Rs. 535 lacs.

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The outstanding balance as on 20. 05. 2023 was Rs. 499. 96 lacs as against contemplated DP of Rs. 500 lacs hence again no justification for classifying the account as NPA or initiating legal remedies. The representation under section 13 (3 A) dated 29. 06. 2023 was made which has been without application of mind has been rejected marked as Annex. R-1 with the reply.

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Since beginning the Applicant Bank has been charging the arbitrary and higher rate of interest particularly from 01. 04. 2017 compared to the rate of interest as stipulated in the sanction from time to time viz. dated 21. 12. 2015, 07. 01. 2016 and 29. 03. 2022 in as much as that till May, 2025 an excess amount of interest of say Rs. 129 lacs has been charged during the intervening period besides panel interest of Rs. 44 lacs.

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It is submitted that defendants have been persistently making fervent appeal to the bank to rationalize/ streamline the rate of interest applied in consonance with the respective sanctions but there is no positive response. Not only this rate of interest chart as applied from time to time is also provided only after issuance of the Tribunal orders and follow up orders just in the month of May, 2025 only. Further it is also relevant to mention

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that during COVID period there was no justification for charging the panel interest and rather simple interest during that period should have been charged besides the fact that once the account is classified as NPA, only simply interest in maximum matching to the Term Loan account for Housing Loan could be charged because the facility was secured with mortgage of property.

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It is submitted that defendants have submitted in detail the facts and the legal deficiencies in the action of the Bank which demonstrates that the Bank had malafied intention to ruin the business of the Debtor just out of their whims and egos. Hence the O.A. deserves to be dismissed in the interest of natural justice. The other legal deficiencies in the Demand Notice and their proceedings carried under SARFAEI Act have been challenged in the SA 611/2023 filed by us which is also under adjudication before the Hon'ble Tribunal.

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It is submitted that calculations as per our Books of outstanding dues to be paid against which compromise proposal of Rs. 2.85 crores has already been submitted and out of which Rs. 50 lacs as upfront amount has also been paid is as follow: -

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It is submitted that without prejudice to the rights and contentions as in our reply as well herein above, notwithstanding that the O.A. is not maintainable and deserves to be dismissed for technical and legal grounds, the humble Defendant having clean set of mind and inclination to repayment the legitimate dues of the Bank, has already made a compromise proposal to the Bank in the SA of Rs. 2.85 crores assuring that no sooner the compromise is sanctioned or as may be ordered by the Hon'ble Tribunal the remaining amount will also be deposited within a maximum period of 30 days. In support of our submission of charging of the excess interest amounting to Rs. 129 lacs and illegitimate panel interest

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Rs. 44 lacs charged, we have already submitted our calculations supported with the CA certificate in the SA under consideration.

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It is submitted that the entire proceedings initiated under the provision of SARFAESI Act are although in violation of provisions of SARFAESI Act and the rules made there under and hence deserves to be quashed and set aside, yet besides also a fact that one of Applicant being Guarantor has expired on 03. 12. 2024 and the IA No. 326/2025 submitted for deletion of name of the deceased has been allowed vide order dated 22. 04. 2025 and in compliance of order dated 22. 04. 2025, applicants have filed an amended cause title and same is on record. The Respondent Bank has not issued a fresh notices to the legal heirs, yet the SA Applicant without pressing for quashing of the Demand notice u/s 13 (2) is inclined to settle the account and therefore in fairness have submitted a logical, sustainable compromise proposal of Rs. 2. 85 lacs and expect the Bank to come forward and taking pragmatic view of the proposal should accept this offer.

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Sh. K. K. Jain filed Vakalatnama on behalf of all the Defendants and filed reply on 04. 10. 2023.

