Allowed

Tamilnad Mercantile Bank Limited v. S Afsar

DRT24 Sept 2025OA/110/2022

Case brief

AI extract

What is this about?

Tribunal allowed the original application filed by a bank to recover over Rs. 3.22 crore including interest from defaulters of an overdraft facility, directing sale of mortgaged properties if payment is not made.

What did the court decide?

Directing respondents to pay Rs.3,22,90,422.10 p.a. plus interest at 10.90% p.a.; authorizing the applicant to sell movable and immovable properties listed in the schedule to recover the dues if payme

Tamilnad Mercantile Bank Limited versus S Afsar — Banking and Recovery | DRT (2025)

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OA No. 110/2022

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 24^TH DAY OF SEPTEMBER, 2025 PRESENT: SEEMA SINHA, [PR. DISTRICT & SESSIONS JUDGE – Retd]

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PRESIDING OFFICER

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OA No.110/2022

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Between

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Tamilnad Mercantile Bank Ltd., Edalakudy Branch, 846, Cape Road, Kottar Post, Edalakudy, Nagercoil – 629 002. Rep. By its Branch Manager.

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---Applicant Bank

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And

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Mr. S. Afsar,

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S/o Sheeref,

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Prop. Halal Trading company,

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No.20, Kottar, Samarasaveethi, Nagercoil – 629 002, Kanyakumari District.

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Also at:

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Mr. Afsar Dayil, Adinadu South, Kattilkadavu, Adinadu, Karunagapally, Kollam – 690 542, Kerala.

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Mr. A.J. Shereef, S/o Abdul Rahman, Adinadu South, Kattilkadavu, Adinadu, Karunagapally, Kollam – 690 542, Kerala.

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Page 1 of 8

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OA No. 110/2022

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Mrs. Sakeena, W/o A.J. Shereef, Adinadu South, Kattilkadavu, Adinadu, Karunagapally, Kollam – 690 542, Kerala. ---Defendants

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Counsel for the Applicant Bank : M/s N. Dilip Kumar, R.M. Ajay Parthiban

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This Original Application was heard and fixed for passing final order before me in the presence of the above said Advocate for Applicant Bank and the Defendants having been set ex-parte and upon hearing the arguments of Counsel for Applicant Bank and upon perusing the material available on the records and having stood over for consideration till this day, this Tribunal delivered the following:

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JUDGEMENT

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1 . This Application has been filed under Sec.19 (1) of the "The Recovery of Debts due to Banks and Financial Institutions Act, 1993" now amended as The Recovery of Debts and Bankruptcy Act, 1993 by the Applicant Bank on 21.09.2021 to recover from the Defendants a sum of Rs.3,22,90,422.10p together with interest at the rate of 10.90% p.a. plus penal interest at the rate of 2%p.a. in respect of Over Draft facility from the date of filing of Application till the date of realization with cost and by sale of mortgaged/hypothecated properties, more fully described in Schedules of the application.

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2 . The brief averments of the application filed by the Applicant Bank are as follows:-

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The 1^st defendant is the Proprietor of M/s. Halal Trading company involves in trading of groceries at Nagercoil, Kanyakumari district. He had approached the Applicant Bank for Overraft facility as working capital for his business needs.

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Over Draft Facility 09270050900446

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The Applicant Bank accepted the request of the defendant and sanctioned the Over Draft Facility of Rs. 2,75,00,000/- after executing necessary documents in favour of the Applicant Bank. D-1 executed a Demand Promissory note on 21.08.2019 for a sum of Rs.2,75,00,000/- in favour of the Applicant bank as a continuing security promising to repay the loan amount on demand with interest at the rate of 11.55%p.a with monthly

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Page 2 of 8

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OA No. 110/2022

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rests. On 21.08.2019 the 1^st defendant had executed a Letter of undertaking for repayment of the loan amount due in promissory note and letter of undertaking for the operation of the loan account accepting all terms and conditions of the bank. And also executed Agreement of hypothecation of stock, Agreement of hypothecation of Book Debts which is mentioned in the “A” Schedule herein. The 1^st defendant had executed power of Attorney in favour of Applicant bank. The 2^nd and 3^rd defendant had executed personal guarantee agreement in favour of the Applicant bank and deposited the title deeds with the Applicant bank and Memorandum of Title deeds was made on 22.08.2019 as Doc.No.8725 of 2019 which are mentioned in ‘B’ Schedule herein.

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The 2^nd and 3^rd defendant had executed consent letter, Mortgage extension letter and undertaking letter to keep the security intact letter with regard to the property in B schedule and also executed Guarantee covering letter and letter of guarantee and thereby stood as guarantor’s for the credit facility availed by them. After availing the loan, defendants were not regular in the matter of repayment. The defendants had not operated the Overdraft account properly as agreed and promised, hence the loan account was classified as NPA on 31.03.2021. So, the demand notice was issued to the defendants on 20.04.2021 and possession notice was issued on 16.07.2021.

