Allowed

M/S. Uco Bank v. Aurora Scientific and Technological Institute

DRT19 Sept 2025OA/176/2022

Case brief

AI extract

What is this about?

The Tribunal allowed an Original Application filed by UCO Bank for recovery of dues under SARFAESI Act. Despite defendants alleging forgery and denial of loan execution with no evidence, the Tribunal rejected their claim. It held defendants liable to pay the principal and contractual interest of 13.75% p.a., distinguishing bank cases where borrowers deposited disputed amounts.

What did the court decide?

Defendants jointly liable to pay Rs. 2,24,33,546.71 with interest @ 13.75% p.a. simple; applicant entitled to proceed against secured properties and other assets.

M/S. Uco Bank versus Aurora Scientific and… — Contract and Commercial Disputes | DRT (2025)

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IN THE DEBTS RECOVERY^{TRIBUNAL-Ii AT HYDERABAD} DATED THIS THE NINETEENTH^{DAY OF SEPTEMBER, 2025} PRESENT: SH. RAMESHWAR^{KOTHE,B.COM, L.LB. (HONS.), [4.A.} PRESIDING OFFICER

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ORIGINAL APPLICATION^{NO. 176 OF2O2Z}

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M/s. UCO Bank N4.G. Road Branch 62, MG Road Secunderabad Hyderabad-3 Rep by its Senior^Manager.

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Versus

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Aurora Scientific^{and TechnologicalInstitute} Represented by^{its Secretary, G-2 SBIColony} Bagh Amberpet,^{HYderabad-500013} '

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Church^{Educational Society,} Gl2, SBl ColonY,^{Bagh AmberPet,} HYderabad,^{Telangana-500013'}

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Mr. N. Raja^{Babu, s/o. Mr' Late N' seethaiah'} Chairman,^{TarakaramaEducational} iociety,^{c-2, SBI colony BaghAmberpet'} Hyderabad -^500013'

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Mrs. N.^{Yashoda,W/o Mr' Late N' Seethaiah'} '2i -2'-li7 1)i; pz, eash Amberpet, Hvderabad'

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q Mr. N. Ramesh^{Babu, S/o Late N Seethaiah'} ' e;;;;i-s";tarv,rarakaramaEducational d".i"tv,^{c-2, Sei cotonv'BaghAmberpet'} HYderabad -⁵⁰⁰⁰¹³ '

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Mrs. N, Sulochana,^{W/o Mr' N Raja Babu'} C-i. Iri'".""#i ser^colony, -^{i6bort. Bagh Amberpet'} Oy""*

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Mrs. N. Manjusha Wo^I,4r. N. Ramesh Babu. I^{2, SBI Cotony,BaghAmberpet,} Hyderabad - 5OOO13.

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Ms. Mounica, D/o N. Raja Babu, 9-?,^{SBI Colony,BaghAmberpet,} Hyderabad - 500013.

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Mr. N. Anudeep, G-2, SBI Cotony Bagh Amberpet, Hyderabad - 5OOO13.

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Karshak Vidya parishad, G-2, SBI Colony Bagh Amberpet, Hyderabad - 500013.

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Tarakarama Educational Society, Represented by its Chairman. 9-1,^{SqI Cotony,BaghAmberpet,} Hyderabad - 5OOO13.

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Kamareddy Educational Societv 9-?,^{S?I Corony, Bash a.O"irj,jt,} Hyderabad - 5OOO 13.

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Aurora Educational Societv. Street No. 12, CfritkaOoattv. Hyderabad - 5OOO2O.

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Ravi Rishi Educational Societv_ 3..i,^ !-B-! 9olott,^{Bas h Am berpet,} nyoerabad _ 500013. ..... Defendants.

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Lounsel Counsel for for Defendantsthe Applicant : l,'lr. N.V. Subba Raju. : M/s. V.V. Ramana.

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..... Defendants.

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:: ORDER::

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The Appticant Bank fited the present OA u/s 19 of The

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of Debts & Bankruptcy Recovery Act, 1993 fgr recovery of ar sum of ffir*o"fa

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oA.716/2022

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Rs.2,24,33,546.71Ps towards Cash Credit account from defendants with further interest @ 14.85o/o^per annum with monthly rests from 23.11.2021 till the date of realisation and sale of OA schedule assets.

