Allowed

State Bank of India v. Activ Ingredients

DRT4 Aug 2025OA/56/2023

Case brief

AI extract

What is this about?

Debt recovery tribunal heard an original application by State Bank of India for recovery of a loan of approx. 40.97 lakhs. Defendant was set ex-parte. Court allowed the application after finding claim documents proved and clarified law on penal interest capitalization.

What did the court decide?

Recovery of Rs.40,97,486.47 with 7.40% p.a. interest (monthly/half-yearly rests) from filing date till realization, with costs.

State Bank of India versus Activ Ingredients — Banking and Recovery | DRT (2025)

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OA No. 56/2023

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 04^TH DAY OF AUGUST, 2025 PRESENT: SEEMA SINHA, [PR. DISTRICT & SESSIONS JUDGE – Retd] PRESIDING OFFICER

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OA No.56/2023

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Between

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State Bank of India, SME Branch, 79, Sattur Road, Virudhunagar, Virudhunagar District – 626 001 Rep. By its Chief Manager. ---Applicant Bank

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And

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M/s Activ Ingredients, Prop. Mrs. V. Poorani, W/o Visahan, No.1/1989/5, Sathyasai Nagar, Rosalpatti Village, Virudhunagar – 626 001. ---Defendant

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Counsel for the Applicant Bank : M/s M. Manoharan

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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 Defendant 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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OA No. 56/2023

JUDGEMENT

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 05.11.2022 to recover from the Defendant a sum of Rs.40,97,486.47p together with interest at the rate of 7.40% p.a. with monthly rests in respect of cash credit facilities 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 defendant had approached the Applicant Bank for availing Cash Credit facilities. After due consideration, the Applicant Bank accepted the request of the defendant and sanctioned the Cash Credit Facility of Rs.30,00,000/- after executing necessary documents on 24.03.2020 in favour of the Applicant Bank. For the above said loan the defendant executed Letter of Arrangement for Rs.30,00,000/- and Agreement of loan cum hypothecation on 24.03.2020. The defendant had further approached the bank for credit facility under Guaranteed Emergency Credit line vide Application dated 25.03.2022. The Applicant bank had sanctioned the credit facilities of Rs.8,95,000/- on 31.03.2022. For the credit facility the defendant had executed Letter of Arrangement and Loan-cumHypothecation on 31.03.2022. Further, Defendant agreed to repay the loan together with interest at the rate of 11.40% p.a. and 7.40%p.a together with costs and charges for the above said loans. Further, defendants also agreed to pay interest as and when it is changed from time to time by the Applicant Bank. After availing the loan, defendants were not regular in the matter of repayment. The defendant made several promises, but she failed to keep up her promises. Thus the loan accounts was classified as NPA on 26.09.22.

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Despite repeated demands and reminders, made by the Applicant Bank, the Defendants have failed and neglected to repay and adjust their liability. Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs.40,97,486.47p together with interest at the rate of 7.40%p.a. with monthly rests in respect of cash credit facilities from the date of filing 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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OA No. 56/2023

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S. No.	Date	Description of document	Exhibits
1.	24.03.2020	Letter of Arrangement	Ex.No.A-01
2.	24.03.2020	Agreement of Loan—cum-Hypothecation	Ex.No.A-02
3.	25.03.2022	Loan Application	Ex.No.A-03
4.	31.03.2022	Letter of Arrangement	Ex.No.A-04
5.	31.03.2022	Agreement of Loan—cum-Hypothecation	Ex.No.A-05
6.	17.10.2022	Statement of Account	Ex.No.A-06

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3 . On the other hand, Notices were issued to Defendant and since from the beginning of the case, there was no representation on behalf of the Defendant. Hence, Defendant was 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. Vijayakumar, who is the Chief Manager of the Applicant Bank.

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He has stated in his affidavit that the defendants has availed Cash Credit facilities from the Applicant Bank, but she 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-06 in support of its claim in the OA.

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The Letter of Arrangement has been marked as Ex.No.A-01, Agreement of Loan-cum-Hypothecation has been marked as Ex.No.A-02, Loan Application has been marked as Ex.No.A-03, Letter of Arrangement has been marked as Ex.No.A-04, Agreement of Loan-cum-Hypothecation has been marked as Ex.No.A-05, Statement of Account has been marked as Ex.No.A-06. 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 Defendant 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

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OA No. 56/2023

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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 Defendant, a sum of Rs.40,97,486.47p together with interest at the rate of 7.40%p.a. with half yearly rests in respect of cash credit facilities 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 Defendant is directed to pay a sum of Rs.40,97,486.47p together with interest at the rate of 7.40%p.a. with half yearly rests in respect of cash credit facilities 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.

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(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.

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(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 Cash Credit facility and the Recovery Officer is also directed to proceed with the matter in accordance

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OA No. 56/2023

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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 04^th August, 2025.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 16.09.2025