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In S. A. 611/2023, Counsel for the S. A applicant submitted that at a Cash Credit Limit of Rs. 600 lacs (Rupees Six Hundred Lacs) against primary security of hypothecation of stocks, book debts and collateral security of mortgage of immovable properties sanctioned against Property was sanctioned in the year 2016 which was subsequently reviewed/ renewed vide sanction letter dated 31. 03. 2021. In terms of the sanction dated 31. 03. 2021 the cash credit limit was to be reduced to Rs. 3.00 crore but the same was not materialized due to the fact that this was an arbitrary decision of the Respondent Bank of instant reduction of limit as against our proposal of restructuring of the facilities by converting of the part limit into Term Loan and continuing part limit as working facilities. However, the S. A Applicant did make his best efforts to repay the principal amount also to

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the desired extent besides continuing to serve the interest in the account and could reduce it to Rs. 500 lacs but could not reduce the limit to Rs. 3.00 crore.

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Counsel for the SA applicant submitted that in view of the precarious financial developments emerged out of COVID 19, the Applicant requested the Respondent Bank to grant them subordinate debt limit of 15% of capital and unsecured loan as on 31. 03. 2020 in terms of the RBI guidelines and Union of India Guidelines issued especially for MSME Units/ enterprises so that the Petitioners could use the same for reduction in the existing Cash Credit limit and as desired by the Bank vide their letter dated 23. 09. 2020 all due information and documents were submitted under the cover of letter dated 20. 10. 2020 which was further replied by the Bank vide their letter dated 03. 02. 2021 and 06. 03. 2021 asking for further certain information and further in the meeting held on 16. 03. 2021 a Resolution Plan was also delivered to the Bank but the Respondent Bank has not given any heed on this request and even not regretted in writing till now except orally sometime in March, 2021 that under the pretext that since the account had become once irregular substandard they cannot extend this facility to the Applicant. Whereas it is relevant to mention that till recent the account has been standard leaving aside intermittent change in the category of account for temporary periods. The Resolution Plan given in the meeting on 16. 03. 2021 reads as:

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"Ref: Resolution Plan for Khandaka Sons Jewellers - 15% GSD Scheme Tenure Limit

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As mentioned above we M/s. Khandaka Sons Jewellers wil ldeposit the entire overdue amount by availing the 15% CGSD Limit.

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We wish to repay the 15% CGSD Scheme amount in 120 months equal installments and we assure we will never default repaying these instalments. We are the honest Customers of Bank. Please help us and support us in this pandemic situation.

Sd/

Kuber Khandaka,

Partner."

Counsel for the SA applicant submitted that pursuant to our representations and follow up subsequently the existing Cash Credit Limit was reviewed/ renewed vide sanction dated 29. 03. 2022, according to which the Cash Credit limit was reduced to Rs. 5.00 crores instantly and it was also mentioned in the sanction dated 29. 03. 2022 that every month from May, 2022 the Bank will reduce the Drawing Power in the account by Rs. 5 lacs and in consonance there to the Applicant has to deposit Rs. 5 lacs additionally besides the interest amount being debited in the account on monthly basis. It is submitted that the Applicant continued to serve the interest portion till May, 2023 regularly but somehow could not deposit the amount in lieu of reduction of the Drawing Power as proposed in the sanction dated 29. 03. 2022. It would be revealed that the balance outstanding on 18. 05. 2023 was Rs. 4,99, 90, 017 i. e. within the sanctioned limit of Rs. 500 lacs but arbitrarily and illegally the various charges such as cash handling, Inward Return charges, SMS charges etc. have been debited amounting to Rs. 5994/- besides also debiting the undue accrued interest in the name of memorandum dues of interest for the intervening period (i. e. from the last day of previous month to 20. 05. 2023) amounting to Rs. 4,84, 726. 66 was deemed debited just to escalate the outstanding level beyond Rs. 500 lacs and considering the outstanding beyond sanctioned limit the account was classified as NPA on 18. 05. 2023/20. 05. 2023 and the notice dated 26. 05. 2023 under section 13 (2) of SARFAESI Act was served.

