Allowed

Indian Overseas Bank v. S K Electricals And Others

DRT30 Jan 2025TA/1554/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed the bank's application for recovery of Rs.46.21 lakhs plus interest under Section 19(1) of the RDB Act, 1993. The court found the claim unchallenged and ordered joint and several liability with rights over hypothecated assets.

What did the court decide?

Recovery of Rs.46,21,741.94 with interest at 11.75% p.a.; liberty to recover from sale of hypothecated property.

Indian Overseas Bank versus S K Electricals And… — Contract and Commercial Disputes | DRT (2025)

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TA No.1554 of 2023 (E)

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30.01.2025

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IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 30^th day of January, 2025

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Present: SMT. S.V. GOWRAMMA Presiding Officer

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TRANSFERRED APPLICATION No. 1554 of 2023

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(Originally filed before DRT- II, Chennai as OA 72/2019 and thereafter transferred to this Tribunal and renumbered as TA No 1554 of 2023)

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M/s. Indian Overseas Bank Sriram Nagar Branch, Represented by its Assistant General Manager No. 135, T.T.K. Road, Alwarpet, Chennai – 600 018. .

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…. Applicant

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-Vs-

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M/s. S.K. Electricals

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Represented by its Partners Flat No. C-2, II Floor,

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Sriram Building, No.14, Chitranjan Road, Kamatchi Nagar, Alwarpet, Chennai – 600 018.

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*2. Mr. S. Rakesh Kumar, (Deceased)

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Mrs. R. Kamali, W/o. Mr. S. Rakesh Kumar, Flat No. C-2, II Floor, Sriram Building, No.14, Chitranjan Road, Kamatchi Nagar, Alwarpet, Chennai – 600 018

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And Also at:

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No.34, Sri Ram Colony, 1^st Street Alwarpet, Chennai – 600 018.

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Ms. R. Reethika, D/o. Mr. S. Rakesh Kumar, No.34, Sri Ram Colony, 1^st Street Alwarpet, Chennai – 600 018.

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And Also at:

No. 117, T.T.K. Road, Alwarpet, Chennai – 600 018.

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R. Reneesh, S/o. S. Rakesh Kumar, No.34, Sri Ram Colony, 1^st Street Alwarpet, Chennai – 600 018.

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And Also at:

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No. 117, T.T.K. Road, Alwarpet, Chennai – 600 018.

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Mrs. I.T. Chandra Kumari, W/o. Mr. V. Sasikumar, No.34, Sri Ram Colony, 1^st Street Alwarpet, Chennai – 600 018

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And Also at:

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Old Door No. 16/2-A, New Door No. 33, Sri Ram Colony Lane, Abiramapuram, Alwarpet, Chennai – 600 018. . …. Defendants

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*Defendants 4 to 6 being LRs of D-2 were impleaded vide order in IA No.1414/22 dated 11.08.2023

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Counsels on record / appeared:

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Counsel for Applicant : M/s. Annal. P Defendants 1 and 3 were set ex-parte on 16.05.2019 Defendants 4 to 6 (LRs of D-2) were set ex-parte on 31.10.2023

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: - FINAL ORDER - :

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This original application is filed on 16.10.2020 by the applicant bank under Section 19(1) of Recovery of Debts and Bankruptcy Act, 1993 (formerly Recovery of Debts Due to Banks and Financial Institutions Act, 1993) against the defendants for recovery of a total sum of Rs.46,21,741.94p (Rupees Forty Six Lakhs Twenty One

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Thousand Seven Hundred Forty One and Ninety Four only) due in respect of

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TA No.1554 of 2023 (E)

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30.01.2025

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Cash Credit facility together with further interest @ 11.75% per annum with monthly rests from the date of application till the date of realization in full, for appropriation of Hypothecation of Book Debts of 1^st defendant morefully described in schedule to OA and costs of this application.

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Originally, this application was filed before DRT-II, Chennai, assigned OA No.72/2019, and thereafter in pursuance to the notification from Ministry of Finance, DFS dated 04.10.2022, OA No.72/2019 stood transferred to this Tribunal and renumbered as TA No.1554/2023.

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Brief Facts of the case:

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The Applicant submits that the application is filed within the period of limitation as prescribed under Section 24 of the Recovery of Debts and Bankruptcy Act, 1993, and the subject recovery claim falls within the jurisdiction of this Hon’ble Tribunal.

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The case of the applicant bank is that the 1^st defendant is a Partnership Firm, represented by its Partners, 2^nd and 3^rd defendants. 1^st defendant, represented by its partners, defendants 2 and 3 approached the applicant bank seeking financial assistance for their business.

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It is submitted that upon request of defendants, the applicant bank had sanctioned Open Cash Credit (Book Debts) of Rs.50 lakhs vide its Credit Sanction Advice dated 29.03.2011, the terms and conditions of which are accepted and acknowledged by the defendants herein.

