Allowed

Tamilnad Mercantile Bank Limited v. M Manikandan Prop. Sri Sakthi Saravana Timbers

DRT22 Jul 2025OA/508/2024

Case brief

AI extract

What is this about?

In an application for recovery of a cash credit loan of Rs.71,30,534.41 along with interest, the Tribunal allowed the debtor laod application. The court relied on the bank's documentary evidence, including sanction letters and guarantees, noting the respondents appeared ex-parte.

What did the court decide?

Respondents directed to pay Rs.71,30,534.41 plus interest at 12.70% p.a. with half-yearly rests; liberty to sell mortgaged properties upon default.

Tamilnad Mercantile Bank Limited versus M… — Contract and Commercial Disputes | DRT (2025)

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OA No. 508/2024

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 22^ND DAY OF JULY, 2025 PRESENT: SEEMA SINHA,

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

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OA No.508/2024

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Between

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Tamilnad Mercantile Bank Ltd., Pavithramputhur Branch, S.No.2/128, Rajaveethi, Pavithram,

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Namakkal District- 637 021. Rep. By its Branch Manager. ---Applicant Bank

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And

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M. Manikandan, S/o Muthusamy,

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Prop. M/s Sri Sakthi Saravana Timbers, D.No.102-K, Pillathurai,

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Thathiengarpet, Musiri,

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Trichi District – 621 214

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R. Muthusamy, S/o Raju Naidu, No.27D, Vadugur Street, Thathiengarpet, Musiri Taluk, Trichi District – 621 214 ---Defendants

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Counsel for the Applicant Bank : M/s T. Thevan

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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

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OA No. 508/2024

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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 10.12.2024 to recover from the Defendants a sum of Rs.71,30,534.41p together with interest at the rate of 12.70% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Cash Credit Loan from the date 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 1^st defendant a proprietorship concern running business in the name and style of M/s Sri Sakthi Saravana Timbers. Both defendants have been availing various credit facilities from the applicant bank for long, on the strength of execution of loan and security documents. The loan account has been subject to renewal/enhancement from time to time. The loans availed in the name of the defendant’s sister concern in the name and style of M/s Sakthi Saravana Traders & M/s Sri Rajaganapathi Hardwares & Timbers from the applicant bank and most of the mortgage properties happen to be common for securing liabilities under both heads of loan accounts. However this suit is confined to the loan account of M/s Sri Sakthi Saravana Timbers. On the other hand the bank files separate Original application for M/s Sakthi Saravana Traders & M/s Sri Rajaganapathi Hardwares & Timbers.

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Cash Credit Loan to a limit of Rs.1,00,00,000/-

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The 1^st defendant approached the applicant bank and requested to sanction cash credit loan to a limit of Rs.1,00,00,000/- for the purpose to meet out his business working capital. After considering the request of the defendant the applicant bank sanctioned the Cash Credit Loan to a limit of Rs.1,00,00,000/- on 18.03.2021. The 1^st defendant had executed necessary security loan documents in favour of the applicant bank on 29.03.2021 and also hypothecated his stocks in trader of machineries, components, spares & WIP, Semi finished goods of Timbers & wooden logs with the bank as a primary security of the loan amounts in relation to “B” Schedule Properties towards. The 2^nd defendant stood as Guarantor for discharge of the loan

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OA No. 508/2024

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account and he had executed guarantee agreement in favour of the applicant bank on 29.03.2021.

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Renewal of Cash Credit loan

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The 1^st defendant approached the applicant bank and requested to renewal of cash credit loan to a limit of Rs.1,00,00,000/-. After considering the request of the defendant the applicant bank renewed the Cash Credit Loan to a limit of Rs.1,00,00,000/- on 30.09.2022. The 1^st defendant had executed necessary security loan documents in favour of the applicant bank on 30.09.2022. The 2^nd defendant stood as Guarantor for discharge of the loan account and he had executed guarantee for the renewed Cash credit loan.

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Details of Mortgage

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The 2^nd defendant who had earlier deposited his Title deeds on 30.01.2015 in relation to “A” Schedule properties towards equitable Mortgage has subsequently executed the coverage of the Equitable mortgage to Successive renewal/reduction/enhancements/restructuring. The 2^nd defendant had executed Memorandum of Deposit of Title deed dated 30.01.2015 vide Doc.No.147/2015 including respective loan amount availed by the 1^st defendant and also he extended his mortgage for the successive renewal of the cash credit facility and executed Mortgage extension letter dated 29.03.2021.