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Counsel for the SA applicant submitted that as contended in their letter dated 08. 08. 2023 in response to our representation 29. 06. 2023 under section 13 (3 A) of SARFAESI Act, it is submitted that at no point of time any notice with regard to the degradation of the account was given to the Applicant and as per the knowledge of the Applicant the account was standard and not degraded as

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NPA earlier than recently stated to have been classified as NPA on 20. 05. 2023.

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It is submitted that subsequent to the notice dated 26. 05. 2023 under section 13 (2) of SAFRAESI Act, the Applicant has also deposited Rs. 10970/- on 22. 07. 2023, Rs. 18, 71, 500/- on 09. 08. 2023 and further Rs. 15 lacs deposited on 13. 08. 2023 in lieu of the cheque tendered before the DRT on 10/08/2023 thus aggregate Rs. 33. 82 lac and is further inclined to deposit Rs. 5 lac or so in lieu of another cheque of Rs. 4.70 lacs tendered before the DRT on 10/08/2023.

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Both these cheques are drawn by M/s. Raj Ratan Jewelers in favour of the Applicant firm and since the delay was occurring in presentation of the same for encashment the Applicant considered it prudent to ask the drawer of the cheque to deposit the like amount of Cheques through NEFT and accordingly Rs. 15 lacs have been deposited and rest Rs. 4.70 lacs are also being deposited. Thus, taking together the amount so far deposited the outstanding balance would stand reduced to RS. 4,72, 41, 270/- much below the sanctioned limit and further with deposit of another Rs. 5 lac as envisaged above, it would stand reduced to Rs. 4,67, 41, 270/- only.

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Counsel for the SA Applicant submitted that even if the amount of DP to be reduced monthly of Rs. 5 lac commencing from May, 2022 upto July, 2023 it amounts to Rs. 80 lacs to be reduced from sanctioned limit of Rs. 500 lac i. e. reduced level of Rs. 4.20 crores. Keeping this aspect in view the SA Applicant hereby undertake and has confirmed to the Respondent Bank that by the first week of September, 2023 further an amount of Rs. 125 lacs approx. will be deposited and by October, 2023 the level of outstanding in the account would be brought down to Rs. 300 lacs.

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It is submitted that despite the above sincere efforts and fervent appeal to the Respondent Bank for not initiating proceedings under the provisions of

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SARFAESI Act, they have in follow up to their Notice under section 13 (2) of SARFAESI Act have taken symbolic possession of the properties charged by affixing the Notice thereupon under Rule 8 (1) on 17. 08. 2023.

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In response to this the Applicant has further represented his case vide his letter dated 19. 08. 2023. Through this letter the Applicant has made fervent appeal that in view of his sincere efforts being made for deposit of the amount, let the Bank defer the recovery proceedings at least for some period say October, 2023 or so and if during this assured period the Applicant fails to keep their promise the Bank would have liberty to rejuvenate their proceedings from present level under the provisions of SARFAESI Act.

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It is submitted that as regards the turnover in the account being not commensurate to the sales is concerned we have long back vide our letter dated 20. 9.2021 and from the perusal of the same it would be revealed that we have already explained post COVID situation most of the sales are out of the exchange of old Gold and Jewellery items and hence except a little margin, the major portion turn out to be in commodity and so apart from this whatever is little cash generated out of sales we have to deposit the interest accrued monthly and meet petty and sundry office expenses also. In view of this the turnover in the account is not commensurate to the sale as projected.

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It is submitted that it is stated in the Demand notice dated 26. 05. 2023 cited above that the balance outstanding as on date of NPA i. e.20. 05. 2023 is RS. 5,04, 80, 737. 97 whereas the statement of account shows the outstanding balance of Rs. 4,99, 96, 011. 91 only on the date of NPA. Thus, there is contradiction in the amount shown outstanding and demanded. Here it is relevant to mention that the interest of the month ended May, 2023 was only payable after last day of the month which has been added in the middle of the month just to escalate the outstanding in the account beyond sanctioned limit with a malign motive of classifying the account as

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NPA. However, interest debited has also been deposited upto date. In view of this there remains no irregularity in servicing of the interest in the account and on this count the account cannot be classified as NPA.

