Allowed

Union Bank of India v. Seshadri Builders

DRT10 Jul 2025OA/55/2023

Case brief

AI extract

What is this about?

The Tribunal allowed the bank's application for recovery of dues. While accepting the loan documents, the Court reduced the contractual interest rate to 8% simple p.a. based on discretion and cited precedents, granting recovery against mortgaged and personal properties.

What did the court decide?

Direct defendants to pay Rs.2,37,72,542/- with interest at 8% simple p.a., proceed against mortgageable properties and personal assets, and grant a recovery certificate.

Union Bank of India versus Seshadri Builders — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERY^{TRIBUNAL.II AT HYDERABAD}

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DATED THIS THE^{1OTHDAY OF JULY,2025}

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PRESENT: SH. RAMESHWAR^{KOTHE,B.COM, L.LB'(HONS.),IVI.A.}

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PRESIDING OFFICER

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ORIGINAL APPLICATION^{NO. 55 OF 2023}

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Between

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Union Bank of India Jubilee Hills Branch,^Hyderabad Rep by its chief Manager

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""""Applicant

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And

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M/s. Seshadri Builders Rep by its Mg'^Partner Sri V. Venkateswara^{Rao, S/o V. Ramanaiah} H Block-73, H. No.8-3-224/9/^10/D Mad hu ra Naga r,^Yousufguda Hyderabad-500 038

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Sri V. Venkateswara^{Rao, S/o V Ramanaiah} Aged 68 Years,^{Mg'Partner M/s Seshadri Builders} H Btock-73, H.^{No.8-3-224/9/10/D} Madhura Nagar,^Yousufguda Hyderabad-500 038

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Sri V. Srinivasa^Pradee? S/o V. Venkateswara^Rao Aged Major, Mg^{Partner M/s Seshadri Builders} H Block-73, H.No.8-3-224/9/^10/D Madhura Nagar,^Yousufguda Hyderabad-500 038

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Smt.V. Nagamani W/o V. Venkateswara^Rao Aged 63 Years,^{Partner M/s Seshadri Builders} H Block-7 3, H. No. 8-3-224/9/^10/D Mad h u ra Naga r,^Yousufguda Hyderabad-s11 038 . \ yrrr . _rr.

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Smt. V. Laxmi Prasanna D/o Sri V. Venkateswara Rao Wo^{Sri V.M.Krishna} Aged Major, H Block-73, H.No.8-3-224/9/ 10/D Madhura Nagar, Yousufguda Hyderabad- 500 038

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....... Defendants.

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Counsel for the Applicant Bank: M/s T,V,K. Murthy & Associates Counsel for the Defendant No.l : Mrli. Dinesh Kumar. 4_ Defendants 2 to 5 , &.e No^{Rq p* sqe*.,*iovr '}

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:ORDER:-

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The applicant bank filed the present Original Application u/s.19 of the Recovery of Debts and Bankruptcy Act, 1993 for recovery of a sum of Rs.2,37,72,542/- frcm defendants joinuy and severally with future interest @14.95olo p.a. (72.95o/o+20lo penal) with monthly rests from the date of Application till the date of realization and costs and in default for sale of OA schedule properties.

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The brief facts of the case are that the 1.t defendant partnership represented by 2nd partner as Managing partner, defendants 3 and 4 as partners, availed SOD (RE) to Contractors (Fresh) of Rs.3 crores towards working capital requirement and Third Party Bank Guarantee to a limit of Rs.2.50 crores vide sanction letter dated 07.09.2017 from erstwhile Andhra Bank, now Union Bank of India. Necessary loan documents such as Dp Note, composite agreement, general form of guarantee, counter guarantee form etc., have been executed. The limits are secured by hypothecation of current assets, personal guarantees and mortgage of OA schedule immovable properties belonging to defendants 3 to 5 who deposited ,Vrv<^,.tb LL/ "t'"',

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oA No.5sl2023

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original^{title deeds and executed registered memorandumof deposit} of title^{deeds.One of the mortgaged proPerties was releasedby} recovering^{Rs.67 61 lakhs in soD limit from 19 12'2020 to} 31,72.2020.^{An amountof Rs'2'37} '72'5421-^{is due under SOD A/c} with subsequent^{interest'hence this OA'}

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The^{1st defendant filed writtenstatement The submissions'} briefly,^{are that the loan documentsare not legible' not certinedas} per Bankers'^{Books of EvidenceAct' 1891' loandocumentsand} mortgage^{documentare not properly stamPed and registeredand} therefore^{they cannot be looked into' OA claimis time-barred'Higher} interestandpenalinteresthavebeenchargedagainstthenorms fixed by^{the Hon'ble Apex Court'The statement of account doesnot} indicate^{time to time interest charged'OA claim is liable to be} rejected.

