Allowed

Canara Bank v. Ms Star Cashews and Others

DRT27 Nov 2025OA/248/2022

Case brief

AI extract

What is this about?

Original Application for issuance of Recovery Certificate under RDB Act was filed by Canara Bank against Star Cashews for business loans. Dismissing interest compounding objections, Debt Recovery Tribunal allowed application, permitted recovery with simple interest, and directed execution against assets.

What did the court decide?

Recovery Certificate allowed for Rs. 4,34,20,708.47 plus pendente lite and future interest at 9% simple per annum; execution against secured assets directed.

Canara Bank versus Ms Star Cashews and Others — Arbitration | DRT (2025)

¶1

IN THE DEBTS RECOVERY TRIBUNAL II, BENGALURU

¶2

Dated this 27^th Day of November, 2025

¶3

Present: Sri. T. RAJESH Presiding Officer OA.No. 248/2022

¶4

BETWEEN:

¶5

Canara Bank, Karkala 1 Branch, Shreyas Building, Main Road Karkala -574104, Rep. by its Authorized Signatory,

¶6

…APPLICANT

¶7

AND:

¶8

M/s. Star Cashews, Rep. by its Prop. Sri. Stanislavius Pais, Office at. Shanthi Villa Compound Naravi, Belthangadi Taluk, Dakshina Kannada -574214.

¶9

Sri. Stanislavius Pais,

¶10

Smt. Gretta Pais, W/o. Sri. Stanislavius Pais,

¶11

Both are R/at No. Star Cottage, A. C. Road, Kabettu, Karkala Town, Kasaba Village, Karkala Taluk, Udupi District -574104.

¶12

...DEFENDANTS

¶13

Counsel on record/appeared for:

¶14

Applicant : Sri. Sunanda S Rathod Defendant No.1 : Sri. Dhananjay Kumar Defendant No.2 & 3 : Exparte

OA 248/2022

FINAL ORDER

The present Original Application in short “OA” has been filed under section 19 of Recovery of Debts and Bankruptcy Act 1993 seeking issuance of Recovery Certificate for Rs. 4,34,20,708.47 (Rupees four crore thirty-four lakh twenty thousand seven hundred eight and paisa forty-seven only) with further interest thereon and cost from the Defendants.

¶19

It is the case of the Applicant that the Defendants, as borrowers, had initially availed a working capital loan of Rs. 1,60,00,000/- (Rupees One Crore Sixty Lakh only) for the purpose of running their business. At the request of the Defendants, the working capital loan was subsequently enhanced to Rs. 2,60,00,000/- (Rupees Two Crore Sixty Lakh only) for the same purpose. Again, upon the request of the Defendants, the said working capital loan was renewed for a sum of Rs. 2,60,00,000/- (Rupees Two Crore Sixty Lakh only). Further, at the request of the Defendants, the OCC/ODBD loan was enhanced from Rs. 2,60,00,000/- (Rupees Two Crore Sixty Lakh only) to Rs. 3,75,00,000/- (Rupees Three Crore Seventy-Five Lakh only) for running the business. Thereafter, upon the Defendants’ request, the said loan was again renewed and revised, reducing the limit from Rs. 3,75,00,000/- (Rupees Three

¶20

OA 248/2022

¶21

¶22

Crore Seventy-Five Lakh only) to Rs. 3,00,00,000/- (Rupees Three Crore only), along with sanction of a WCTL of Rs. 75,00,000/- (Rupees Seventy-Five Lakh only) for the purpose of processing raw cashew nuts into kernels. The Defendants also availed a FITL loan of Rs. 14,25,243/- (Rupees Fourteen Lakh Twenty-Five Thousand Two Hundred and Forty-Three only) for the purpose of processing raw cashew nuts into kernels.

¶23

It is also the case of the Applicant that, in view of the above loan, the Defendants executed necessary loan documents. Despite availing the credit facility, agreeing with the Terms and Conditions for the loans, failed in complying with the same, resulting in defaults and consequentially turning the loan accounts as Non-Performing Asset (NPA).

¶24

In the above circumstances, the applicant approached this Tribunal by filing this OA seeking issuance of Recovery Certificate for the amount due in the accounts.

¶25

Summons were issued to the Defendants. The Defendant

¶26

No.1 filed vakalat, and written statement, through its counsel but after giving sufficient opportunity Defendants failed to adduce any kind of evidence to support their contentions hence Defendants evidence was closed on 08.08.2025. Defendant No.2

¶27

OA 248/2022

¶28

¶29

and 3 failed to appear hence they were call out and placed ex parte on 17.04.2025.