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It is submitted that it is further to be noted that when the interest is being served almost regularly if there is irregularity of excess drawing beyond Drawing Power the Bank has liberty to charge penal interest because in due course no sooner the amount is deposited the account comes in order Suo motto. For this reason, Bank is not justified in classifying the account as NPA without giving any notice for reduction of D. P.

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It is submitted that as regards the purported non compliance of the terms of sanction letter dated 29. 03. 2022 as mentioned in your above notice we have submitted point wise reply in our letter dated 11/8/2023 which reads as under:

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(1) Our sales total sales for the year is around Rs. 7 crores out of which major portion comes out of the exchange of old ornaments/ Jewellery with new and hence in fact the liquidcash amount of sales comes very small and out of the cash generated we are depositing the amount of approximately Rs. 1 crore to serve the interest and charges being levied in theaccount and rest of the cash is used in sundry expenses pertaining to the office and business, including salary of thestaff and other statutory expenses. Hence despite our inclination to route the entire sales through the account we find ourselves in helpless nature. However, we can assure that we have only single Bank account i. e. with you and whatever the surplus out of cash generated is deposited in the account from time to time.

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(2) As regards the latest ITR and Status net worth statement of guarantor Shri Padam Prakash Khandaka is concerned, we may humbly submit that he is aged 75 years and since last 5 years he is not the assessee in Income tax because of he being not in business of any kind due to his age factor and having no taxable income. In view of this fact the condition stipulated is not practical and beyond control to be

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complied with and hence needs to be revisited and waived. However, his net worth remains stable and constant.

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(3) As already stated herein above overdue amount inclusive of the interest debited upto April, 2023 has already been paid by depositing Rs. 10 lacs on 18. 05. 2023 and as regards the further accrued interest for the month ended May, 2023 is also being paid. We assure that we will ensure the repayment of interest accrued regularly without any default and also as agreed we are vigorously making efforts to repay the entire dues by raising liquidity from other sources and in the meantime, we humbly request your kind cooperation by keeping patience because undue pressure on us for quick repayment creates lot of mental agony whereby the focus on 14 the business activities is disturbed and resultantly adverse impact on business performance. According to us there is nothing overdue in any other account and hence please enlighten us as to in what context CIC reports is referred.

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(4) With regard to age wise book debts it is submitted the book debts as included in the stock statement for arriving at the Drawing power are less than 90 days only. However, itis pertinent to mention that as per sanction 25% margin is required to be maintained on stocks and 30% margin on book debts. On perusal of the stock statements submitted it would be revealed that the stock level of paid up stocks in itself is sufficient to cover the drawing power for the sanctioned / availed limits in Cash Credit account irrespective of the book debts level. However, while submitting stock statement when next due, we would provide list of book debts also age wise with their addresses.

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(5) As regard the Balance Sheet of the allied concerns it is submitted that our following allied concerns have closed their business on the dates mentioned against each and hence their Balance sheet now has no relevance in the matter, hence this condition in view of the above facts needs to be waived. Rishabh Enterprises - 31. 03. 2017, Hotel Indraprastha - 31. 03. 2019, Shree Kuber Industries - 31. 03. 2018.

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(6) There is no such case of mismatch of sales as per stock statement and as per GSTR. However kindly advise us the specific instance of such mismatch so that we

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could explain in a better way. As regards the GSTR details for the period 01. 04. 2021 to 31. 03. 2022 and 01. 04. 2022 to 3. 11. 2022 the same are being obtained and would be sent shortly because for the present the services of the Chartered Accountant dealing this subject are temporarily not available on certain technical/ legal grounds.

