Allowed

State Bank of India v. M/S M M Cotton Factory and Others

DRT23 Mar 2026OA/1109/2024

Case brief

AI extract

What is this about?

The Tribunal allowed the SARFAESI Act application for recovery of Rs. 5.77 Crore against borrowers and guarantors. The court uniformed interest rates and authorized recovery from mortgaged assets if dues remain unsatisfied.

What did the court decide?

Recovery of Rs. 5,77,51,790 with cost and simple interest @8% p.a. from date of filing; Recovery Certificate issued; Enforcement against mortgaged and personal assets permitted.

State Bank of India versus M/S M M Cotton Factory and Others — Banking and Recovery | DRT (2026)

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DEBTS RECOVERY TRIBUNAL-III, CHANDIGARH

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ORIGINAL APPLICATION NO.1109/2024

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PRESIDED OVER BY MRIDULESH KUMAR SINGH

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DATE OF INSTITUTION: 28.08.2024

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DATE OF DECISION: 23.03.2026

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State Bank of India, a body Corporate constituted under the provisions of The State Bank of India Act, 1955 (23 of 1955), having its Corporate Office at Madame Cama Road, Nariman Point, Mumbai (Maharashtra) 400021, carrying on its business of Banking in India and Abroad, having one of its local Head Office at Sector 17-A, Chandigarh, having its Branch, amongst other places, at Kairon Road, Malout, District Sri Muktsar Sahib-152107 (Punjab) and one of the Specialized Branch, known as Stressed Assets Recovery Branch, 3^rd Floor Admin Office Building at Fountain Chowk, Civil Lines, Ludhiana-141001 (Punjab) through its Chief Manager, Shri Dalip Mahajan.

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	……..Applicant
Versus

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M/s M M Cotton Factory, a Partnership Firm, having office at Village and Post Office Danewala, Tehsil Malout, District Sri Muktsar Sahib, Punjab-152107, through its Partners Shri Surinder Pal son of Shri Rikhi Ram, Shri Navdeep Rai son of Shri Surinder Pal, Smt. Promila Rani wife of Shri Surinder Pal and Shri Darshan Kumar son of Shri Rikhi Ram.

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Shri Surinder Pal son of Shri Rikhi Ram, Partner of M/s M M Cotton Factory and Partner of M/s H M Rice Mills, Resident of House No 189, Behind S.D. School, Water Works Road, Street No. 03, Krishna Colony, Malout, District Sri Muktsar Sahib (Punjab)-152107.

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Shri Navdeep Rai son of Shri Surinder Pal, Partner of M/s M M Cotton Factory, Resident of House No. 189, Behind S.D. School, Water Works Road, Street No. 03, Krishna Colony, Tehsil Malout, District Sri Muktsar Sahib (Punjab)- 152107.

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Smt. Promila Rani wife of Shri Surinder Pal, Partner of M/s M M Cotton Factory, Resident of House No. 189, Behind S.D. School, Water Works Road, St. No. 03, Krishna Colony Tehsil Malout, District Sri Muktsar Sahib-152107 (Punjab).

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2 OA /1109/2024 STATE BANK OF INDIA VS. M/S M M COTTON FACTORY AND OTHERS