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The averments of applicant bank as^per the OA, briefly, are that 2nd defendant society established 1st defendant^institute. Defendants l and 2, represented by its Secretary, availed^cash credit facility of Rs.2,00,00,000/- on 3t.t2.2009.^Defendant No.1 executed all the requlred loan documents. The rate^of interest of the loan facility was 13.75olo^p.a. with monthly^rests subject to revision linked to^prime lending rate^changes. Defendants 3 to 7, being^guarantors, executed^respective agreements of^guarantee. The credit facilities were enhanced/ renewed on 05.03.2015. Defendants 3 to 14 being^guarantors executed necessary agreements of^guarantee dated 05.03.2015 and 19.05.2015. The credit facilities were once again renewed on 16.11.2018. Defendants 3 to 7 and 10 to 13 crated mortgage by way of extension of mortgage of OA B-schedule properties on 16.11.2018 as a security to the loan availed by defendants. Defendants defaulted in repayment resulting in classification of loan account as NPA, followed by demand notice u/s 13(2) of the SARFAESI Act dated 21.06.2021 and legal notice dated 01.11.2021 demanding the outstanding dues. However, defendants failed to clear the dues. Hence, the present oA.

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Defendant No.1 filed written statement and defendants 2 to 14 adopted the same. In the written statement, defendants deny availment of loan, execution of loan documents,^guarantees and mortgages deeds, renewals/enhancernent of limits in 2015 flg..*.p (7^-\ot"'

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and 2018. Defendants were made to sign various blank papers/ documents/vouchers/agreements/letters without their free will which were subsequen y filled in by the applicant bank for the purpose of the OA. Mere signatures of the defendants do not constitute valid execution and subsisting right against the defendants. Hence, the documents are not admitted by the defendants. The accounts were classified as NpA without following the provisions of RBI norms. Therefore, the demand notice dated 27.06.2027 is liable to be set aside. Applicant failed to take into consideration the payments made by defendants correcfly while filing the present OA. Applicant added premature interest in the OA claim amount. The statement of account is not in terms of the provisions of the Bankers Book of Evidence Act, 1891 and the certification was not given by the competent persons. Applicant ignored the losses and damages suffered by the 1't defendant and filed the present OA on vague, baseless and concocted grounds. Applicant's claim ia barred by limitation. Applicant is not entiued to the OA claim or for sale of OA schedule asset.

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During the pendency of OA, learned counsel appearing for the applicant filed a Memo reporting the demise of Defendant No.3 and defendants 6, 8 and 9 LRs of defendant No.3 being parties to the OA proceedings already, are liable both for the credit facilities availed by D.1 as also to the extent of property of defendant No.3.

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The Applicant Bank examined K.R.R. Rajyalakshmi, Chief Manager as AW-1 and marked 16 documents through her as Ex. A.1 to Ex. 4.16. oY.**

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oA.t76l2022

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Heard learned counsel appearing for the applicant and learned counsel appearing for the defendants. Perused the written arguments filed by the defendants and the material placed on record.

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Learned counsel appearing for the applicant bank would submit that the defendants have failed to discharge the liability despite notice. He contended that the OA claim is amply proved through the evidence affidavit of AW-1 coupled with recitals in Exs. A.1 to A.16 and accordingly prayed to allowing the OA against the defendants t,2, 4 to t4 and against oA schedule properties.

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B. Learned counsel appearing for the defendants would contend that the applicant has filed the present OA by applying abnormal rate of interest and without providing any statement of account to enable them to reconcile with their accounts to know the accurate dues. Learned counsel would submit that the applicant bank has not taken into account the deposits made by the defendants. Defendants paid Rs.L,7s,41,500/- into the loan account. The applicant bank has to deduct the same form the loan account. Applicant bank is required to charge simple rate of interest since the defendant being an educational institution. Therefore, learned counsel prayed for allowing 60/o interest per annum. In support of his arguments, learned counsel placed reliance on the following judgements:-

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(i) Hon'ble High Court of Kerala in W.p. (C) No.7988 of 2020 dated 10.08.202 between Swaroop vs. State of Kerala & Ors. in IlrP(C) No.79B8 of 2020 decided on 10.08.2023;

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Ow*f-,

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(ii) Hon'ble DMT, Madras in Karur Vysya Bank Ltd. vs. V.T.C. Builders and Anr. decided on 15.03.2002 (Eq. r (2003) BC 13;

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(ii, Hon'ble DMT, Kolkgta in Smt. D. Sandhva Bhaskar Sridevi and D. Srinivasa Prasad Reddy in Appeal No. I I 6 of 2023 decided on I 5.05.2024.

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9. The point that arises for consideration is:-

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Whether the Applicant Bank is entitled for the OA claim against the Defendants l, 2 and 4 to 14 and against the OA schedule assets as prayedfor?

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Defendants alleged various irregularities against the applicant bank. However, despite contending so, they failed neither to produce any documentary evidence in support of their contentions nor did they cross examine AW.1 to disprove the averments and the documents relied by the applicant bank. Under such circumstances, the evidence atfidavit of AW-1 and the Exhibited documents through her remain unchallenged and unrebutted.