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(7) There are no statutory dues are overdue / outstanding against us including TDS, GST, Custom/Excise duty, ESI, PF etc. and all the statutory dues as applicable on us for period F. Y.2021-22 and latest till 30. 09. 2022 have been paid by us. However, it is significant to bring on record that one matter regarding disputed income as taken note by the Income is pending before the Rajasthan High Court vide S. B. Civil Writ Petition No. 4723/2020 where the matter has been clubbed with other Writ Petitions of similar nature and pending decision / next date the proceedings have been stayed in pursuance to the demand notice dated 04. 03. 2020 vide the Court order's dated 20. 07. 2020.

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(8) Confirmation for verification of Top 20 book debtors or 50% of book debts as on 30. 09. 2022 and 31. 12. 2022 will be submitted by obtaining the same from the auditor and sent shortly because for the present the services of the Chartered Accountant dealing this subject are temporarily not available on certain technical/legal grounds.

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(9) We confirm there is no diversion of funds in the account except genuine trade transactions with the associate firms in case of need. However, Certificate to this effect will be submitted by obtaining the same from the auditor and sent shortly because for the present the services of the Chartered Accountant dealing this subject are temporarily not available on certain technical/legal grounds.

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(10) It is not true that the account is irregular as the interest debited in the account is being serviced regularly on monthly basis and the drawings are well within the drawing power calculated on the basis of the stocks/ book debts available as per stock statements submitted.

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It is submitted that in the given facts and circumstances when the interest servicing in the account is regular and we are also inclined to ensure

¶95

reduction in the sanctioned limit/ drawing power gradually in aggregate Rs. 50 lacs a year and hence we do not see any reason why our account should be classified Non-Performing Assets and subjected to the provisions of SARFAESI Act, 2022 for recovery proceedings. It is more explicit that the Bank's dues are well secured with the present value of the securities charged to the Bank by way of equitable mortgage of the properties which are valued not less than Rs. 8.60 crores as per Valuation Report already submitted to the Bank.

¶96

It is submitted that there is contradiction in the date of classification of the Account as NPA as will be evident from the perusal of the demand Notice dated 26. 05. 2023 under section 13 (2) that date of NPA is mentioned as 20. 05. 2023 and the letter dated 08. 08. 2023, wherein the date of NPA is mentioned as 18. 05. 2023. This legal deficiency makes this Demand Notice not tenable in the eyes of law but also speaks about the malign motive and indifferent attitude of the Respondent Bank.

¶97

It is submitted that likewise the amount outstanding and payable as mentioned in the Demand Notice is Rs. 5,06, 23, 740. 97 as on the date of classification of the account as NPA on 20. 05. 2023 and whereas in the Statement of Account enclosed thereto, on perusal it would reveal that the outstanding balance in the account as on 20. 05. 2023 was Rs. 4,99, 96, 011. 91. Thus, a contradiction in the amount of demand, which makes the Demand Notice as infectious. Not only this the vindictive approach of the Respondent Bank is also demonstrated.

¶98

It is submitted that from the perusal of the letter sent to the Head office of the Respondent Bank, it would be revealed that during the period from 2017-18 to till July, 2023 the Bank has charged arbitrarily and illegally excessive interest and other charges amounting in aggregate Rs. 1,27, 56, 860/- but there is no response in the matter. It is further submitted that if this issue of arbitrary and excessive substantive reduction in the outstanding level.

¶99

It is submitted that the Respondent Bank has already filed an Original Application No. 1068/2023 and hence keeping in view the action of initiation of the recovery proceedings under the provisions of SARFAESI Act is not warranted and it is nothing but to pressurize and demoralize the SA Applicant just to ruin his business for which since long the Respondent Bank has been indifferently behaving in their acts and deeds.

¶100

It is submitted that even today the SA Applicant is inclined to mobilize there sources including by selling their other immovable properties not engaged in the business or mortgaged to the Bank, at shortest possible time at the fair and reasonable market price so as to repay the entire legitimate dues but all this would take some time say 8-10 months in settling the entire things. As regards the security to the loan amount is concerned it is evident that the present market value of the properties mortgaged to the Bank is more than Rs. 862 lac and in order to substantiate our this statement a copy of the Valuation Report of the Government of India approved Valuer is submitted.