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5. Shri Darshan Kumar son of Shri Rikhi Ram, Partner of M/s M M Cotton Factory and Partner of M/s H M Rice Mills, Resident of
House no.449, Gali No.2, Ward No.2, Gobind Nagri, Malout,
District Sri Muktsar Sahib (Punjab)-152107.
6. Shri Parshotam Dass son of Shri Raghu Dass, Resident of Kothi No. 89, Green Valley Colony, Shekhu Road, Malout, District Sri Muktsar Sahib-152107 (Punjab).
7. Shri Happy Mittal son of Shri Darshan Mittal, Resident of House No. 449, Street. No. 02, Behind Krishna Mandir, Gobind Nagri, Tehsil Malout, District Sri Muktsar Sahib-152107 Punjab.
8. Smt. Suman Lata wife of Shri Parshottam Dass, Resident of Kothi No. 89, Green Valley Colony, Shekhu Road, Malout, District Sri Muktsar Sahib-152107 (Punjab).
9. Shri Kewal Krishan son of Shri Rikhi Ram, Resident of House No. 505, Street No. 02, Behind Krishna Mandir, Gobind Nagri, Tehsil Malout, District Sri Muktsar Sahib-152107 (Punjab).
10.Shri Ravinder Pal son of Shri Mangat Rai, Resident of House No. 806, St No. 02, Ward No. 05, Mani Bazaar, Tehsil Malout, District
Sri Muktsar Sahib-152107 (Punjab).
11.M/s H M Rice Mills, a Partnership Firm, at Village and Post Office
Danewala, Jandwala Road, Tehsil Malout, District Sri Muktsar
Sahib. (Punjab)-152107 through its Partners Shri Darshan Kumar son of Shri Rikhi Ram and Shri Surinder Pal son of Shri
Rikhi Ram.
12.M/s M M Rice Mills having Office at Village Aulakh, Near Suraj
Brick Company, on Link Road from Malout - Muktsar Road, Tehsil
Malout, District Sri Muktsar Sahib-152107 Punjab, through its
Proprietor Shri Surinder Pal son of Shri Rikhi Ram.
13.M M Rice Land Private Limited, having office at Village Aulakh,
Near Suraj Brick Company, on link road from Malout - Muktsar
Sahib Road, Tehsil Malout, District Sri Muktsar Sahib-152107
(Punjab), through its Directors. .……Defendants

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3 OA /1109/2024 STATE BANK OF INDIA VS. M/S M M COTTON FACTORY AND OTHERS

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Advocates:

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Argued by Sh. Vivek Verma, Advocate for the applicant

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Sh. Ishmeet, Advocate proxy for Sh. Sherry K Singla, Advocate for Defendant Nos. 1 to 5 ( through VC ) (opportunity to file the WS was closed and defense was struck off vide order dated 29.05.2025) None for Defendant Nos. 6 to 13 (already ex-parte vide order dated 29.05.2025)

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FINAL ORDER

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Present Original Application was instituted by the applicant under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993, against the defendants for recovery of Rs. 5,77,51,790.00 (Rupees Five Crore Seventy Seven Lacs Fifty One Thousand Seven Hundred Ninety only). T he Original Application has been filed through Shri Dalip Mahajan, Chief Manager of applicant w ho is competent to institute the Original Application vide the Gazette Notification dated 02.05.1987 which is Annexure 1 to this OA.

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The brief facts of the OA that Defendant no. 1 through its partners the Defendant nos.2 to 5 approached the applicant for grant of Cash Credit Limit of Rs.200.00 Lacs and Term Loan of Rs.72.50 Lacs. Defendant nos. 2 to 13 stood as guarantors. Thereafter, the defendant no. 1 through its partners approached the applicant for enhancement of the limit to Rs.300.00 Lacs and for Fresh Term Loan of Rs.30.00 Lacs. Thereafter, the defendant no. 1 through its partners approached the applicant for enhancement of the limit to Rs.400.00 Lacs and for Term Loan of Rs.21.00 Lacs. Thereafter, defendant no. 1 through its partners approached the applicant for renewal of the Limit vide request letter dated 11.04.2019, which is Annexure A11 to this OA; Resolution dated 08.04.2019 by defendant no. 13, which is Annexure A12 to this OA. Thereafter, the defendant no. 1 through its partners approached the applicant for Working Capital Term Loan (WCTL) of Rs.80.00 Lacs under GECL. Thereafter, the defendant no. 1 through its partners approached the applicant for renewal and

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4 OA /1109/2024 STATE BANK OF INDIA VS. M/S M M COTTON FACTORY AND OTHERS

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restructuring of Credit Facilities vide letter dated 10.06.2021, which is Annexure A19 to this OA.