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Though the defendants in para 6 of the written arguments claimed to have deposited Rs.1,75,41,500/- into the loan account, no evidence is placed on record to substantiate the same. Hence this aspect needs no consideration.

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t2. Learned counsel for the defendants, during his arguments, prayed for consideration of future interest @60lo per annum in the light of the judgements cited supra for the reason of the loan having been availed for r4lrning the educational institute of defendant No.1. CW*"'

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In the case of Karur Vysya Bank (supra), the relief sought for was with regard to the rate of interest. In the cited case, the borrower had already^paid a sum of Rs.15,42,945/- and agreed to pay the entire balance amount with 60lo simple interest from the date of plaint till 29.11,1999, the Court fee and Advocate fee before the learned Presiding Officer passed the order on 29.11.1999. The total interest amount, adding the Court fee and Advocate fee works out to Rs.5,23,488/- and the balance suit claim works out to Rs.28,574l- totalling to Rs.5,52,062/-. The defendants paid the entire balance amount of Rs,5,52,062/by way of a cheque. Considering these aspects, learned Presiding Officer ordered on 30.11.1999 to pay 60lo simple interest from the date of plaint till 29.11.1999 basing on the judgement of the Apex Court reported in N. M. Veerappav. Canara Bank - II (1998) SLT 361. Needless to elaborate or emphasise the exclusivity of the cited case and why the said ratio in the cited case cannot be applied to the case on hand.

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t4. In the judgement of Hon,ble DRAT, Kotkara in Appeal No.il6 of 2023 (supra),the issue pressed in the appeal was on the point of rate of interest only. In the cited case, the borrower challenged the rate of interest granted by DRT in the OA. It may not be out of place to mention here that the appeal before DRAT is subject to payment of 50o/o of the disputed amount before entertaining the appeal itself, Whereas, in the case on hand, the borrower has not deposited any amount since the filing of the OA.

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Before coming to any conclusion for granting relief on the rate of interest, I deem it appropriate to take into consideration the foilowins aspects:-

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OWo^.g

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a) Firstly the defenda nt- borrowe r is not a charitable institution or NGO established for Promoting^education.

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b) Secondly, as already stated supra, in Kuur vysya Ban* case, the borrower already deposited entire disputed amount before the date of order of the learned Presiding Officer. Whereas in the Case of Smt. D. Sandhyo Bhashat Stidei & Anothe\ entertainment of appeal before the DRAT itself is subject to deposit of 50o/o of the dues stipulated uls 27 of the RDB Act. However, in the case on hand defendants have not made known their intention or willingness to deposit the disputed amount either in part or in full unlike in the cited cases.

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c) Thirdly, relief in rate of interest cannot be a uniform norm and the same has to be considered^judiciously taking into account the facts and circumstances, financial stakes involved and bonafides of the borrower.

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tb. In the entire^pleadings the defendants denied each and every averment of the OA including execution of loan documents itself. They totally rejected the OA claim and^{questioned the} competency of person certifying the statements of^account. There is no remorse on the^part of the^{defendantsfor not} discharglng the liability. On the other^{hand, they prayed to} discharge them from the^{liabilitywith costs.The pleadings} allege irregularities in^{NPA classification,makinguse of blank/} printed documents for filing the OA etc. Except making^bald assertions, defendants did^{not choose to place on record any} essential^{particulars/material} in support^{of their contentions.} Nor did they choose to confront and^{cross examine AW'1 to} substantiate their contentions. In^{the case on hand, the} contractual rate of interest^{as per Ex.A1 Promissory Notewas} 13.75olo. Whereas the rate of^{interg:,t prayed in the relief} ,//xry...9

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U't*"

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portion is 14.85% i.e., higher than the contracted rate of 13.750lo. Therefore, the rate of interest as^prayed for is not allowed.

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In view of the foregoing observations, facts and circumstances of the case and the Evidence Affidavit of AW.1 coupled with the recitals in Exs. A.1 to A.16 marked on behalf of the Applicant Bank, I hold that Defendants l, 2 and 4 to 74,^jolntly and severally and defendants 6, 8 and 9 to the extent of estate of deceased defendant No.3, are liable to pay the OA claim to the Applicant Bank with future interest and costs.

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In the result, the present Original Application No.l76/2022 is allowed as under:^-

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i) the defendants t, 2 and 4 to 14^jointly and severally and defendants 6,8 and 9 to the extent of estate of defendant No.3 now lying in their hands, are liable to pay to the applicant bank a sum of Rs.2,24,33,546.7LPs along with interest @13.75olo per annum simple from the date of application till the date of realization;

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ii) the OA claim is secured by way of hypothecation/mortgage of properties as described in the schedules to the OA and the applicant bank is entitled to^proceed against the same for recovery of its dues;

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