Allowed

City Union Bank Limited v. Kodiyappan

DRT16 Sept 2025OA/486/2023

Case brief

AI extract

What is this about?

The Tribunal allowed the Original Application filed by City Union Bank Limited to recover outstanding loan amounts from defaulting borrowers. The court upheld the claim based on submitted documents, preparing a Recovery Certificate for execution.

What did the court decide?

Directing the respondents to jointly and severally pay Rs.24,50,674/ with interest and directing the Recovery Officer to proceed with the Recovery Certificate.

City Union Bank Limited versus Kodiyappan — Contract and Commercial Disputes | DRT (2025)

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OA No. 486/2023

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 16^TH DAY OF SEPTEMBER, 2025 PRESENT: SEEMA SINHA,

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

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OA No.486/2023

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Between

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The City Union Bank Limited., No. 2, Vaigaidam Road, Thenkarai, Periyakulam, Theni District – 626 501. Rep. By its Branch Manager.

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---Applicant Bank

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And

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Mr. N. Kodiyappan,

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S/o Nagama Naicker, Door.No.7/3/30, Sarojini Naidu Street, Kailasapatti, Periyakulam, Theni District – 625 601.

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Mrs. K. Sathya,

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W/o N. Kodiyappan, Door.No.7/3/30, Sarojini Naidu Street, Kailasapatti, Periyakulam, Theni District – 625 601.

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---Defendants

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Counsel for the Applicant Bank : M/s R. Pandivel, S. Iniyan Karthik

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Page 1 of 11

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OA No. 486/2023

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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 17.05.2023 to recover from the Defendants a total sum of Rs.24,50,674/i.e., (i) Rs.5,81,708/- together with interest at the rate of 11% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Housing Loan (ii) Rs.5,19,148/- together with interest at the rate of 14.75% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Cash Credit Facility (iii) Rs.10,26,035/- together with interest at the rate of 13.75% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Term Loan-I and (iv) Rs.3,23,783/- together with interest at the rate of 14% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Term Loan-II from the date of filing of Application till the date of realization with cost 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 Applicant Bank submits the defendants had approached the applicant bank for availing Housing Loan, Cash Credit Facility & Term Loans. The applicant bank has also sanctioned the said Housing Loan for a sum of Rs.24,50,000/- and Cash Credit Facility to the limit of Rs.5,00,000/and Term Loan-I for a sum of Rs.9,00,000/- and Term Loan-II for a sum of Rs.2,10,000/- to the defendants

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Housing Loan

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The Applicant Bank submits that the applicant bank sanctioned the said Housing Loan to the defendants through the sanction letter dt.13.03.17 and by accepting the terms & conditions, the defendants counter signed the sanction letter dt.14.03.17. In consideration of said Housing Loan, the defendants has executed a Demand Promissory Note on 14.03.17 for a sum of Rs.24,50,000/- in favour of the Applicant Bank as a continuing security promising to repay the loan amount on demand with monthly interest at the rate of 11% per annum with monthly rests or at such other rates as prescribed by the applicant bank from time to time.

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Page 2 of 11

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OA No. 486/2023

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The defendants have undertaken to repay the above said Housing Loan in 120 monthly installments of Rs.33,748.75 each with interest & cost. The Applicant Bank further submits that in default of any of the above said single installment the Applicant Bank is at liberty to demand and collect the entire outstanding balance. To that effect, the defendants have executed Application Cum Undertaking for loan dt.14.03.17 in favour of the Applicant Bank. The defendants availed the said Housing Loan as per the particulars mentioned in the Statement of Accounts maintained by the Applicant Bank in regular course & conduct of the business. The defendants by admitting & acknowledging their liabilities executed Revival Letters & Balance Confirmation Letters dt.01.03.20 & 20.07.22 in favour of the applicant bank.

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Cash Credit Facility

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The applicant bank sanctioned the said Cash Credit facility to the defendants through its sanction letter dt.26.05.17 and by accepting the terms & conditions, the defendants counter signed the sanction letter dt.30.05.17. In consideration of Cash Credit Facility, the defendants executed a Demand Promissory Note on 30.05.17 for a sum of Rs.5,00,000/in favour of the Applicant Bank as a continuing security by promising to repay the loan amount on demand with compound interest at the rate of 14.50% per annum with monthly rests or at such other rates as prescribed by the applicant bank from time to time. Further the defendants executed a Letter of continuity containing Terms & Conditions on 30.05.17 as well as an Undertaking to abide the Overdraft Rules on 30.05.17 in favour of the Applicant Bank. The defendants availed the said Cash Credit Facility as per the particulars mentioned in the Statement of Accounts maintained by the Applicant Bank in regular course and conduct of the business. By admitting and acknowledging their liabilities the defendants have executed Revival Letters and Balance Confirmation Letters on 01.03.20 & 20.07.22 in favour of the Applicant Bank.