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The applicant sanctioned the Cash Credit Limit of Rs.200.00 Lacs and Term Loan of Rs.72.50 Lacs vide letter of arrangement dated 19.11.2011, which is Annexure A2 to this OA and terms and conditions were duly accepted by the defendants. Thereafter, the applicant sanctioned enhancement of the limit to Rs.300.00 Lacs and sanctioned Fresh Term Loan of Rs.30.00 Lacs vide letter of arrangement dated 15.11.2013, which is Annexure A5 to this OA. Thereafter, the applicant sanctioned enhancement of the limit to Rs.400.00 Lacs with Term Loan for Rs.21.00 Lacs vide letter of arrangement dated 26.10.2015, which is Annexure A8 to this OA. Thereafter, the limit was renewed by the applicant vide letter of arrangement dated 11.04.2019 and 19.06.2019, which are Annexures A13 and A14 to this OA. Thereafter, the applicant sanctioned renewal of the Limit for Rs.400.00 Lacs with sanction of Working Capital Term Loan (WCTL) of Rs.80.00 Lacs under GECL vide letter of arrangement dated 23.07.2023, which is Annexure A16 to this OA. Thereafter, the CC Limit was renewed and restructured by the applicant by sanction of CC Limit of Rs.33.00 Lacs, WCTL (GECL) of Rs.80.00 Lacs, WCTL of Rs.367.00 Lacs, Funded Interest Term Loan (FITL-1) of Rs.18.00 Lacs, Funded Interest Term Loan (FITL-2) of Rs.21.00 Lacs, WCTL (GECL 3.0) of Rs.40.00 Lacs with total Credit Facilities of Rs.559.00 Lacs vide letter of arrangement dated 13.08.2021, which is Annexure A20 to this OA.

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Defendant no. 1 through its partners h ypothecated the stocks and book debts, plant and machinery, etc. vide agreement of loan cum hypothecation dated 19.11.2011, which is Annexure A3 to this OA; Supplemental Agreement of Loan cum Hypothecation dated 15.11.2013, 26.10.2015, 23.07.2020 & 13.08.2021 which are

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Annexure A6, Annexure A9, Annexure A17 & Annexure A21 to this OA.

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5 OA /1109/2024 STATE BANK OF INDIA VS. M/S M M COTTON FACTORY AND OTHERS

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Defendant nos. 2, 5, 8, 9, 11 and 12 mortgaged their immovable properties detailed as under:

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(i) Defendant no. 2 mortgaged Factory Land and Building measuring 14Kanal-06Marla situated at Village Danewala, Tehsil Malout, District Sri Muktsar Sahib, Punjab through equitable mortgage of Sale Deed bearing vasika no. 344 dated 02.05.2006, along with its translation, which are Annexures A24 and A24T to this OA.

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(ii) Defendant no. 2 mortgaged Residential property measuring 09Marla situated at Village Shekhu, Krishna Colony, Water Works Road, Malout, District Sri Muktsar Sahib, Punjab through equitable mortgage of Sale Deed bearing vasika no. 2406 dated 15.01.1991, along with its translation, which are Annexures A25 and A25T to this OA; Letter dated 04.08.2021 of confirmation of extension of mortgage by deposit of title deeds, which is Annexure A26 to this OA. (iii) Defendant no. 5 mortgaged Residential property measuring 05Marla situated at Village Shekhu, Street No. 2, Gobind Nagri, Near Krishna Mandir, Malout, District Sri Muktsar Sahib, Punjab through equitable mortgage of Sale Deed bearing vasika no. 2002 dated 24.10.2002, along with its translation, which are Annexures A28 and A28T to this OA; Letters dated 13.08.2021 of confirmation of extension of mortgage by deposit of title deeds, which are Annexure A27 & A29 to this OA.