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It is further submitted that in evidence of availing the aforesaid Cash Credit facility, 1^st defendant represented by 2^nd and 3^rd defendants had executed the following loan and security documents in favour of applicant bank on 29.03.2011:

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(i) Demand Promissory Note for Rs.50 lakhs, agreeing to repay the said loan with interest at the rate of 11.75% p.a. from the date until payment in full with monthly rests or such rates as may be revised by the bank from time to time;

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(ii) Letter of Continuity and Confirmation of DPN for Rs.50 lakhs

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(iii) Hypothecation of Book Debts for Rs.50 lakhs as security for the due repayment to the applicant at any time on demand at Chennai

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(iv) Letter of Hypothecation (for securing Machineries / Vehicles / Goods/ Book-Debts) for Rs.50 lakhs, thereby hypothecating the Book Debts of the 1^st defendant firm

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It is submitted by applicant bank that apart from the above said documents executed by the 1^st defendant, 2^nd and 3^rd defendants, being the partners of the 1^st defendant firm, have individually executed two separate Guarantee for Cash Credits, etc. both dated 29.03.2011, guaranteeing the due repayment of the Cash Credit Facility of Rs.50 lakhs availed by the 1^st Defendant firm and the same are continuing in nature and subsisting as long as the amounts are due and payable by the 1^st defendant. 2^nd and 3^rd defendants have also executed Partnership cum Letter of Authority dated 29.03.2011.

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The applicant bank submits that at the request of 1^st defendant, applicant bank had enhanced the aforesaid Open Cash Credit of Rs.50 lakhs to Rs. 1 crore and

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executed the following loan and documents on 06.05.2011 in favour of applicant bank:

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(ii) Letter of Continuity and Confirmation of DPN for Rs.1 Crore

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(iii) Hypothecation of Book Debts for Rs.1 Crore as security for the due repayment to the applicant at any time on demand at Chennai (iv) Letter of Hypothecation (for securing Machineries / Vehicles / Goods/ Book-Debts) for Rs.1 Crore, thereby hypothecating the Book Debts of the 1^st defendant firm

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It is submitted by applicant bank that apart from the above said documents executed by the 1^st defendant, 2^nd and 3^rd defendants, being the partners of the 1^st defendant firm, have individually executed two separate Guarantee for Cash Credits, etc. both dated 06.05.2011, guaranteeing the due repayment of the Cash Credit Facility of Rs.1 Crore availed by the 1^st Defendant firm and the same are continuing in nature and subsisting as long as the amounts are due and payable by the 1^st defendant.

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It is further submitted by applicant bank that at the request of 1^st defendant, applicant bank has renewed the aforesaid Cash Credit facility to Rs.98 lakhs at its existing limit amount prevailed then, vide its Credit Sanction Advice dated 06.06.2014, the terms and conditions of which are accepted and acknowledged by

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the defendants.

Applicant bank submits that defendants have also executed Revival Letters dated 20.03.2014 and 15.03.2017 respectively, for the above said Cash Credit facility availed from the applicant bank. The 1^st defendant had agreed to pay interest at the rate of 11.75% p.a. compounded on monthly rests basis and the above said facilities are secured by hypothecation of Book Debts of the 1^st defendant, morefully described in the schedule to OA

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It is submitted by applicant bank that since the first defendant failed to regularize its loan account, it was declared as NPA on 30.09.2015. The applicant bank issued Lawyer Notice dated 07.10.2017 to the defendants herein, calling upon them to repay the dues along with interest at contractual rate. The notices sent to defendants returned with endorsement ‘left’ on 09.10.2017. Despite several reminders, defendants did not come forward to clear the dues. Hence, this Original Application (OA) has been filed to recover the dues from the defendants.

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After the filing of the OA, summons was sent to the Defendant Nos.1 to 3 through Registered Post with Acknowledgment Due, which was returned unserved with postal endorsement as ‘Left’ in respect of D-1 and D-2. Summon to D-3 was duly served. Applicant bank had caused paper publication of the notice and filed proof thereof. When OA was taken up on 16.05.2019, even after giving sufficient time, there was no appearance or representation from the defendants. Hence, defendants 1 to 3 were placed ex-parte on 16.05.2019.

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Thereafter, during the pendency of OA, applicant bank filed IA No.1414/22

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for bringing on record LRs of deceased 2^nd defendant, which was allowed on 11.08.2023 and applicant bank had impleaded defendants 4 to 6 as LRs of deceased 2^nd defendant and filed clean copy of OA. Notice to newly added defendants 4 and 5 retuned as ‘no such person’, while notice to 6^th defendant returned as ‘refused’. Defendants 4 to 6 were placed ex-parte on 31.10.2023.