¶101

It is submitted that the respondent Bank without giving prior notice has taken possession of the mortgaged properties on 17. 08. 2023 under the provisions of section 13 (4) of SARFAESI Act by affixing the notice under Rule 8 (1) of the Rules made under the SARFAESI Act. The action of the respondent Bank and the manner in which they have proceeded for possession of the properties is quite illegal, contrary to the provisions of the settled law and the rules and hence deserves to be set aside with a prayer to restore the possession.

¶102

It is submitted that a representation in response to the Demand Notice dated 26/05/2023 was submitted under section 13 (3 A) of the Act on 29. 06. 2023 which has been replied by the Respondent Bank on 08. 08. 2023 instead of 15 days as is required under the provisions of the Act and the rules made there under. It is further to be noted that in response to their

¶103

letter dated 08. 08. 2023 we again sent representation on 11/08/2023 and the same remains un responded.

¶104

It is submitted that meanwhile the Respondent Bank without giving prior notice as required under the provisions of the Act, have taken symbolic possession of the mortgaged properties on 17. 08. 2023 by affixing the Possession Notice on the property in question, which is bad in law and make their entire proceedings to be quashed.

¶105

It is submitted that the matter being subjudice before the Hon'ble Tribunal through the Original Application No. 1068/2023 the Respondent Bank should not resort to the proceedings under the provisions of SARFAESI ACT and better to come forward for amicable settlement, in view of our categorical inclination to repay the dues and the demonstrative efforts for having deposited the amount as stated above after filing of the O.A.., but there has been no response.

¶106

It is submitted that again considering the gravity of the situation and to demonstrate our loyalty for repayment of the Bank's dues, of course in sanctioned tenure period in the given facts and circumstances we have again approached to the respondent Bank through their Authorized officer vide our letters dated 29. 06. 2023, 11. 08. 2023 and 19. 08. 2023, no positive reply as yet received.

¶107

It is submitted that we consider it prudent to mention that it is time circumvent that we could not pay the intermittently the interest portion and the like amount of DP reduced timely but we never had such intentions and were rather making all out vigorous efforts to meet out the financial obligations. Even now we are very much inclined to repay the Bank's dues by realizing our movable/immovable assets at a fair price at the earliest but again all this would entail a time period slot which needs to be considered.

¶108

According to our estimate we will be able to mobilize the funds for repayment say within a maximum period of 8-10 months. Hence please consider this extended time slot as moratorium for our enterprise which otherwise within the repayment schedule time period which continues upto September, 2025 or for the entire dues even upto September, 2030. If principally agreed for according time as contemplated in the sanction dated 29. 03. 2022.

¶109

It is submitted that we are prepared to submit the repayment plan in phased manner within the sought time which is again within there payment tenure fixed by the respondent Bank vide their sanction letter dated 29. 03. 2022 and thus rather the whole amount will be paid well before the last date of repayment schedule which is September, 2025 or even September, 2030.

¶110

It is submitted that the Ld. Tribunal be pleased to examine legality and sanctity of the demand notice under section 13 (2) of the Act without issuing the recall notice and without adhering to the set norms, procedure and rules made and be also pleased to examine the legality of their taking possession on 17. 08. 2023 by invoking the provisions of Section 13 (4) read with rule 8 (1) without giving prior notice of their such intent.

¶111

It is submitted that the Ld. Tribunal direct the respondent Bank to place on record the statement of Account from the beginning along with details of rate of interest and other charges debited compared to the terms of sanction in force in the account particularly from the period from last date of sanction and also directed the respondent Bank to reverse the penal and undue charges debited in the account right from beginning as per letter addressed to the Head Office of the Respondent Bank.

¶112

Heard arguments and perused the record.

¶113

In the result, this O. A. No. 1068 of 2023 is allowed in following terms:

¶114

having heard the arguments and perused the record and the arguments oral and written, one thing is clear that defendant no. 6 expired on 03. 12.