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(iv) Defendant nos. 5 and 9 mortgaged Plot measuring 15½Marla (450 sq. yards) situated at Village Danewala, Near Guruduwara Danewala Chowk, Main G.T. Road, Malout, District Sri Muktsar Sahib, Punjab through equitable mortgage of Sale Deed bearing vasika no. 2946 dated 15.02.2001, along with its translation, which are Annexures A30 and A30T to this OA; Letter dated 13.08.2021 of confirmation of extension of mortgage by deposit of title deeds, which is Annexure A31 to this OA.

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(v) Defendant no. 8 mortgaged Residential property bearing Plot no. 89, measuring 206.66 sq. yards situated at Green Valley Colony, Shekhu Road, Malout, District Sri Muktsar Sahib, Punjab through equitable mortgage of Sale Deed bearing vasika no. 1769 dated

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6 OA /1109/2024 STATE BANK OF INDIA VS. M/S M M COTTON FACTORY AND OTHERS

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11.08.2010, along with its translation, which are Annexures A32 and A32T to this OA; Letter dated 13.08.2021 of confirmation of extension of mortgage by deposit of title deeds, which is Annexure A33 to this OA.

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(vi) Defendant no. 11, through its partners mortgaged Factory Land and Building measuring 17Kanal-04Marla situated at Danewala, Tehsil Malout, District Sri Muktsar Sahib, Punjab through equitable mortgage of Sale Deed bearing vasika no. 2370 dated 16.09.2004, along with its translation, which are Annexures A34 and A34T to this OA; Letter dated 13.08.2021 of confirmation of extension of mortgage by deposit of title deeds, which is Annexure A35 to this OA. (vii) Defendant no. 12, through its partners mortgaged Factory Land and Building measuring 19Kanal-16Marla situated at Village Aulakh, Tehsil Malout, District Sri Muktsar Sahib, Punjab through equitable mortgage of Sale Deed bearing vasika no. 2020-21/52/1/481 dated 01.07.2020 and vasika no. 1307 dated 24.08.1999, along with its translation, which are Annexures A36 and A36T, A37 and A37T to this OA; Letter dated 13.08.2021 of confirmation of extension of mortgage by deposit of title deeds, which is Annexure A38 to this OA. Documents Executed: Guarantee Agreement dated 19.11.2011, which is Annexure A4 to this OA; Guarantee Agreement dated 15.11.2013, which is Annexure A7 to this OA; Guarantee Agreement dated 26.10.2015, which is Annexure A10 to this OA; Guarantee Agreement dated 19.06.2019, which is Annexure A15 to this OA; Guarantee Agreement dated 23.07.2020, which is Annexure A18 to this OA; Guarantee Agreement dated 13.08.2021, which is Annexure A22 to this OA; Board Resolution dated 13.08.2021 of defendant no. 13, which is Annexure A23 to this OA; Revival Letter dated 10.10.2018, which are Annexures A39 and A40 to this OA; Statements of Accounts, which are Annexures A41 to A46 to this OA; Notice dated 11.07.2022 u/s 13(2) of SARFAESI Act, which is Annexure A47 to this OA; Valuation report dated 23.08.2022, which is Annexure A48 to this OA.

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7 OA /1109/2024 STATE BANK OF INDIA VS. M/S M M COTTON FACTORY AND OTHERS

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The loan accounts became irregular and were classified as NPA and after adjusting debit and credit entries in loan accounts there was a debit of Rs. 5,77,51,790.00 which is recoverable and the defendants were served recall notices but they did not repay the outstanding amount, therefore, the applicant requested to accept the application and to issue Recovery Certificate accordingly.

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The defendants were served notices to appear before this Tribunal. Sh. Ishmeet Singh, Advocate proxy for Sh. Sherry K Singla, Advocate appeared on behalf of defendants nos. 1 to 5 on 03.03.2025 and filed Power of Attorney of Sh. Sherry K Singla, Advocate. Since no WS was filed by defendant nos. 1 to 5 within stipulated period, their opportunity to file WS was closed and their defense was stuck off vide order dated 29.05.2025. Also, since no one appeared on behalf of defendant nos. 6 to 13, they were proceeded ex-parte vide order dated 29.05.2025.