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Heard the submissions of Applicant Bank and perused the records.

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To prove the case of the Applicant Bank, Shri. M.P. Vinuraj, Chief Manager, Asset Recovery Management Branch of applicant bank has filed his Affidavit by way of evidence and same was considered as evidence of AW-1 and list of documents came to be marked as Ex A-1 to A-19 As the defendants remained ex-parte, the OA claim remains unchallenged. There is no contra evidence available on record to repudiate the claim of the Applicant Bank.

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With regard to the amount advanced, the interest applied, the conduct and operations in the account and the default committed, this Tribunal comes to the conclusion that the applicant bank is entitled for a final order on the following terms:

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-:O R D E R:-

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14. The OA is allowed with costs,

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(a) The applicant bank is allowed to recover from Defendants No.1, 3 to 6 jointly and severally a sum of Rs.46,21,741.94p (Rupees Forty Six Lakhs Twenty One Thousand Seven Hundred Forty One and Ninety Four only) due in respect of Cash Credit facility together with

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further interest @ 11.75% per annum with monthly rests from the date of filing this application till the date of realization.

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(b) In the event of failure of the defendants to pay the aforesaid amount, the bank is at liberty to recover the amount by sale of the schedule mentioned hypothecated property in the OA;

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(c) The liability of defendants 4 to 6, being LRs of deceased D-2, is restricted to the extent of estate inherited by them from the deceased 2^nd defendant.

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(d) Schedule mentioned property in the OA shall be appended to this final order;

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(e) The applicant bank shall file the latest memo of calculation of OA amount together with interest, costs etc., to be paid by the defendants duly considering the amounts, if any, paid by the defendants and/or amount realized by sale of assets etc., during the intervening period after the filing of the OA, enabling the Registry to prepare Recovery Certificate for the amount to be paid by defendants to the applicant bank.

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(f) The applicant bank shall file memo of costs within ten days from the date of this final order.

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(g) Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of the final order.

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A copy of this order be communicated to the parties concerned.

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Sd/(S.V. GOWRAMMA) PRESIDING OFFICER,

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DRT-III, CHENNAI

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(Dictated to PS, transcribed by her, corrected, signed and pronounced by me on this the 30^th

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day of January, 2025)

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ANNEXURES

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WITNESSES EXAMINED FOR THE APPLICANT BANK :

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AW-1: Shri. M.P. Vinuraj, Chief Manager, Asset Recovery Management Branch of applicant bank.

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Exhibits on the part of the Applicant:

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Sl. No.	Description of Documents	Exhibit No.
1.	Credit Sanction Advice dated29.03.2011	A-1
2.	Demand Promissory Note for Rs. 50,00,000/- dated 29.03.2011	A-2
3.	Letter of Continuity and Confirmation of DPN dated 29.03.2011	A-3
4.	Hypothecationof Book Debts dated29.03.2011	A-4
5.	Letter of Hypothecation ( for securing Machineries / Vehicles/Goods/Book-Debts) dated29.03.2011	A-5
6.	Guarantee for Cash Credits, etc., executed by the 2^nd Defendant dated29.03.2011	A-6
7.	Guarantee for Cash Credits, etc., executed by the 3^rd Defendant dated29.03.2011	A-7
8.	Partnership Letter cum Letter of Authority dated 29.03.2011	A-8
9.	Demand Promissory Note for Rs. 50,00,000/- dated 06.05.2011	A-9
10.	Letter of Continuity and Confirmation of DPN dated 06.05.2011	A-10
11.	Hypothecation of Book Debts dated 06.05.2011	A-11
12.	Letter of Hypothecation ( for securing Machineries / Vehicles/Goods/Book- Debts) dated 06.05.2011	A-12
13.	Guarantee for Cash Credits, etc., executed by the 2^nd& 3^rdDefendant dated 06.05.2011	A-13
14.	Credit Sanction Advicefor Renewaldated 06.06.2014	A-14
15.	Revival Letterdated20.03.2014	A-15

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16.	Revival Letterdated15.03.2017	A-16
17.	Lawyer Notice dated 07.10.2017	A-17
18.	Returned Covers dated 09.10.2017	A-18
19.	Statement of Accounts	A-19

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Witness Examined for the Defendant: -Nil-

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List of Documents Exhibited for the Defendant: -Nil –

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SCHEDULE

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HYPOTHECATION OF THE BOOK DEBTS OF THE 1^ST DEFENDANT

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Sd/(S.V. GOWRAMMA)

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PRESIDING OFFICER, DRT-III, CHENNAI

Indian Overseas Bank v. S K Electricals And Others

Case brief

What is this about?

What did the court decide?

Indian Overseas Bank v. S K Electricals And Others

Case brief

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What did the court decide?

What the court decided

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