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2 to 5^{desPiteserviceof} 4. No representation^{for defendants} counsel.^{Right of their filing} notice and^{makingappearancethrough a} was forfeited. written^{statement and adducing evidence}

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In order^{to prove its claim, applicantbank examinedP Bala} Nagesh,^{Chief Manager as AW-1 and marked 26 documents throuqh} him as^{ExhibitsA-1 to 4-26'}

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V. venkateswara^{Rao-2nd defendant Partnerof 1't defendant} tked one partnership firm examined^{himself as} z#i*r-T.l.,rnu document as Ex.B.l. A^t'''

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Learned counsel for the applicant reported no oral argumenB however filed written arguments. Heard learned counsel for the l"t defendant. Right of remainir defendants to advance arguments was forfeited as no rep.esentatil ror the appricant ou"o ".^{jl,,:'$Jr:1".[J],:',tT]::::} perused the material documents brought on record.

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I' According to the appricant bank, after avairing soD rimit and BG facility, the defendants neglected in repayment. The limits are secured by way of guarante( -'s of defendants 2 to 5' hypothecation and modgage of immovabre and s. Even urt". ."r"u.ing lo,l"::ilT:ffi:j j:lj#,';i recovering Rs.67.61 lakhs in i to'o'there is an outstanding amount of Rs.2,37,72,s42/ - ,n ,oo derend a n ts. w h i re rery i n e, oJ'.',.'.:::,,Til;H,."1T."[I^ J:: to substantiate the craim, the appricant bank sought to attow ttre oa.

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Per contra, it is the contention of the learned counsel for the 1* defendant that the bank has not charged interest applicable to MSME unit as per RBI guiderines. Decraring the account as NpA is arso not in accordance with RBI Circulars for MSME sector. Learned counsel relied upon Ex.B.1 as proof of 1"t defendant being registered under the MSME Act. The applicant bank ought to have given opportunity before categorizing the account as non_performing which is in clear violation of Secs.9 and 1O of the MSMED Act. Besides regutar payments, defendants also deposited Rs.72 lakhs pursuant to conditional order passed therein. Defendant firm made a substantial payment of Rs.4,32,62,920/- which is evident from the statement of account flled by the bank itself. The major part of the present claim pertains to interest even out of that payment of Rs.72 lakhs has

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already^{beenmade.Learned counsel therefore requeststo reduce the} rate of^{interest as per discretionarypowersof the Tribunal' In support} of his^{contentlon, learned relied upon the following judgements:-}

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a. Hon'ble Apex^{Court in CentralBank of Indiavs' Ravindra and} " ';;;"; ?idrizi-1 scc 367 with speciric^{rererenceto to} paragraPh 55,^sub-Para(8);

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b. Hon'ble ADex^{Court in M/sPro Knits vs TheBoardof Directors} oi cinari^{ean* a ors 2024 INsc565;}

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c. Hon'ble DMT,^{Kolkatain AppealNo'116 of 2O2i(Arising} -out^of Z"i.i'iaZ''ii'^{)n i ;' ioiit t, Hv dera bad ) betweensmt' D',} ziiiiii ii"trr",^{srideviand Anr' vs' Federat BankLimited} decided on^{15.05.2024; and}

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d. Hon'ble DMT,^{Madrasin KarurVysyaBank Ltd' vs' V'T'C'} - iiiiiets ana enr' I(2ooi) Bc 43; and

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Hon'ble DMT,^{Allahabad in Appel Dy'No'9i/2019between} '4Zli'"arii'Li iiaiu, str"ttia Assets Resotution^Branch i{ii,ti"iiirJ^{ri. Cil,ti' maan Educationatrrust and ors'} 'Decided on 15 10.2020'

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Now,^{the points that arlse for adjudicationare:-}

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til whether the^{Applicant Bankhas proved its claim} '''^'iiiii'ii tni i"re;dants^{and oAscheduteproperties?}

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(ii) To what relief?

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Point No.(i):

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Availment^{of SOD and BG Facilities by the 1st defendant} partnership firm represented^{by its partners-defendants is not} dlsputed.^{The applicant bankfiled documentsbeing Exs'A 1 to A 26} marked through^{AW-1' Theyare absolutely legible' The evidence} affldavit of AW-1^{coupledwith recitals in Exs'A'1to 4'26 amply} proves that the 1't defendant^{availed theSODand BG facilities'they}

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executed loan documents, memorandum of deposit of tifle deeds, guarantee deeds etc. The fact of committing default in payment can be seen from the statement of account. There is no averment in the written statement about 1st defendant being MSME and opportunity before categorization of account NpA. However, the 1st defendant did not raise this ground in the written statement. Without pleading in written statement, the argument cannot be accepted. However, the 1't defendant has not praced on record the RBI circurar which the applicant bank alleged to have not followed. Hence, the judgement in M/s Pro Knits (supra) is of no help to the 1't defendant in the circumstances of the case.