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Despite repeated demands and reminders, made by the Applicant Bank, the Defendants have failed and neglected to repay and adjust their liability. Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs.3,22,90,422.10p together with interest at the rate of 10.90% p.a. plus penal interest at the rate of 2%p.a. in respect of Over Draft facility from the date of filing of Application till the date of realization with cost.

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The Applicant Bank has submitted the following documents in support its claim in the OA, which are as follows:

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S. No.	Date	Description of document	Exhibits
1.	21.08.2019	Loan requisition letter	Ex.No.A-01
2.	21.08.2019	Sanction Advice	Ex.No.A-02
3.	21.08.2019	Proprietor declaration letter	Ex.No.A-03
4.	21.08.2019	Demand PromissoryNote	Ex.No.A-04
5.	21.08.2019	Take deliveryletter	Ex.No.A-05
6.	21.08.2019	Demand Promissory Note presentment thereof	Ex.No.A-06
7.	21.08.2019	Undertakingletter	Ex.No.A-07
8.	21.08.2019	Undertakingletter	Ex.No.A-08
9.	21.08.2019	Undertakingletter	Ex.No.A-09

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Page 3 of 8

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OA No. 110/2022

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10.	21.08.2019	Undertakingletter	Ex.No.A-10
11.	21.08.2019	Hypothecation Agreement	Ex.No.A-11
12.	21.08.2019	Letter of Hypothecation of book debts	Ex.No.A-12
13.	21.08.2019	Power of Attorney	Ex.No.A-13
14.	21.08.2019	Undertakingletter	Ex.No.A-14
15.	21.08.2019	Authorization Letter from borrower	Ex.No.A-15
16.	21.08.2019	Consent letter of borrower	Ex.No.A-16
17.	21.08.2019	Consent letter of Mortgagor	Ex.No.A-17
18.	21.08.2019	Undertakingletter to keepsecurity	Ex.No.A-18
19.	21.08.2019	Memorandum of deposit of Title deeds	Ex.No.A-19
20.	21.08.2019	Guarantee coveringletter	Ex.No.A-20
21.	21.08.2019	Authorization letter of Guarantor	Ex.No.A-21
22.	21.08.2019	Guarantee Agreement	Ex.No.A-22
23.	22.08.2019	Memorandum of Deposit of Title deeds	Ex.No.A-23
24.	26.09.1986	Registered Sale deed in Doc.No.3598 of 2019	Ex.No.A-24
25.	09.12.1996	Registered Sale deed in Doc.No.4350 of 1996	Ex.No.A-25
26.	----	Loan Account Statement	Ex.No.A-26

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"A" SCHEDULE

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HYPOTHECATED GOODS

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All the stocks, trade and all goods stored at the premises of defendant and the go-downs and warehouse of the defendants.

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HYPOTHICATED STOCKS AND BOOK DEBTS

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All the hypothecated stocks, book debts, outstanding, money receivables, claims and bills due and owing to the defendants,

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"B" SCHEDULE

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DESCRIPTION OF THE IMMOVABLE PROPERTY

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ITEM I

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Kollam District, Karungapally Taluk, Adinadu Village, Kulashekarapuram Panchayat, KerlaState in Re S.No. 117/2, 115/ 20-4, 115/20 an extent of 7.8 ares, 2.32 ares and 10.11 ares in following boundaries

Page 4 of 8

OA No. 110/2022

Boundary:

North : Road South : Property of Thiruvikaramup East : Purayidom West : Tharapurayidom Nilam

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ITEM II

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Kollam District, Karungapally Taluk, Adinadu Village, Kulashekarapuram Panchayat, KerlaState in Re S.No. 115/20-3 an extent of 21.15. ares in following boundaries

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Boundary:

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North : Road South : Property of Sainalbdeen East : Property of Rahiyanathu West : Property of SasiUsef & Usha

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3 . On the other hand, Notices were issued to Defendants and since from the beginning of the case, there was no representation on behalf of the Defendants. Hence, Defendants were set ex-parte.

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4. Now the main point for consideration before me is as to whether the Applicant has been able to prove his case on his own leg?

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Having gone through the affidavit of the applicant and the documents filed by them and also considering the submission of the counsel for the Applicant, I find that the Applicant Bank, in order to prove its claim, has filed Proof Affidavit executed by one Mr. N. Karthikeyan, who is the Manager of the Applicant Bank.

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He has stated in his affidavit that the defendants has availed Over Draft Facility from the Applicant Bank, but they failed to pay the outstanding loan amount, hence he has filed the case. The applicant bank has also filed the documents given by the defendants at the time of sanctioning the loan amount, which have been marked as exhibits No.A-01 to A-26 in support of its claim in the OA.