¶30

In their Written Statement, Defendant No. 1 contends that the Hon’ble Supreme Court of India, in a ruling reported in 2001 SAR, page No. 931, has laid down the law that a bank must make specific averments in its application stating that the interest and compounding interest have been charged at such rates and capitalized at such periodical rests as are permitted by, and do not run counter to, the directions of the Reserve Bank of India (RBI). It is further contended that the Applicant Bank has not followed the principles and guidelines laid down by the Apex Court of India, and therefore the claim for interest is not shown to be legal or in accordance with the RBI directions. According to the Defendants, there is no cogent evidence to substantiate that the interest claimed by the Applicant Bank is in conformity with the directives of the RBI.

¶31

The Applicant examined AW-1, who filed a proof affidavit reiterating the averments made in the OA and produced Exhibits A-1 to A-62, which were marked in evidence.

¶32

Heard for both side and considered the contentions as taken in the OA in the light of documentary evidence and the

OA 248/2022

proof affidavit.

The following issues arise for consideration in the light of

¶37

pleading and evidence:

¶38

i) Whether the applicant succeeded in proving the OA claim as against the Defendants?

¶39

ii) If so, to what extent?

¶40

Both these issues are gone into and decided together.

¶41

With respect to the contention raised by Defendant No. 1 that the Applicant Bank has not complied with the directions of the Hon’ble Supreme Court of India as reported in 2001 SAR 931, and that the Bank has failed to make averments regarding the rate of interest, compounding, and periodicity of capitalization as permitted by the Reserve Bank of India (RBI), this Tribunal finds no merit in such submissions. The record reveals that the Applicant Bank has clearly set out the applicable rate of interest, the basis of charging compound interest, and the periodical rests, all of which are supported by the duly certified Statement of Accounts. The Applicant Bank has acted in accordance with the contractual terms mutually agreed upon between the parties and in conformity with the relevant RBI directives.

¶42

The Defendants have not produced any cogent evidence

¶43

OA 248/2022

¶44

¶45

to demonstrate that the interest charged is contrary to RBI guidelines or that the Applicant Bank has violated the principles laid down by the Hon’ble Supreme Court. Mere allegations without supporting material cannot rebut the documentary evidence placed on record by the Applicant Bank.

¶46

Although the Defendants, in their Written Statement, have admitted the availment of the loan, they have not produced any proof affidavit or documentary evidence to support the contentions raised by them. Their allegations, therefore, remain unsubstantiated. In contrast, the Applicant Bank has filed sufficient, credible, and duly certified documents establishing the sanction and availing of the loan facilities by the Defendants. These documents, marked as Exhibits A1 to A62, are admissible and adequately substantiate the claim made in the Original Application. The Applicant’s evidence remains unrebutted and is accordingly deemed to be proved. The Original Application has been filed within the period of limitation, and there is no capitalization of penal interest. The material placed on record is sufficient to establish the liability of the Defendants.

¶47

On 14.03.2025, the Applicant filed a memo stating that

¶48

the Bank had sold Item Nos. 1, 3 and 4 of the mortgaged

¶49

OA 248/2022

¶50

¶51

properties described in the OA schedule through a SARFAESI auction held on 13.11.2024, for a total sale price of Rs. 69,35,000/- (Rupees Sixty-Nine Lakh Thirty-Five Thousand only), of which Item No. 1 fetched Rs. 55,25,000/- (Rupees Fifty-Five Lakh Twenty-Five Thousand only) and Item Nos. 3 and 4 together fetched Rs. 14,10,000/- (Rupees Fourteen Lakh Ten Thousand only).

¶52

Hence in view of the above findings this Tribunal comes

¶53

to the conclusion that the OA is liable to be allowed.

¶54

Taking into consideration the fact that the loan is availed by the Defendants for business purpose and also the fact that OA claim is arrived at by calculating interest at the agreed rate, pendente lite and future interest is awarded at 9.00% (simple). The prayer for interest with monthly rests and for penal interest for the future period is hereby declined.

¶55

In the result, OA.No.248/2022, is allowed,

¶56

i) The Applicant is allowed to recover an aggregate sum

¶57

of Rs. 4,34,20,708.47 (Rupees Four Crore Thirty-Four Lakh Twenty Thousand Seven Hundred Eight and Paise Forty-Seven only), together with pendente lite and future interest at 9.00%

¶58

OA 248/2022

¶59

¶60

per annum (simple) from the date of filing of the OA until realization, from the Defendants jointly and severally, after giving due credit to all amounts recovered during the pendency of the OA, including Rs. 69,35,000/- realized through the sale of Item Nos. 1, 3 and 4 of the schedule property. The balance amount is permitted to be recovered by proceeding against the remaining secured asset described as Item No. 2 of the OA schedule. Property schedule to the OA be the schedule to the Recovery Certificate.

¶61

ii) Defendants jointly and severally and their assets are

¶62

liable to be proceeded against for the shortfall if any to recover the balance amount due.

¶63

iii) The Applicant bank is allowed cost of the proceedings

¶64

for which Applicant to file cost memo within seven days from the date of receipt of the order.