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Term Loan-I

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The applicant bank sanctioned the said Term Loan-I to the defendants and by accepting the terms & conditions, the defendants counter signed the sanction letter dt.06.12.17. In consideration of said Term Loan-I, the defendants have executed a Demand Promissory Note on 08.12.17 for a sum of Rs.9,00,000/- in favour of the Applicant Bank as a continuing security promising to repay the loan amount on demand with interest at the rate of 13.75% Per annum with monthly rests or at such other rates as prescribed by the applicant bank from time to time. The defendants have undertaken to repay the above said Term Loan-I in 60 monthly installments of Rs.20,824.96 each with interest & cost. The Applicant Bank further submits that in default of any of the above said single installment the Applicant

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Page 3 of 11

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OA No. 486/2023

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Bank is at liberty to demand and collect the entire outstanding balance. To that effect, the defendants have executed Application Cum Undertaking for loan dt.08.12.17 in favour of the Applicant Bank. In consideration of the said Term Loan-1, the 1" defendant executed Agreement for Hypothecation on 08.12.17 in favour of the applicant bank by hypothecating the milch animals. Now the said milch animals were not available with the borrower. So the bank is not able to proceed against the hypothecated milch animals. The defendants availed the said Term Loan-I as per the particulars mentioned in the Statement of Accounts maintained by the Applicant Bank in regular course and conduct of the business. The defendants by admitting & acknowledging their liabilities executed Revival Letter & Balance Confirmation Letter dt.01.12.20 in favour of the applicant bank.

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Term Loan-II

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The applicant bank sanctioned the said Term Loan-II to the defendants through its sanction letter dt.29.03.20 and by accepting the terms & conditions, the defendants counter signed the sanction letter dt.02.04.20. In consideration of said Term Loan-II, the defendants has executed a Demand Promissory Note on 02.04.20 for a sum of Rs.2,10,000/in favour of the Applicant Bank as a continuing security promising to repay the loan amount on demand with interest at the rate of 14% per annum with monthly rests or at such other rates as prescribed by the applicant bank from time to time. The defendants have undertaken to repay the above said Term Loan-II in Bullet Payment within 4 months with interest & cost. To that effect, the defendants have executed Application Cum Undertaking for loan dt.02.04.20 in favour of the Applicant Bank. The defendants availed the said Term Loan-II as per the particulars mentioned in the Statement of Accounts maintained by the Applicant Bank in regular course and conduct of the business. The defendants by admitting & acknowledging their liabilities executed Revival Letter & Balance Confirmation Letter dt.20.07.22 in favour of the applicant bank.

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Common to all Loans

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In consideration of the above said loan & facility, 1^st defendant offered his property namely a house site measuring 2490% Sq.ft & building constructed thereon bearing Door No.5.7.6/5 & 5.7.6/6 & 5.7.6/7 situated at Thamaraikulam, Periyakulam Taluk, Theni District as Security and thereby he has deposited/re-deposited their Title Deeds on 20.04.17, 24.05.17 & 06.12.17 with the Applicant Bank pertaining to his property, with an intention to create an Equitable Mortgage over the said property. To that effect and by confirming the same, the 1^st defendant has executed Registered Memorandum of Deposit of Title Deeds dt.26.04.17, 29.05.17 & 08.12.17 pertaining to the said properties in favour of the Applicant Bank.

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Page 4 of 11

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OA No. 486/2023

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The defendants have not repaid the loans as agreed and promised by them. Thus the defendants have committed default in repaying the loan amount with interest & costs. Hence the Applicant Bank issued demand notice on 27.07.21. Even after the receipt of the said notices the defendants have not repaid the loan amount. Despite repeated demands made by the Applicant Bank the defendants did not take any sincere steps to discharge the loan. Hence the applicant bank sold the mortgage properties under the SARFAESI Act and thereby the sale proceeds were adjusted & appropriated towards the loan account. The applicant bank further submits that after crediting the sale proceeds yet there is a balance amount payable by the defendants. Despite the repeated demands, the defendants have not repaid the balance amount.