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After availing the loan, defendants were not regular in the matter of repayment. The defendants made several promises, but they failed to keep up their promises. Despite repeated demands and reminders, made by the Applicant Bank, the Defendants have failed and neglected to repay and adjust their liability. Thus the loan account was declared as Non Performing Asset (NPA) on 23.01.2024. Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs.71,30,534.41p together with interest at the rate of 12.70% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Cash Credit Loan from the date 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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S. No.	Date	Description of document	Exhibits
1.	18.03.2021	Sanction Letter	Ex.No.A-01
2.	18.03.2021	Demand PromissoryNote	Ex.No.A-02
3.	18.03.2021	Letter of waivepresentment	Ex.No.A-03
4.	18.03.2021	Agreement of demand cash credit in the	Ex.No.A-04

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OA No. 508/2024

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		hypothecation of movableproperties
5.	29.03.2021	Letter of hypothecation of book debts loan	Ex.No.A-05
6.	29.03.2021	Power of Attorney	Ex.No.A-06
7.	29.03.2021	Guarantee Agreement	Ex.No.A-07
8.	30.09.2022	Requisition to avail the loan	Ex.No.A-08
9.	30.09.2022	Sanction intimation letter	Ex.No.A-09
10.	30.09.2022	Declaration cum undertaking	Ex.No.A-10
11.	30.09.2022	Proprietor declaration	Ex.No.A-11
12.	30.09.2022	Negative lien letter	Ex.No.A-12
13.	30.09.2022	Consent for disclosure	Ex.No.A-13
14.	30.09.2022	Credit ratingundertakingletter	Ex.No.A-14
15.	30.09.2022	Credit ratingundertakingcum consent	Ex.No.A-15
16.	30.09.2022	Acknowledgement of debt from the borrower	Ex.No.A-16
17.	30.09.2022	Annexure-I	Ex.No.A-17
18.	30.09.2022	Guarantee coveringletter	Ex.No.A-18
19.	30.09.2022	Consent letter	Ex.No.A-19
20.	30.09.2022	Guarantee coveringletter	Ex.No.A-20
21.	30.09.2022	Consent letter	Ex.No.A-21
22.	30.09.2022	Undertakingto keepthe securityin tact	Ex.No.A-22
23.	30.09.2022	Guarantee coveringletter	Ex.No.A-23
24.	30.09.2022	Consent letter	Ex.No.A-24
25.	30.09.2022	Undertakingto keepthe securityin tact	Ex.No.A-25
26.	30.09.2022	Guarantee coveringletter	Ex.No.A-26
27.	30.09.2022	Consent letter	Ex.No.A-27
28.	30.09.2022	Undertakingto keepthe securityin tact	Ex.No.A-28
29.	30.01.2015	True copy of Memorandum of deposit of Title deeds No.147/2015	Ex.No.A-29
30.	29.03.2021	Mortgage extension letter	Ex.No.A-30
31.	29.03.2021	Mortgage extension letter	Ex.No.A-31
32.	29.03.2021	Mortgage extension letter	Ex.No.A-32
33.	30.09.2022	Mortgage extension letter	Ex.No.A-33
34.	30.09.2022	Mortgage extension letter	Ex.No.A-34
35.	30.09.2022	Mortgage extension letter	Ex.No.A-35
36.	04.12.1974	True copy of gift deed executed by Alamelu Ammal in favour of Muthusamy vide Doc.No.39/74	Ex.No.A-36
37.	02.03.1992	True copyof Patta No.90	Ex.No.A-37
38.	11.12.1980	True copy of Sale deed executed by Angammal in favour of Muthusamy vide Doc.No.1618/1980	Ex.No.A-38
39.	05.07.1980	True copy of Sale deed executed by Sellakannu in favour of Muthusamy vide Doc.No.831/1980	Ex.No.A-39
40.	30.09.2022	Revival Letter	Ex.No.A-40

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OA No. 508/2024

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41. --	Statement of account for Cash	Credit Loan Ex.No.A-41
	AccountNo.080700150950007

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SCHEDULE-A

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Item No.1

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Land to the extent of 2400 Sq.ft and RCC roof Building constructed therein situated at S.F No.50/2, bearing D.No.27 D/14, New D.No.14/66, Anna Nagar, Pillathurai Village, Thathiyangarpettai, Musiri Taluk, Trihcy District, property stands in the name of Muthusamy.

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Boundaries:

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North :East West Road South :East West Road East :Balance land of vendor Alamelu Ammal West :Plot of Nallu Naidu

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Item No.2

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All that part and parcel of vacant land to the extent of 2398 Square feet Actual extent (2400 sq.ft as per document) i.e 5½ cents, Old S.No.50/2 New Survey No.50/27, Anna Nagar, Pillathurai Village, Thathiyangarpettai, Musiri Taluk, Trihcy District, within the four boundaries. Property stands in the name of Muthusamy

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South :East west Pathway West :Angammal Property North :East West Pathway East :Angammal Land purchased from Palaniyandi Chettiyar

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Item No. 3.

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a) All the piece and parcel of the following lands situated in Pilladurai Village, Musiri Taluk, Within the Jurisdiction of Thathiyangarpettai, Trichy District, Thathiyangarpettai Sub Registrar Office.

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North of :Item No.2 South of :Lands of Veerappa Pillai East of :Lands of Kamalam West of :North South Road

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OA No. 508/2024

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The land measuring 74 links East to West on the South 98 Links, on the North 42 links, North to South on the west, 46 links on East, totaling 3784 Sq. links or 0.03784 Acres in Old S.No.221/4B-0.10 acres.