¶65

iv) The Recovery Certificate to be drawn in terms of this

¶66

order and transferred to Recovery for execution.

¶67

v) Interim application pending, if any, stands disposed of

¶68

in terms of this final order.

¶69

OA 248/2022

¶70

¶71

17. Communicate a copy of the order to the parties concerned

¶72

in terms of Section 19(21)(i) of the RDB Act, read with Rule 16

¶73

of DRT (Procedure) Rules, 1993.

¶74

(Dictated to PY directly on the Computer, after its transcription, corrected and pronounced by me in the open Court on this the 27^th day of November, 2025)

¶75

Sd/(T. RAJESH)

¶76

PRESIDING OFFICER

¶77

ANNEXURES

¶78

WITNESSES EXAMINED FOR THE APPLICANT BANK:

¶79

AW-1: Sri. M. Ananda, Authorized officer, of Applicant Bank.

¶80

Exhibits on the part of the Applicant:

¶81

Exhibit Nos.	Date	Particulars of Documents
A1	27.03.2014	sanction memorandum
A2	26.03.2014	Mortgage Deed
A3	27.03.2014	Common hypothecation agreement
A4	27.03.2014	Certificate of loan papers
A5	27.03.2014	Pro- Note
A6	27.03.2014	Letter of proprietorship
A7	27.03.2014	Request for over draft
A8	27.03.2014	Undertaking letter
A9	27.03.2014	Declaration from borrower to loan application
A10	27.03.2014	Letter of undertaking
A11	27.03.2014	Specimen signature card
A12	24.08.2015	Sanction memorandum
A13	03.08.2015	Supplemental memorandum of Deposit of title deed
A14	24.08.2015	Supplemental common Hypothecation

¶82

OA 248/2022

¶83

¶84

A15	24.08.2015	Pro- Note
A16	24.08.2015	Link letter in respect of enhancement of credit facilities
A17	24.08.2015	Letter of Proprietorship
A18	24.08.2015	Letter evidencing execution of documents
A19	24.08.2015	Certificate of loan papers
A20	24.08.2015	Undertaking letter
A21	24.08.2015	Declaration
A22	24.08.2015	Letter evidencing not to avail OCC
A23	10.07.2015	Affidavit
A24	10.07.2015	Declaration
A25	24.08.2015	Letter of Revival
A26	24.08.2015	Letter of Renewal
A27	22.02.2017	Sanction memorandum
A28	22.02.2017	Certificate of loan
A29	22.02.2017	Link letter
A30	22.02.2017	Letter of renewal
A31	22.02.2017	Letter of revival
A32	21.07.2018	Sanction memorandum
A33	03.07.2018	Supplemental memorandum of Deposit of title deed
A34	05.07.2018	Supplemental common hypothecation agreement
A35	05.07.2018	Pro- Note
A36	05.07.2018	Request for overdraft
A37	05.07.2018	Letter of Proprietorship
A38	05.07.2018	Certificate of loan papers
A39	05.07.2018	Letter evidencing execution of documents
A40	05.07.2018	Link letter -enhancement of credit facility
A41	05.07.2018	Undertaking letter
A42	05.07.2018	Guarantee covering letter
A43	05.07.2018	Guarantee agreement
A44	05.07.2018	Letter of Revival
A45	05.07.2018	Letter of renewal
A46	03.04.2020	Sanction memorandum
A47	20.04.2020	Certificate of loan papers

¶85

OA 248/2022

¶86

¶87

A48	20.04.2020	Letter evidencing execution of documents
A49	20.04.2020	Letter of Proprietorship
A50	20.04.2020	Letter from the guarantor
A51	20.04.2020	Link letter
A52	20.04.2020	Debt restructuring agreement
A53	20.04.2020	Debtor creditor agreement
A54	20.04.2020	Draft letter of undertaking
A55	20.04.2020	Undertaking letter
A56	20.04.2020	Letter of renewal
A57	20.04.2020	Letter of revival
A58	01.09.2020	Letter
A59	11.01.2021	Reminder letter
A60	--	Served acknowledgement
A61	--	Statement of account
A62	--	Unapplied interest & certificate

¶88

Witness Examined for the Defendants: -Nil- List of Documents Exhibited for the Defendants: -Nil -

¶89

Sd/(T. RAJESH) PRESIDING OFFICER

Canara Bank v. Ms Star Cashews and Others

Case brief

What is this about?

What did the court decide?

Canara Bank v. Ms Star Cashews and Others

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Hdfc Bank versus Ashok Kumar

Canara Bank versus Amarjit Singh

Ajay Kashyap versus Piramal Capital

Ms Hi Tech Constructions versus State Bank of India

Hdfc Bank versus Lal Babu Singh

Isaac john gill versus Bank of Baroda