Allowed

Bank of Baroda v. M/s Royal Ventures

DRT12 Mar 2025OA/347/2024

Case brief

AI extract

What is this about?

The Tribunal issued a Recovery Certificate under a Lok Adalath award. The court held the bank entitled to recovery of dues upon default of partial payments and ruled penal interest cannot be capitalised for further interest.

What did the court decide?

Direction to issue Recovery Certificate for specified dues and interest; penalty on failure to pay.

Bank of Baroda versus M/s Royal Ventures — Banking and Recovery | DRT (2025)

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Fair order

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IN THE DEBTS RECOVERY TRIBUNAL-1 AT ERNAKULAM

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DATED THIS 12^th DAY OF MARCH, 2025

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PRESENT: Su. WILLYAHM, B.Sc., M.L. [DISTRICT JUDGE - Retd] PRESIDING OFFICER

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OA No.347/2024

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Between

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Bank of Baroda M. G. Road Branch Ernakulam – 682 016 represented by its Chief Manager.

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---Applicant Bank

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And

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M/s. Royal Ventures 14/384-Z4 NTS Arcade Pandikkad Road, Manjeri Malappuram District – 676 121 Represented by its Managing Partner Moitheen Abdulla Kurikkal M.P.

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Moitheen Abdulla Kurikkal M.P. S/o Abdulla Kurikkal Managing Partner, M/s. Royal Ventures Residing at Shaad, Cherani, Mannengara Road Karuvambram P.O., Manjeri Malappuram District – 676 123

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OA 347/2024

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M.K. Nassar S/o P. Abdulla, Partner M/s. Royal Ventures Residing at

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Nasheeman, Kannothumchal Thana P.O., Kannur District – 670 012

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Hashir M.K. S/o Abdulla Panakkat Partner, M/s. Royal Ventures Residing at

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Shaad, Cherani, Mannengara Road Karuvambram P.O., Manjeri Malappuram District – 676 123.

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---Defendants

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This Interlocutory Application coming on 24.02.2025 for hearing before me in the presence of Mr. Santhosh G. Prabhu, Counsel for the Applicant Bank and Defendants having been set exparte and upon hearing arguments of learned counsel for the Applicant Bank and upon perusing the material on records, this Tribunal delivered the following:

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O R D E R

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The applicant bank has filed the instant IA No.636/2025 seeking to pass final order in the OA pursuant to the Award passed by the Lok Adalath.

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The counsel for the applicant bank has filed the present interlocutory application stating inter alia that the above OA has been filed for realization of a sum of Rs.3,48,93,585/- being the amount due under loan account No.74800500000031 together with interest for Rs.3,18,28,085/- @13.95% per annum and for Rs.25,85,421/- being the amount due under the loan account No.74800600000252 @11.25% per annum with monthly rests from the date of OA till the date of payment from the defendants, jointly and severally, and by sale of OA schedule properties till recovery.

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The Original Application was referred to Lok Adalath organized in Debts Recovery Tribunal – 1, Ernakulam on 05.10.2024 for settlement under Section 20(1)(i)(a) of The Legal Services Authorities Act and in pursuance of the compromise/settlement arrived at between the parties to the above case, an award came to be passed by the Lok Adalath on 05.10.2024 and as per the terms of compromise, the defendants were obliged to remit a sum of Rs.2,70,00,000/- to the applicant bank to be paid in three installments. In the event of failure to pay the amounts, benefit of

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Page 2 of 6

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OA 347/2024

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the compromise would be withdrawn and the bank was declared to be entitled to recover the entire amount as claimed in the OA by sale of the hypothecated/mortgaged properties shown in the OA and also from the other assets of the defendants as well as refund of the application fee paid by the applicant bank in accordance with law now in force. The relevant portion of the said award is as follows:-

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“Both parties agree that the applicant shall be entitled to seek refund of court fee in accordance with the law now in force.”

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As per the award, the defendants had to pay an amount of Rs.2,70,00,000/- to the applicant bank. It was made clear in the award that in the event of failure to pay the amount as aforesaid, the defendants shall forfeit the benefits of compromise and they shall have no objection for issuance of Recovery Certificate for the entire amount claimed in the OA with interest and costs, less payments effected subsequent to passing of the award, on filing of necessary application before the Tribunal intimating the instance of such default.

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According to the petitioner/applicant bank, the defendants have paid only a sum of Rs.5,00,000/- on 05.10.2024 and Rs.15,00,000/- on 14.10.2024 as per the award dated 05.10.2024 and failed to remit the balance amount, therefore, they are entitled for a Recovery Certificate in terms of the default clause set out therein. Therefore, this Tribunal holds that the applicant bank is entitled for a Recovery Certificate in terms of the default clause set out therein.