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B) All the piece and parcel of the following lands situated in Pilladurai Village, Musiri Taluk, Within the Jurisdiction of Thathiyangarpettai, Trichy District, Thathiyangarpettai Sub Registrar Office.

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North of :East West Road South of :Item No.1 East of :Lands of Pichamuthu West of :North South Road

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The land measuring 74 links East to West on the North, 60 Links on the South, 17 links North to South on the West, 26 links on the East, totaling 1440 ½ Sq. links or 0.014401½ Acres

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The above said land are presently surveyed as 221/4B3 (as per sale deed No.831/1980 extent 0.0813.0 Sq. meter assessed to Rs.5.00, the said land with building constructed in it D.No.3788/102R2-15, Electricity connection and other easementary rights and other rights attached to it.

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SCHEDULE -B

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On hypothecation of stocks in Trade of machinery components, spares & WIP, Semi Finished Goods of Timber & Wood Logs.

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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. A. Chandan Ramkumar, who is the Branch Manager of the Applicant Bank.

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He has stated in his affidavit that the defendants has availed Cash Credit Loan 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

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OA No. 508/2024

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amount, which have been marked as exhibits No.A-01 to A-41 in support of its claim in the OA.

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The Sanction Letter has been marked as Ex.No.A-01, Demand Promissory Note has been marked as Ex.No.A-02, Letter of waive presentment has been marked as Ex.No.A-03, Agreement of demand cash credit in the hypothecation of movable properties has been marked as Ex.No.A-04, Letter of hypothecation of book debts loan has been marked as Ex.No.A-05, Power of Attorney has been marked as Ex.No.A-06, Guarantee Agreement has been marked as Ex.No.A-07, Requisition to avail the loan has been marked as Ex.No.A-08, Sanction intimation letter has been marked as Ex.No.A-09, Declaration cum undertaking has been marked as Ex.No.A-10.

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The Proprietor declaration has been marked as Ex.No.A-11, Negative lien letter has been marked as Ex.No.A-12, Consent for disclosure has been marked as Ex.No.A-13, Credit rating undertaking letter has been marked as Ex.No.A-14, Credit rating undertaking cum consent has been marked as Ex.No.A-15, Acknowledgement of debt from the borrower has been marked as Ex.No.A-16, Annexure-I has been marked as Ex.No.A-17, Guarantee covering letter has been marked as Ex.No.A-18, Consent letter has been marked as Ex.No.A-19, Guarantee covering letter has been marked as Ex.No.A-20.

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The Consent letter has been marked as Ex.No.A-21, Undertaking to keep the security in tact has been marked as Ex.No.A-22, Guarantee covering letter has been marked as Ex.No.A-23, Consent letter has been marked as Ex.No.A-24, Undertaking to keep the security in tact has been marked as Ex.No.A-25, Guarantee covering letter has been marked as Ex.No.A-26, Consent letter has been marked as Ex.No.A-27, Undertaking to keep the security in tact has been marked as Ex.No.A-28, True copy of Memorandum of deposit of Title deeds No.147/2015 has been marked as Ex.No.A-29, Mortgage extension letter has been marked as Ex.No.A-30.

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The 1^st Mortgage extension letter has been marked as Ex.No.A-31, 2^nd Mortgage extension letter has been marked as Ex.No.A-32, 3^rd Mortgage extension letter has been marked as Ex.No.A-33, 4^th Mortgage extension letter has been marked as Ex.No.A-34, 5^th Mortgage extension letter has been marked as Ex.No.A-35, True copy of gift deed executed by Alamelu Ammal in favour of Muthusamy vide Doc.No.39/74 has been marked as Ex.No.A-36, True copy of Patta No.90 has been marked as Ex.No.A-37, True copy of Sale deed executed by Angammal in favour of Muthusamy vide Doc.No.1618/1980 has been marked as Ex.No.A-38, True copy of Sale deed executed by Sellakannu in favour of Muthusamy vide Doc.No.831/1980 has

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OA No. 508/2024

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been marked as Ex.No.A-39, Revival Letter has been marked as Ex.No.A-40, Statement of account for Cash Credit Loan Account No.080700150950007 has been marked as Ex.No.A-41. 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 Defendants, a sum of Rs.71,30,534.41p together with interest at the rate of 12.70% p.a. with half yearly rests in respect of Cash Credit Loan from the date 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 No.1 & 2 are directed to pay jointly/severally a sum of Rs.71,30,534.41p together with interest at the rate of 12.70% p.a. with half yearly rests in respect of Cash Credit Loan from the date 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 Defendants, the Applicant Bank is at liberty to sell the movable / immovable properties

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OA No. 508/2024

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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 defendants are jointly/severally 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 defendants.

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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 Cash Credit loan 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 22^nd July, 2025.

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Sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 28.07.2025

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Tamilnad Mercantile Bank Limited v. M Manikandan Prop. Sri Sakthi Saravana Timbers

Case brief

What is this about?

What did the court decide?

Tamilnad Mercantile Bank Limited v. M Manikandan Prop. Sri Sakthi Saravana Timbers

Case brief

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What did the court decide?

What the court decided

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