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In support of the OA, affidavit of Sh. Dalip Mahajan , Chief Manager, of the applicant h as been filed.

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Heard arguments and perused record.

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It was argued by learned counsel for applicant that in view of the documentary evidence brought on record, the applicant had proved

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its case.

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The learned proxy counsel for defendant nos. 1 to 5 appeared through video conferencing but nothing was argued on OA.

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None appeared on behalf of defendant nos. 6 to 13.

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From the perusal of all the Annexures A1 to A48 to this OA, it

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is proved that the defendants approached applicant for availing of the loan facilities which were granted to them and for that they had executed all the relevant documents in favour of the applicant. The defendants failed to pay back the loans as per terms and conditions of the agreement between the parties. Subsequently, accounts of the defendants were classified as NPA. From the documentary evidence brought on record, it is proved that applicant is entitled to recover a sum of Rs. 5,77,51,790.00 (Rupees Five Crore Seventy Seven Lacs Fifty One Thousand Seven Hundred Ninety only), w ith interest from the

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8 OA /1109/2024 STATE BANK OF INDIA VS. M/S M M COTTON FACTORY AND OTHERS

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defendants, jointly and severally, from the date of filing of the present Original Application till realization of the account.

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In so far as pendente lite and future rate of interest is concerned, the applicant in relief clause has claimed interest @11.40%p.a. with monthly rests in CC Limit, @10.40%p.a. with monthly rests in FITL-1, @9.25%p.a. with monthly rests in GECL extension 1.0, @9.25%p.a. with monthly rests in WCTL-1, @9.40%p.a. with monthly rests in FITL-2, @8.90%p.a. with monthly rests in GECL 3.0, plus 2% penal interest in all accounts from 30.09.2023 till the realization.

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The Tribunal is of the considered opinion that sometimes in appropriate cases the prerogative of mercy is the brightest jewel in the crown of the Judge. Keeping in view the facts and circumstances of the instant case including undertaking of the defendants, quantum of loans and prevalent market rates of interest which have gone drastically downhill in yester years, while exercising the discretion vested in this Tribunal, this Tribunal deems it just and appropriate to grant uniform simple interest @8.00%p.a. in all the loan accounts from the date of filing of the OA till realization of the amount ordered vide this final order. It is ordered accordingly.

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In the result, the application is allowed declaring that the defendants are liable to pay to the applicant a total sum of Rs. 5,77,51,790.00 (Rupees Five Crore Seventy Seven Lacs Fifty One Thousand Seven Hundred Ninety only), jointly and severally, with costs, current and future simple interest @8.00%p.a. in all the loan accounts from the date of filing of OA till the date of realization of the amount. Accordingly, the applicant shall be entitled to recover aforesaid amount from the sale of mortgaged properties/hypothecated assets of defendants in execution proceedings if not sold earlier under the provisions of the SARFAESI Act, 2002. If the dues of the applicant still remain unsatisfied, it shall be entitled to recover the same by attachment and sale of personal assets of the defendants. The applicant is at liberty to enforce the claim through due process of law.

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11. Any other application pending stands disposed of.

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9 OA /1109/2024 STATE BANK OF INDIA VS. M/S M M COTTON FACTORY AND OTHERS

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Issue Recovery Certificate accordingly.

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Parties to appear before Learned Recovery Officer of this Tribunal on 15.04.2026.

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Copy of this order be given dasti to the applicant and be sent to defendants through registered/speed post and this order be also uploaded on the official website of this Tribunal and record be consigned.

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Pronounced by me in the open Tribunal .

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Dated: 23.03.2026.

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(MRIDULESH KUMAR SINGH)

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Presiding Officer,

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DRT-III, Chandigarh

State Bank of India v. M/S M M Cotton Factory and Others

Case brief

What is this about?

What did the court decide?

State Bank of India v. M/S M M Cotton Factory and Others

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

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