¶42

Hence, the Applicant Bank has filed the OA for recovery of a total sum of Rs.24,50,674/- i.e., (i) Rs.5,81,708/- together with interest at the rate of 11% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Housing Loan (ii) Rs.5,19,148/- together with interest at the rate of 14.75% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Cash Credit Facility (iii) Rs.10,26,035/- together with interest at the rate of 13.75% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Term Loan-I and (iv) Rs.3,23,783/- together with interest at the rate of 14% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Term Loan-II from the date of filing of Application till the date of realization with cost.

¶43

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

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List of Documents Loan Documents

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Housing Loan

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S. No.	Date	Description of document	Exhibits
1.	13.03.17	Sanction letter counter signed by the defendants in favour of the Applicant bank	Ex.No.A-01
2.	14.03.17	Demand Promissory Note executed by the defendants in favour of the Applicant bank	Ex.No.A-02
3.	14.03.17	Application Cum Undertaking executed by the defendants in favour of the Applicant bank	Ex.No.A-03
4.	01.03.20	Revival Letter executed bythe defendants in	Ex.No.A-04

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Page 5 of 11

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OA No. 486/2023

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		favour of the Applicant bank
5.	01.03.20	Balance Confirmation Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-05
6.	20.07.22	Revival Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-06
7.	20.07.22	Balance Confirmation Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-07
8.	---	Statement of Accounts maintained by the Applicant bank in regular course and conduct of the business	Ex.No.A-08

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Cash Credit Facility

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S. No.	Date	Description of document	Exhibits
1.	26.05.17	Sanction letter counter signed by the defendants in favour of the Applicant bank	Ex.No.A-09
2.	30.05.17	Demand Promissory Note executed by the defendants in favour of the Applicant bank	Ex.No.A-10
3.	30.05.17	Letter of Continuity executed by the defendants in favour of the Applicant bank	Ex.No.A-11
4.	30.05.17	Letter containing Terms & Conditions with regard to Overdraft Rules executed by the defendants 1 to 4 in favour of the Applicant bank	Ex.No.A-12
5.	01.03.20	Revival Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-13
6.	01.03.20	Balance Confirmation Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-14
7.	20.07.22	Revival Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-15
8.	20.07.22	Balance Confirmation Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-16
9.	----	Statement of Accounts maintained by the Applicant bank in regular course and conduct ofthe business	Ex.No.A-17

Page 6 of 11

OA No. 486/2023

Term Loan – I

S. No.	Date	Description of document	Exhibits
1.	06.12.17	Sanction letter counter signed by the defendants in favour of the Applicant bank	Ex.No.A-18
2.	08.12.17	Demand Promissory Note executed by the defendants in favour of the Applicant bank	Ex.No.A-19
3.	08.12.17	Application Cum Undertaking executed by the defendants in favour of the Applicant bank	Ex.No.A-20
4.	08.12.17	Agreement of Hypothecation executed by the defendants in favour of the Applicant bank	Ex.No.A-21
5.	01.12.20	Revival Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-22
6.	01.12.20	Balance Confirmation Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-23
7.	---	Statement of Accounts maintained by the Applicant bank in regular course and conduct ofthe business	Ex.No.A-24

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Term Loan – II

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S. No.	Date	Description of document	Exhibits
1.	29.03.20	Sanction letter counter signed by the defendants in favour of the Applicant bank	Ex.No.A-25
2.	02.04.20	Demand Promissory Note executed by the defendants in favour of the Applicant bank	Ex.No.A-26
3.	02.04.20	Application Cum Undertaking executed by the defendants in favour of the Applicant bank	Ex.No.A-27
4.	20.07.22	Revival Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-28
5.	20.07.22	Balance Confirmation Letter executed by the defendants in favour of the Applicant bank	Ex.No.A-29
6.	---	Statement of Accounts maintained by the Applicant bank in regular course and conduct ofthe business	Ex.No.A-30

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Page 7 of 11

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OA No. 486/2023

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Common to All Loans

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S. No.	Date	Description of document	Exhibits
1.	26.04.17	Registered Memorandum of Deposit of Title Deeds executed by 1^stdefendant in favour of the Applicant bank	Ex.No.A-31
2.	29.05.17	Registered Memorandum of Extension equitable Mortgage executed by 1^stdefendant in favour of the Applicant bank	Ex.No.A-32
3.	08.12.17	Registered Memorandum of Extension equitable Mortgage executed by 1^stdefendant in favour of the Applicant bank	Ex.No.A-33
4.	27.07.21	Demand notice issued by the Applicant bank to the defendants	Ex.No.A-34

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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. K. Goverthanan, who is the Branch Manager of the Applicant Bank.

