Allowed

Canara Bank v. Muttappa Bagennavar

DRT5 Jun 2026OA/1020/2023

Case brief

AI extract

What is this about?

The DRT Allowed an original application for a Recovery Certificate. The court rejected the defendants' defense regarding fraud, signature forgery, and unauthorized agricultural loan conversion, finding the executed housing loan and mortgage documents established valid liability.

What did the court decide?

Issuance of Recovery Certificate for Rs. 32,07,187.07 plus 8% simple interest pending future interest and cost of proceedings.

Canara Bank versus Muttappa Bagennavar — Contract and Commercial Disputes | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL II, BENGALURU

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Dated this 05^th Day of June, 2026

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Present: Sri. T. RAJESH Presiding Officer

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OA.No.1020/2023

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BETWEEN:

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Canara Bank, Athani Branch, Opp: to Govt. Hospital, Athani, Belagavi -591304, Karnataka, Rep. by its Chief Manager,

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…APPLICANT

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AND:

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Sri. Muttappa Bagennavar, S/o. Birappa Bagennavar, R/at Nandagoan Athani Taluk,

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Belgaum District -591304.

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Sri. Laxman Birappa Bagennavar, S/o. Birappa Bagennavar, R/at Nandagoan, Athani Taluk, Belgaum District -591304.

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Sri. Srimant Murgagaol, S/o. Basappa Murgagaol, R/at Khothanatti, Athani Taluk, Belgaum District -591230.

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...DEFENDANTS

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Counsel on record/appeared for:

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Applicant : Prakasha Hegde K Defendants : Meenakshi B Mane

OA 1020/2023

FINAL ORDER

The present Original Application in short “OA” has been filed under section 19 of Recovery of Debts and Bankruptcy Act 1993 seeking issuance of Recovery Certificate for Rs. 32,07,187.07 (Rupees thirty-two lakh seven thousand one hundred eighty-seven and paisa seven only) with further interest thereon and cost from the Defendants.

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It is the case of the Applicant that the Defendant No.1 and 2 as borrowers and Defendant No.3 as Guarantor had availed Agricultural Term Loan for a sum of Rs. 25,00,000/- (Rupees twenty-five lakh only), on 05.03.2016 bank sanctioned a loan of Rs. 30,00,000/- (Rupees thirty lakh only). In consideration of the said loan facilities, the Defendants executed the necessary loan documents in favour of the Applicant Bank to secure the loan. Further, Defendant Nos. 1 and 2, as collateral security for the said loan facilities, executed a Simple Mortgage Deed in favour of the Applicant Bank by creating a mortgage over the schedule property.

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It is the case of the Applicant that the Defendants, despite availing the credit facility, agreeing with the Terms and Conditions for the loans, failed in complying with the same, resulting in defaults and consequentially turning the loan accounts as Non-Performing Asset (NPA).

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In the above circumstances, the Applicant approached this Tribunal by filing this OA seeking issuance of Recovery Certificate for the amount due in the account.

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OA 1020/2023

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Summons were issued to the defendants. The defendants entered appearance through vakalat and filed their written statement. However, despite being granted sufficient opportunity, they failed to adduce their evidence. Accordingly, the defendant’s evidence was closed on 18.05.2026.

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The written statement filed by the defendants contends that the properties in question were mortgaged with Syndicate Bank and that they have never mortgaged any property with Canara Bank. The defendants further contend that the applicant's claim pertains to properties allegedly mortgaged with Canara Bank, which is specifically denied by them. It is their case that the documents relied upon by Syndicate Bank were obtained from them by misrepresentation of facts. The defendants submit that they had approached the bank for financial assistance for agricultural purposes; however, Syndicate Bank allegedly obtained their signatures on documents relating to a housing loan and created a simple mortgage over their agricultural property without their knowledge and consent. According to the defendants, the bank committed fraud upon innocent agriculturists who approached it for financial assistance for agricultural activities, despite being aware that agricultural loans are not enforceable under the provisions of the SARFAESI Act, 2002. The defendants further contend that they never executed any valid simple mortgage deed in favour of the applicant and that the rate of interest charged by the applicant is exorbitant and unconscionable. They also allege that Syndicate Bank

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OA 1020/2023

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obtained their signatures on blank forms and documents without disclosing the nature, terms, and particulars of the loan transaction.

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The Applicant had let in evidence through AW-1, who filed Proof Affidavit reiterating the contentions taken in the OA and also produced Exhibits A-1 to A-7, got the same marked in evidence.

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Heard both sides and considered the contentions raised in the OA in the light of the documentary evidence and proof affidavits. It is noted that the Applicant alone has adduced evidence in support of its case, whereas the Defendants have not led any evidence and have merely filed their written statement.

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The following issues arise for consideration in this matter:

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i) Whether the Applicant succeeded in proving the OA claim as against the Defendants?

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ii) If so, to what extent?

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Both these issues are gone into and decided together.

