Allowed

Canara Bank v. K Maheswaran

DRT20 Jan 2026OA/116/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed an Original Application filed by Canara Bank to recover a sum of approximately Rs. 56.39 lakhs from two defendants for overdraft, COVID FITL, and GECL loans, relying on proved loan documents and principles regarding penal interest capitalization.

What did the court decide?

Defendants directed to jointly/severally pay Rs.56,39,768.02p with interest subject to deduction of Rs.40,10,000/- auction proceeds.

Canara Bank versus K Maheswaran — Banking and Recovery | DRT (2026)

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OA No. 116/2022

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 20^TH DAY OF JANUARY, 2026 PRESENT: SEEMA SINHA,

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[PR. DISTRICT & SESSIONS JUDGE – Retd] PRESIDING OFFICER

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OA No.116/2022

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Between

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Canara Bank, Nagal Nagar Branch-II, Dindigul. Rep. By its Branch Manager. ---Applicant Bank

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And

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Mr. K. Maheswaran, Prop. M/s. JaiBhairavi Isha Shopee, No.34 D2, AMC Road, Opposite to Police Line, Dindigul - 624 001, Dindigul District.

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Mrs. M. Maheswari, W/o K. Maheswaran, No.34 D2, AMC Road,

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Opposite to Police Line, Dindigul - 624 001,

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Dindigul District. ---Defendants

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Counsel for the Applicant Bank : M/s K. Hariharan

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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 Defendants 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. 116/2022

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 01.11.2021 to recover from the Defendants a total sum of Rs.56,39,768.02p i.e., (i) Rs.48,29,983.71p together with interest at the rate of 10.70% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Overdraft Facility (ii) Rs.2,63,814.51p together with interest at the rate of 10.70% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of COVID FITL (iii) