Allowed

Canara Bank v. Magen Roto Printers

DRT19 Sept 2025OA/58/2024

Case brief

AI extract

What is this about?

In an original application for recovery of loan dues under RDB Act, 1993, the Tribunal allowed the application. It held that the defendant is liable to pay the claim less sale proceeds of seized machinery, pending a status report on the seized assets by the applicant bank. The account became NPA due to non-disbursal of working capital and failure to commence production.

What did the court decide?

Defendant to pay claim of Rs.73,41,666.99 less sale proceeds of seized machinery with interest at 11.25% p.a.; OA allowed as secured by A-schedule.

Canara Bank versus Magen Roto Printers — Contract and Commercial Disputes | DRT (2025)

¶1

IN THE DEBTS RECOVERY TRIBUNAL-II AT HYDERABAD DATED THIS THE NINETEENTH DAY OF SEPTEMBER, 2025

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

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PRESIDING OFFICER

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ORIGINAL APPLICATION NO. 58 OF 2024

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Between:

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Canara Bank D. No. 1-461 1 Om Sri Sai Nilayam Venkateswara Colony Ring Road, Uppal H yde ra bad - 50 0039 Rep by its Chief l4anager.

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.......Applicant.

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And

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Magen Roto Printers Rep by its Proprietor Smt. Gera Ludhiyana Wo^{Sri G. Srinivas} Age: 49, Occ: Business H. No. 4- 10-29 Plot No.1, Block No. 19 Sy. No. 96/1/A AUto NAgA T, TSIICL/IALA Bagh, Ranga Reddy District. Tela nga na-500070.

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Also at: Flat No.402, MM Residency Shaktinagar colony L. B. Nagar, RR Dist. Tela n9 a na^- 500 074.

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..... Defendant.

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Counsel for the Applicant :^{Ms. SangeetaJaiswal.} Counsel for Defendant^{: Mr. B. D. Raju.}

$ott-

oa.s812024

:: ORDER::

The Applicant Bank filed the present OA u/s 19 of The Recovery of Debts & Bankruptcy Act, 1993 for recovery of a sum of Rs.73,71,666.99ps from defendant with future interest @74.75o/o per annum inclusive of penal interest @2olo from 79.07.2024 till the date of realisation and sale of OA A_schedute property.

¶18

The averments of applicant bank as per the OA, briefly, are that at the request of the defendant, applicant bank sanctioned a term loan of Rs.5g,0O,OO0/_ and working capital limit of Rs.9,00,000/-, vide sanction letters dated 23.O7.2079 and 04.72.20L9 respectively. The term loan of Rs.58,O0,OOO/- is primarily secured by hypothecation of machinery purchased out of the said loan. As the business activity was not commenced, applicant has not released cash credit of Rs.9,OO,OOO/_. During an inspection in March, 2023, it was observed that defendant was not running the business. As the defendants did not maintain the loan account as per the terms, the account was classified as NpA on 23.05.2023. After issuance of recall notice dated 24.O5.2023, legat notice dated 02.08.2023 and seizure notice dated 2A.0A.2023, applicant bank seized the machineries available at the premises on 16.09.2023. Defendant failed to clear the dues even after issuance of second legal notice dated 2A.71.2023. Hence the present OA is filed for recovery of outstanding dues from the defendant.

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Defendant filed written statement denying the OA averments. Defendant contends that applicant seized the machineries in his absence and without following due legal process. There is no gap of 30 days between the date of seizure notice and actual %i*r

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oA.5812024

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seizure. The seized machinery was valued at Rs.10 lakhs against the original value of Rs.77.88 lakhs. Some machlneries were shown as missing in spite of existence of the same in the premises. While the machinery being situated at Autonagar address, the Panchanama was shown as lf executed at Uppal address. Applicant bank was duly appraised that the delivery of some machineries was taken^place in the end of 2022 only. The defendant had to incur rent and maintenance expenses of the premises between availment of loan in 2019 and^final delivery of balance machinery in 2022. Defendant added a^sum of Rs.20.50 lakhs in addltion to the loan amount of^Rs.58lakhs for^purchase of the machinery. Production activity could not be commenced as working capital was not released by^the applicant bank despite speclfic request on 12.03.2023.^With these submissions, defendant^prayed for dismissal^{of OA.}

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In order to^prove its case, the Applicant^{Bank examinedV.} Vasantha, Manager as AW-1 and marked 15 documents through her as Exs. A.1 to Ex. A.15.

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In order to substantiate her defence, Gera^Ludhiyana, Proprietor examined herself as DW.1 and marked 6 documents as Exs. 8.1 to 8.6.

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Heard learned counsel for the applicant and^{learned counselfor} the defendant. Perused the material^placed on^record.

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Learned counsel appearing for the applicant bank,^{drew my} attention to Ex.A.5 letter dated 01.06.2023 detailing^the sequence of events starting from the^supply of^machineryby the manufacturer. Learned counsel^wouldsubmit that^theloan was disbursed on 05.12.2019, the date of co[mencemglt^of .,AY/n,,_

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,j/ "q-

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oa.5a/2024

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commercial operation was 05.02.2020 (before Covid) and date of first repayment was to be commenced from 05.03.2020. At the defendant's instance, applicant agreed for change of supplier. Despite payment, the vendor did not supply the machinery. Applicant bank not only followed up the matter with the supplier vide letter dated 20.09.2021 but also issued legal notice to the supplier on 11.10.2021, followed by a reminder dated 06.06.2022. In the joint inspection of bank officials and defendant's representative, it was revealed that the vendor closed its unit 2 to 3 years back. pursuant to defendant,s letter dated 12.03.2023, applicant bank conducted inspection of defendant's premises on 16.05.2023 to find no machineries were installed. Additional finance is not possible unless project is completed and production activities commenced. Accordingly, defendant was advised to install machineries and commence production. However, defendant could not do so. In the meanwhile, the account became NpA due to non_service of EMIS.

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B, Learned counsel for the defendant would contend that the delay in taking off the project was direcfly attributable to the supplier of the machineries. The applicant bank ought to have 9iven sufficient opportunity to the defendant in place of initiation of recovery proceedings particularly the defendant being a SC-woman-entrepreneur.

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The point that arises for consideration is:-

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Whether the Applicant Bank is enti ed for the OA claim against the Defendants and against OA A_

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oa.'al2024

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schedule hypothecated stocks/book debts as^prayed for?

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It is not under dispute that the^{project for which defendant} availed loan and the applicant^{bank extended financial helphas} not seen the light of the day. While defendant^citedCovld Pandemic being the reason for delay^{in supply of machineryby} the vendor, applicant bank^{faultedthe supplier of the machines.}

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The machines reportedly^{purchasedfrom out of the loan} amount has been seized by the^{applicant bankon 16.09.2023.} None of the^parties appraised this^{Tribunal of the post seizure} developments. Ultimately,^{the very purposeof availmentof} loan by the defendant and extension of^{financial assistancefor} setting up the^{project has been defeated.Therefore, the} prospects of repayment of loan in normal^{courseof business are} completely ruled out.^{The loan is not secured by any immovable} properties. There is no prayer as to the OA^B-schedule hypothecated machineries. Accordingly,^{Ihold thatthe} defendant is liable to^{pay the OA claim,less the sale proceeds} of.seized machinery,^{if any, to the applicant bank alongwlth} costs and interest. The^{applicantbank should file a status} report of the seized^{machinery immediately, whereupononly} the Recovery Certiflcate^{shall be issued.}

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In the result, the^{presentoriginal ApplicationNo.58/2024 is} allowed as under:^-

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i) the defendant is^liable to^{pay to the applicant} bank a total sum of^{Rs.73,41,666.99Ps,less} the sale^proceeds of^{seizedmachinery,if} any, along wlth interest @11.25%^p.a' AY*"9

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oA.5812024

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simple from the date of application till the date of realization;

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ii) the OA is secured by way of hypothecation of stocks and book debts described in Schedule_ A annexed to the OA and the applicant bank is entitled to proceed against the same for recovery of its dues;

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iii) applicant bank is entiUed to proceed against the person and properties of defendant for realization of its dues; and

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iv) the applicant bank is entitled for the costs.

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13' The Appricant Bank is directed to fire cost Memo within 2 weeks from the date of receipt of this Order.

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t4. Issue Recovery Certificate accordingly.

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Communicate a copy of this order to the parties concerned and upload in Web Site.

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(Dictated to the steno, signed and pronounced by me in the open 19'" day of September, 2025.)

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K*'e ESHWAR KOrHE) PRESIDING OFFICER

Canara Bank v. Magen Roto Printers

Case brief

What is this about?

What did the court decide?

Canara Bank v. Magen Roto Printers

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

Parties & counsel

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Case details

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