Allowed

Indian Overseas Bank v. M Mohamed Shafi

DRT26 Aug 2025OA/21/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed the original application filed by Indian Overseas Bank to recover a term loan amount, interest, and costs from the defendant. The court relied on undisputed documentary evidence and cited Supreme Court precedents regarding interest capitalization.

What did the court decide?

Recovery of Rs.20,95,033.37 plus interest at 9.25% p.a. from filing date; direction to sell hypothecated properties for deficiency; issuance of recovery certificate.

Indian Overseas Bank versus M Mohamed Shafi — Contract and Commercial Disputes | DRT (2025)

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OA No. 21/2023

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 26^TH DAY OF AUGUST, 2025 PRESENT: SEEMA SINHA,

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[PR. DISTRICT & SESSIONS JUDGE – Retd] PRESIDING OFFICER

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OA No.21/2023

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Between

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Indian Overseas Bank, D.No.4/108A, Vathiyarvilai, Mangarai, Vilavancode Taluk, Kanuakumari District – 629 157 Rep. By its Branch Manager. ---Applicant Bank

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And

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Mr. Mohamed Shafi, S/o Mohamed Asan, D.No.3-145, Kundu Veedu, Eraviputhoorkadai, Kattathurai, Kalkulam Taluk, Kanyakumari – 629 158. ---Defendant

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Counsel for the Applicant Bank : M/s R. Pandivel.

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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 Defendant 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 19.10.2022 to recover from the Defendant a sum of Rs.20,95,033.37p

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Page 1 of 5

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OA No. 21/2023

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together with interest at the rate of 9.25% p.a. with monthly rests plus penal interest at the rate of 2%p.a in respect of Term Loan 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 defendant approached the Applicant Bank for availing Term loan for his business. After due consideration, the Applicant Bank accepted the request of the defendant and sanctioned the Term Loan of Rs. 20,00,000/after executing necessary documents in favour of the Applicant Bank. The Terms of sanction along with terms & conditions were communicated to the defendant by the Applicant bank through its sanction intimation letter dt.07.09.19 and the same was duly accepted by the defendant by countersigning the same on 07.09.19. The defendant executed a Demand promissory note on 07.09.19 for a sum of Rs.20,00,000/- in favour of the applicant bank by promising to repay the loan amount on demand with interest at the rate of 10.10%p.a with monthly rests or at such other rates changed from time to time by applicant bank. Further defendant executed a letter containing terms & conditions and Term Loan Agreement on 07.09.19 for a sum of Rs.20,00,000/- in favor of the Applicant bank by hypothecating the goods mentioned in Schedule and agreed to repay the loan amount in 84 monthly installments of Rs.33,306/- each with interest at 10.10%p.a with monthly rests. The defendant by admitting & acknowledging his liability executed Revival letter dt 01.09.22 in favour of the applicant bank. After availing the loan, defendant was not regular in the matter of repayment. The defendant made several promises, but he failed to keep up his promises.

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Despite repeated demands and reminders, made by the Applicant Bank, the Defendant had failed and neglected to repay and adjust his liability. Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs.20,95,033.37p together with interest at the rate of 9.25% p.a. with monthly rests plus penal interest at the rate of 2%p.a in respect of Term Loan 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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Page 2 of 5

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OA No. 21/2023

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S. No.	Date	Description of document	Exhibits
1.	07.09.19	Sanction Letter counter signed by defendant in favour of the Applicant Bank	Ex.No.A-01
2.	07.09.19	Demand Promissory Note executed by defendant in favour of the Applicant Bank	Ex.No.A-02
3.	07.09.19	Letter containing Terms & Conditions executed by defendant in favour of the Applicant Bank	Ex.No.A-03
4.	07.09.19	Term Loan Agreement executed by defendant in favour of the Applicant Bank	Ex.No.A-04
5.	01.09.22	Revival Letter executed by defendant in favour of the Applicant Bank	Ex.No.A-05
6.	---	Statement of Accounts maintained by the Applicant bank in regular course and conduct of the business	Ex.No.A-06

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Schedule of Hypothecated Goods

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All Goods, Stocks of Chappals etc., all stored & kept at D.No.3-145, Kundu Veedu, Eraviputhoorkadai, Kattathurai, Kalkulam Taluk, Kanyakumari District – 629 158

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3 . On the other hand, Notices were issued to Defendant and since from the beginning of the case, there was no representation on behalf of the Defendant. Hence, Defendant was 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 Mrs. S. Angitha Senan, who is the Branch Manager of the Applicant Bank.

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She has stated in her affidavit that the defendant has availed Medium Term Loan from the Applicant Bank, but he failed to pay the outstanding loan amount, hence she has filed the case. The applicant bank has also filed the documents given by the defendant at the time of sanctioning the loan amount, which have been marked as exhibits No.A-01 to A-06 in support of its claim in the OA.

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The Sanction Letter counter signed by defendant in favour of the Applicant Bank has been marked as Ex.No.A-01, Demand Promissory Note

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Page 3 of 5

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OA No. 21/2023

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executed by defendant in favour of the Applicant Bank has been marked as Ex.No.A-02, Letter containing Terms & Conditions executed by defendant in favour of the Applicant Bank has been marked as Ex.No.A-03, Term Loan Agreement executed by defendant in favour of the Applicant Bank has been marked as Ex.No.A-04, Revival Letter executed by defendant in favour of the Applicant Bank has been marked as Ex.No.A-05, Statement of Accounts maintained by the Applicant bank in regular course and conduct of the business has been marked as Ex.No.A-06. 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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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 Defendant, a sum of Rs.20,95,033.37p together with interest at the rate of 9.25% p.a. with half yearly rests in respect of Term Loan from the date of filing of Application till the date of realization with cost. Accordingly, it is hereby

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OA No. 21/2023

ORDERED

(a) That the Defendant is directed to pay personally a sum of Rs.20,95,033.37p together with interest at the rate of 9.25% p.a. with half yearly rests in respect of Term Loan 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 Defendant, 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 defendant is personally 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 defendant.

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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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(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 Term loan and the Kisan Credit Card 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 26^th August, 2025.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 16.09.2025

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Indian Overseas Bank v. M Mohamed Shafi

Case brief

What is this about?

What did the court decide?

Indian Overseas Bank v. M Mohamed Shafi

Case brief

What is this about?

What did the court decide?

What the court decided

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