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The applicant bank has charged Rs.4,62,693.76 and Rs.17,384.87 as penal interests on the loan account Nos.74800500000031 and 74800600000252 respectively availed by defendants in terms of the agreements. It is well settled that penal interest cannot be capitalised and no interest can be charged on penal interest. The applicant bank, therefore, is not entitled to get any further interest on the aforesaid amount of penal interest, as laid down by the Hon'ble Supreme Court of India in Central Bank of India v. Ravindra [reported in AIR 2001 SC 3095] .

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In the result, IA No.636/2025 is allowed and consequently, the Original Application is allowed directing defendants to pay to the applicant bank, jointly and severally and it is ordered to issue recovery certificate in terms of the award dated 05.10.2024 of the Lok Adalath as per the following lines :

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“(i) A sum of Rs.3,48,93,585/- (Rupees Three Crores Forty Eight Lakhs Ninety Three Thousand Five Hundred Eighty Five only) due under the loan account No.74800500000031 with interest on the sum

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Page 3 of 6

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OA 347/2024

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of Rs.3,44,30,891.24 (Rupees Three Crores Forty Four Lakhs Thirty Thousand Eight Hundred Ninety One and Paise Twenty Four only) @11.95% per annum from 11.03.2024 till realisation less the net sale proceeds of Rs.5,00,000/- (Rupees Five Lakhs only) credited on 05.10.2024 and Rs.15,00,000/- (Rupees Fifteen Lakhs only) credited on 14.10.2024; and

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(ii) A sum of Rs.25,85,421/- (Rupees Twenty Five Lakhs Eighty Five Thousand Four Hundred Twenty One only) due under the loan account No.74800600000252 with interest on the sum of Rs.25,68,036.13 (Rupees Twenty Five Lakhs Sixty Eight Thousand Thirty Six and Paise Thirteen only) @9.25% per annum from 11.03.2024 till realisation”

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On failure to pay the above said debts to the Applicant Bank, the Applicant Bank is directed to bring the OA schedule properties, for sale to realize its dues and its proportionate costs.

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The Registry is directed to prepare DRC in terms of this final order. The Applicant Bank shall file memo of costs within 10 days from the date of this order. Registry is directed to communicate the copy of this order to both parties as provided in Rule 16 of the Debts Recovery Tribunal (Procedure) Rules, 1993, as amended in 2003.

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Typed by PS, transcribed, corrected and pronounced by me in the open court this the 12^th day of March, 2025.

(Su. WILLYAHM)

PRESIDING OFFICER

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OA 347/2024

SCHEDULE A

I. The whole of the Borrowers’/Defendants’ stocks, both present and future and including but without prejudice to the generality of the foregoing words, all stocks of raw materials, work-inprocess, semi-finished goods finished goods such as packing materials stores etc. whatsoever and wheresoever situate and/or in transit whether now belonging to or that may at any time during the continuance of this security belong to the Borrowers/Defendants or that may be held by any party anywhere to the order and disposition of the Borrowers/Defendants.

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II. All the present and future book debts, outstanding money, receivables, claims, bills, contracts, engagements, and securities that are now due and owing or which may at any time hereafter during the continuance of this security become due and owing to the Borrowers/Defendants in the course of its business by any person, firm, company or body corporate or by the Government of India or any State Government or Indian Railways or any Government Department or Office or any Municipal or Local or Public or Semi-Government body or authority whatsoever including those relating to the assets leased out and/or given on hire purchase basis.

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III. All the tangible movable machinery and plant and cranes, boats and crafts, and the vehicles of the Borrowers/Defendants together with. spares, tools and accessories, and other movables, both present and future, and the furniture, fixtures and fittings and office equipment whether installed or not and whether lying loose or in cases which are now lying or stored in or about or shall be brought in to be stored or be in or upon or about the Borrower's premises and godowns or wherever else the same may be or be held any party to the order or disposition of the Borrower (including those on lease or hire-purchase) relating or about the Borrowers/Defendants' works at Ernakulam.

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OA 347/2024

SCHEDULE B

District : Malappuram Sub District : Areekode Taluk : Ernad Village : Perakamanna Block No. : 68 Re-Sy. No. : 215/3-5 Sy. No. : 442 Extent : 263.16 Ares (650.27 Cents) Value : Rs.3,79,59,000/-

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DESCRIPTION

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All that part and parcel of land having an extent of 263.16 Ares (650.27 Cents) in Re. Sy. No.215/3-5 (Sy. No.442) in Block No. 68 in Perakamanna Village, Ernad Taluk, Malappuram District alongwith building situated therein and all other rights and appurtenants there to as described in Sale Deed No.3594/2013 dated 18.06.2013 of SRO, Areekode.

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Boundaries

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East : Al Madeena Granite Crusher South : Property of Children of Ariyathodika Mammad & 1.50 Acre balance property West : Road of Al Madeena Granite North : Property of Al Madeena Granite and property in the possession of P. K. Alavi

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(Su. WILLYAHM) PRESIDING OFFICER

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Bank of Baroda v. M/s Royal Ventures

Case brief

What is this about?

What did the court decide?

Bank of Baroda v. M/s Royal Ventures

Case brief

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