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The learned counsel for the 1st defendant has zeroed in his arguments on rate of interest. His plea is that 1'r defendant made a substantial repayment of more than Rs.4.32 crores as is evident from statement of account filed by the bank and even out of the current outstanding shown in the OA claim, an amount of Rs.72 lakhs has been paid towards compliance of conditional order passed in SA filed by it. These payments are not disputed by the applicant bank. Learned counsel would plead to consider the payments and reduce the rate of interest, pendente rfe and future. On this plea, I deem it trite to note down the observations of the Hon,ble DRATS in the judgements relied upon by the defendants.

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In the case cited at (c), defendants in OA 3966/2017 fited Appeal before Hon'ble DMT, Kolkata for grant of interest @60lo 3s against 15.48olo p.a. awarded by this Tribunal. Following the proposition of law decided in Central Bank of India vs. Ravindra & Others [(2002) 1 SCC 367] case and C.K Sasankan vs. Dhanatakshmi Bank Limited [2009 (11) SCC 60] case and considering the facts that

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loan was sanctioned in 2013, amount paid by defendants, nonderivation of any income on the property, the Hon'ble DRAT reduced the pendent lite and future rate of interest to 9olo simple while taking note of observation of Hon'ble Supreme Court in C.K. Sasankan's case that Tribunal has to look into the rate of inflation, if any, coupled with the market rates and the bank rate of interests.

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in the citation at para 9(d) above, the subject matter of dispute was also rate of interest. In this case, the appellant creditor bank challenged rate of interest awarded by the DRT, Chennai. The Presiding Officer, DRT, Chennai taking into consideration^payment of entire suit claim by the borrowers with an undertaking to clear the entire balance amount with 6010 simple interest, awarded 6010 simple interest from the date of plaint till the date of realisation using the discretion under Section 34, CPC. Accordingly, the Hon'ble Appellate Tribunal upheld the order passed by the learned DRT, Chennai.

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In the citation at para 9(e) above, the Hon'ble DRAT, Allahabad upheld the order of learned DRT, Patna in OA 295/2018 granting 10olo interest as against contract rate ol tzo/o and 15olo at the time of filing application after taking into consideration that defendant no.1 in OA was educational institution and it could not repay loan amount due to poor response from students and shown pleasurable reason for not maklng repayment and the recent trend of nationalized banks to decrease rate of interest on various loan including^{institutionalloans.}

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In the instant case, the loan was sanctioned in 2017. The contractual rate of interest as per Ex.A.z sanction letter is 72,95o/o p.a. whereas the applicant bank is claiming 14.95o/o p.a. in the OA by substantial adding 2o/o penal interest. Considering ,htfr-of

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repayment, which is not disputed by^{the applicantbank, in the} entirety of aforesaid facts and^{circumstancesof the case, in exercise} of discretionary^powers to^{grant pendent/lfe and futureinterest and} importantly In the light of the observations^{in the cited judgments at} para 9 (c) to (d) supra,I deem it^just and^proper to^{granl pendente} /lfe and future interest at the rate of^{8olo p.a. simple. In my} considered opinion, this^{wouldpavethe way for a viablerecovery.}

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In the light of the above discussion, I^{find that the Evidence} Affldavit of AW.1 coupled with the^{recitals in the documents viz., Exs.} A.1 to A.26 marked on behalf of the^{Applicant Bank,} amply^proves the OA claim in favour of the applicant bank.^Hence, I^{hold that} defendants 1 to 5^jointly and severally are liable to^pay the^{OA claim} to the Applicant Bank with future interest and costs.

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Point No.(ii):-

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In the result, the present Original Application No.55/2023^is allowed with costs, as under:-

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i)	defendants1to5^jointlyandseverally areliableto^paytotheApplicantBanka sumofRs.2,37,72,5421-withinterest
	@8o/o^p.a.simplefromthe^dateof Applicationtillthedate of realization;
ii)	theclaimofapplicant bank is securedby wayofmortgageof OAschedule immovablepropertiesandtheapplicant bankisentitledto^proceedagainstthe sametowardsrecoveryof itsdues;
iii)	theapplicantbankisalso entitledto proceedagainstthepersoqandproperties ?W*"