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He has stated in his affidavit that the defendants has availed Housing Loan, Cash Credit Facility, Term Loan-I & Term Loan – II 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-34 in support of its claim in the OA.

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The Sanction letter counter signed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-01, Demand Promissory Note executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-02, Application Cum Undertaking executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-03, Revival Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-04, Balance Confirmation Letter executed by

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Page 8 of 11

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OA No. 486/2023

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the defendants in favour of the Applicant bank has been marked as Ex.No.A-05, Revival Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-06, Balance Confirmation Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-07, Statement of Accounts maintained by the Applicant bank in regular course and conduct of the business has been marked as Ex.No.A-08, Sanction letter counter signed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-09, Demand Promissory Note executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-10.

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The Letter of Continuity executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-11, Letter containing Terms & Conditions with regard to Overdraft Rules executed by the defendants 1 to 4 in favour of the Applicant bank has been marked as Ex.No.A-12, Revival Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-13, Balance Confirmation Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-14, Revival Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-15, Balance Confirmation Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-16, Statement of Accounts maintained by the Applicant bank in regular course and conduct of the business has been marked as Ex.No.A-17, Sanction letter counter signed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-18, Demand Promissory Note executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-19, Application Cum Undertaking executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-20.

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The Agreement of Hypothecation executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-21, Revival Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-22, Balance Confirmation Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A23, Statement of Accounts maintained by the Applicant bank in regular course and conduct of the business has been marked as Ex.No.A-24, Sanction letter counter signed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-25, Demand Promissory Note executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-26, Application Cum Undertaking executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-27, Revival Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-28, Balance Confirmation Letter executed by the defendants in favour of the Applicant bank has been marked as Ex.No.A-29,

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Page 9 of 11

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OA No. 486/2023

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Statement of Accounts maintained by the Applicant bank in regular course and conduct of the business has been marked as Ex.No.A-30.

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The Registered Memorandum of Deposit of Title Deeds executed by 1st defendant in favour of the Applicant bank has been marked as Ex.No.A-31, Registered Memorandum of Extension equitable Mortgage executed by 1st defendant in favour of the Applicant bank has been marked as Ex.No.A-32, Registered Memorandum of Extension equitable Mortgage executed by 1st defendant in favour of the Applicant bank has been marked as Ex.No.A-33, Demand notice issued by the Applicant bank to the defendants has been marked as Ex.No.A-34. So the averments of the applicant as well as the statement of the pleading have been corroborated by the above mentioned documents.

¶76

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.

¶77

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).

¶78

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 ".

¶79

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 total sum of Rs.24,50,674/- i.e., (i) Rs.5,81,708/- together with interest at the rate of 11% p.a. with half yearly rests in respect of Housing Loan (ii) Rs.5,19,148/- together with interest at the rate of 14.75% p.a. with half yearly rests in respect of Cash Credit Facility (iii) Rs.10,26,035/- together with interest at the rate of 13.75% p.a. with half yearly rests in respect of Term Loan-I and (iv) Rs.3,23,783/- together with interest at the rate of 14%

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Page 10 of 11

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OA No. 486/2023

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p.a. with half yearly rests in respect of Term Loan-II 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 total sum of Rs.24,50,674/- i.e., (i) Rs.5,81,708/- together with interest at the rate of 11% p.a. with half yearly rests in respect of Housing Loan (ii) Rs.5,19,148/- together with interest at the rate of 14.75% p.a. with half yearly rests in respect of Cash Credit Facility (iii) Rs.10,26,035/- together with interest at the rate of 13.75% p.a. with half yearly rests in respect of Term Loan-I and (iv) Rs.3,23,783/- together with interest at the rate of 14%p.a. with half yearly rests in respect of Term Loan-II 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.

¶86

(b) 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.

¶87

(c) 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 Housing Loan, Cash Credit Facility, Term loan – I, Term Loan – II 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 16^th September, 2025.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 24.09.2025

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Page 11 of 11

City Union Bank Limited v. Kodiyappan

Case brief

What is this about?

What did the court decide?

City Union Bank Limited v. Kodiyappan

Case brief

What is this about?

What did the court decide?

What the court decided

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