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Upon consideration of the pleadings, the documentary evidence

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produced by the applicant clearly establishes the loan transaction and the security created in respect thereof. Further, it is not in dispute that Syndicate Bank stood amalgamated with Canara Bank pursuant to the Scheme of Amalgamation notified by the Central Government under the provisions of the Banking Regulation Act, 1949, whereby all assets,

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OA 1020/2023

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liabilities, rights, interests, approvals, and obligations of Syndicate Bank

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vested in and stood transferred to Canara Bank. Consequently, the applicant is legally entitled to enforce the loan and security documents originally executed in favour of Syndicate Bank.

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The plea of fraud and misrepresentation is not supported by any

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contemporaneous or independent material and remains a mere assertion. Though it is contended that the loan was of agricultural nature, the loan application as well as the loan agreement and all loan and security documents executed by the defendants clearly disclose that the facility in question was a housing loan. The defendants have executed the housing loan agreement and the documents are consistent and pertain only to the said housing loan transaction. In the absence of any substantiating evidence to support the allegations raised, such bald pleas cannot be accepted.

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The said contention is not supported by the record. The loan and security documents placed on record, including the housing loan agreement and the Simple Mortgage Deed executed by the defendants, duly evidence the creation of valid security in favour of the applicant. Similarly, the challenge to the rate of interest as being exorbitant or unconscionable, in the absence of any violation of statutory norms or

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OA 1020/2023

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contractual terms, does not merit acceptance. Accordingly, these

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contentions are liable to be rejected.

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The contention that the defendant’s signatures were obtained on

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blank documents cannot be accepted in the absence of any cogent or independent evidence. Such a plea, being a bald assertion, does not by itself raise any triable issue, particularly when the loan and security documents stand duly executed and form part of the record. It is wellsettled that execution of documents carries a presumption of validity, and the burden lies heavily on the party alleging fraud or misrepresentation to rebut the same by clear and convincing evidence. The Hon’ble Supreme Court and various High Courts have consistently held that a mere allegation of signatures on blank papers, without contemporaneous complaint or supporting material, is insufficient to discredit duly executed financial documents, and that such defences are treated as afterthoughts when raised in recovery proceedings. In the present case, no material has been placed to substantiate the plea of fraud, coercion or improper filling up of documents, and therefore the said contention is liable to be rejected.

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The evidence tendered by the Applicant remains uncontroverted and undisputed. The evidence put forth by the Applicant is found admissible and sufficient to prove the averments made in the OA, and the

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OA 1020/2023

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default committed by the Defendants in repaying the loan amount due.

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The liability of the Defendants and the loan amount due are also proved by the above documents.

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Hence in view of the above findings this Tribunal comes to the conclusion that the OA is liable to be allowed.

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Taking into consideration of the fact that the loan is availed for

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housing purposes and also the fact that OA claim is arrived at by calculating interest at the agreed rate, pendente lite and future interest is awarded at 8.00% (simple). The prayer for interest with compounded monthly rests and for penal interest for the future period is hereby declined.

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In the result, OA.No. 1020/2023, is allowed,

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i) The Applicant is allowed to recover an aggregate sum of Rs. 32,07,187.07 (Rupees thirty-two lakh seven thousand one hundred eighty-seven and paisa seven only) with pendente lite and future interest of 8.00% p.a. (simple) from 14.11.2022 till the realization from the Defendants jointly, severally and personally after giving credit to all the amounts recovered and received during the pendency of the OA if any,

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and allow the same to be recovered by proceeding against the schedule properties. Properties schedule to the OA be the schedule to the Recovery

OA 1020/2023

Certificate.

ii) If the sale proceeds are found insufficient to clear the loan

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amount due from the Defendants jointly, severally and personally, then the Applicant Bank shall be at liberty to proceed against their other assets

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for recovery of the balance amount due.

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iii) The applicant bank is allowed cost of the proceedings for which

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Applicant to file cost memo within seven days from the date of receipt of the order.

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iv) The Recovery Certificate to be drawn in terms of this order and

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transferred to Recovery for execution.

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v) Interim application pending, if any, stands disposed of in terms

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of this final order.

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Communicate a copy of the order to the parties concerned in terms

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of Section 19(21)(i) of the RDB Act, read with Rule 16 of DRT (Procedure)

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Rules, 1993.

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(Dictated to PY directly on the Computer, after its transcription, corrected and pronounced by me in the open Court on this the 05^th day of June, 2026)

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Sd/(T. RAJESH) PRESIDING OFFICER

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ANNEXURES

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WITNESSES EXAMINED FOR THE APPLICANT BANK:

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AW-1: Frony John P, Chief Manager, of Applicant Bank.

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OA 1020/2023

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Exhibits on the part of the Applicant:

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Exhibit Nos.	Date	Particulars of Documents
A1	03.03.2016	Housingloan application
A2	05.03.2016	Sanction letter
A3	05.03.2016	Housing loan agreement
A4	07.09.2015	Simple mortgage deed
A5	--	Certified statement of account
A6	02.12.2022	Legal notice
A7	--	Postal receipt (3 nos.)

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Witness Examined for the Defendants:

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-Nil -

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List of Documents Exhibited for the Defendants:

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-Nil -

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Sd/-

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(T. RAJESH) PRESIDING OFFICER

Canara Bank v. Muttappa Bagennavar

Case brief

What is this about?

What did the court decide?

Canara Bank v. Muttappa Bagennavar

Case brief

What is this about?

What did the court decide?

What the court decided

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