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The Loan requisition letter has been marked as Ex.No.A-01, Sanction Advice has been marked as Ex.No.A-02, Proprietor declaration letter has been marked as Ex.No.A-03, Demand Promissory Note has been marked as Ex.No.A-04, Take delivery letter has been marked as Ex.No.A-05, Demand

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OA No. 110/2022

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Promissory Note presentment thereof has been marked as Ex.No.A-06, Undertaking letter has been marked as Ex.No.A-07, Undertaking letter has been marked as Ex.No.A-08, Undertaking letter has been marked as Ex.No.A-09,, Undertaking letter has been marked as Ex.No.A-10.

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The Hypothecation Agreement has been marked as Ex.No.A-11, Letter of Hypothecation of book debts has been marked as Ex.No.A-12, Power of Attorney has been marked as Ex.No.A-13, Undertaking letter has been marked as Ex.No.A-14, Authorization Letter from borrower has been marked as Ex.No.A-15, Consent letter of borrower has been marked as Ex.No.A-16, Consent letter of Mortgagor has been marked as Ex.No.A-17, Undertaking letter to keep security has been marked as Ex.No.A-18, Memorandum of deposit of Title deeds has been marked as Ex.No.A-19, Guarantee covering letter has been marked as Ex.No.A-20.

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The Authorization letter of Guarantor has been marked as Ex.No.A21, Guarantee Agreement has been marked as Ex.No.A-22, Memorandum of Deposit of Title deeds has been marked as Ex.No.A-23, Registered Sale deed in Doc.No.3598 of 2019 has been marked as Ex.No.A-24, Registered Sale deed in Doc.No.4350 of 1996 has been marked as Ex.No.A-25, Loan Account Statement has been marked as Ex.No.A-26. So the averments of the applicant as well as the statement of the pleading have been corroborated by the above mentioned documents.

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As the Defendants remained ex-parte, the claim of the Applicant Bank is neither disproved nor dislodged and goes on record as proved. Accordingly a cumulative analysis of both the Proof Affidavit and documents marked by the Applicant Bank would prove the claim of the Applicant Bank in the OA.

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So far the claim of interest is concerned, it is a well settled Law that the Tribunal has got powers to award pendente lite interest in view of the Judgment of the Hon’ble Supreme Court in N.M. Veerapa Vs Canara Bank (reported in AIR 98(1), 1101 & in Central bank of India Vs Ravindra and OS (AIR, 2001(1), 3095).

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So far the penal interest is concerned Hon'ble supreme court stated in the said judgement as followed " Though interest can be capitalised on the anology that the interest falling due on the accrued date and remaining unpaid, partakes the character of amount advanced on that date, yet penal interest, which is charged by way of penalty for non payment, cannot be capitalized. Further interest, i.e interest on interest, whether simple, compound or penal, cannot be claimed on the amount of penal interest. Penal interest cannot be capitalized. It will be opposed to public policy ".

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Page 6 of 8

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OA No. 110/2022

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Therefore, this Original Application is allowed. The Applicant Bank is entitled for a final order on the following lines:-

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The Applicant Bank is entitled to recover from the Defendants, a sum of Rs.3,22,90,422.10p together with interest at the rate of 10.90% p.a. in respect of Over Draft facility from the date of filing of Application till the date of realization with cost. Accordingly, it is hereby

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ORDERED

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(a) That the Defendants are directed to pay jointly/severally a sum of Rs.3,22,90,422.10p together with interest at the rate of 10.90% p.a. in respect of Over Draft facility from the date of filing of Application till the date of realization with cost within one month from the date of receipt of this order.

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(b) In case of default of payment by the above mentioned Defendants, the Applicant Bank is at liberty to sell the movable / immovable properties more fully described in Schedule of the original application for appropriation of sale proceeds towards the satisfaction of amount due to the Applicant Bank.

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(c) If the sale proceeds are not sufficient, after defraying the expenses of such sale, for the payment of all such amounts, the defendants are jointly/severally liable to pay the amount of such deficiency with interest mentioned above until realization.

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(d) Any amount remitted during the course of this proceedings shall be given due credit, to the loan account of the defendants.

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(e) Recovery Certificate be prepared, as per the directions given above, and issue accordingly. A copy of the order is to be communicated to the parties concerned, immediately.

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Page 7 of 8

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OA No. 110/2022

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(f) It is further ordered that the Applicant Bank shall file cost memo within a period of one month from the date of receipt of this order, so as to prepare the recovery certificate with cost for the Over Draft facility and the Recovery Officer is also directed to proceed with the matter in accordance with law. In case, cost memo is not filed before said period of one month, Recovery Certificate will be prepared with available records.

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Dictated to T.P, taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 24^th September, 2025.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 08.10.2025

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Tamilnad Mercantile Bank Limited v. S Afsar

Case brief

What is this about?

What did the court decide?

Tamilnad Mercantile Bank Limited v. S Afsar

Case brief

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