¶115

By operation of law, O.A. stands abated against defendant no. 6 and limitation to set aside abatement has also expired.

¶116

The Tribunal is of the view that no order can be passed against defendant no. 6 or his property. It was the duty of the bank to bring LR’s on record which has not been complied with. Thus, no decree can be passed against a dead person or his estate.

¶117

The account had become NPA on 29. 01. 2020 with the outstanding amount of 6, 15, 47, 000/- There was a restricting done even a fresh sanction letter was also issued, but while issuing notice under Securitization Act, the bank has relied upon the earlier sanction letter only. They have also relied upon the earlier outstanding in the account. Therefore, the bank is also in tune and in concurrence with Reserve Bank of India guidelines. That dispute restricting the account has to be kept in surveillance for one year or more and in case of default, the same date of NPA will be treated as date of account becoming NPA.

¶118

Continuously the Bank has been declaring the account as NPA in 2020, (after Moratorium) 2022 & then in 2023 thus it is clear that as per RBI guidelines the account never came out of NPA thus first date i.e. 29.01.2020 is the correct and only date of NPA.

¶119

During the pendency, the borrower has deposited a total sum of Rs. 4, 20, 59, 470/- and Rs. 1, 23, 79, 470/-. As per orders of this Tribunal a further sum of Rs. 50. 00 Lac was also deposited.

¶120

During the course of the arguments, the defendants / SA applicants have argued that the business suffered set back because of various reasons including strike by jewellers, notebandi and Corona pandemic. Therefore, I have requested to grant concession in interest from the date of NPA, i. e. 29. 01. 2020 till payment. The Tribunal is aware of the circumstances as stated above.

¶121

Counsel for the bank strongly opposed any relief to the SA applicant/defendants and has argued that their account was realized and there is a subsequent default being made by them and subsequently, they have classified the account as NPA. There is no answer to the fact that notice under Section 13 (2) relies upon the original sanction letter and not the sanction letter by which the account was restricted.

¶122

The Tribunal is of the opinion that bank is entitled to 8% simple interest from 29. 01. 2020 or NPA amount of Rs. 6, 15, 47, 000/- of reducing balance, i. e. as and when the payment is given that will be reduced from the principal and the balance amount only, the interest will be charged.

¶123

ORDER

¶124

O.A. stands decreed and SA proceedings stands disposed of with order as under:

¶125

Defendants no 1 to 5 are liable to pay Rs 6, 15, 47, 000/- along with interest @ 8% simple from 30.01.2020 on reducing balance giving credit & effect of amount deposited by them in terms of decree being passed in O.A. No liability is fixed on defendant no. 6, accordingly the mortgage of the property if any by the defendant no. 6 also stands discharged. The amount already paid since 30.01.2025 shall be adjusted on the dates when payment was made.

¶126

The payments shall be adjusted in NPA amount of Rs 6, 15, 47, 000/- and interest shall be computed separately and after clearance of principal liability interest shall be recovered. Cost of this litigation is fixed at 2.50 lacs to be recovered by Bank.

¶127

According to the SA applicants/defendants they are ready and willing to pay a sum of Rs. 2.70 Crore to the bank to get rid of liabilities by 30. 09. 2025 and if amount as ordered above is less than Rs. 2.70 Crore, they will pay Rs. 2.70 Crore to the bank by 30. 09. 2025. If the payment is not made

¶128

by 30. 09. 2025, the bank will be at liberty to move MA for issuance of Recovery Certificate.

¶129

Upon payment of above amount the properties shall stand discharged and bank shall issue no dues certificate and return properties papers to owns/mortgagers if not required or charged in any other account.

¶130

(Vimal Gupta) Presiding Officer, Debts Recovery Tribunal, Jaipur

¶131

Signed and uploaded on 30.08.2025.

Punjab National Bank v. Khandaka Sons Jewellers

Case brief

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Punjab National Bank v. Khandaka Sons Jewellers

Case brief

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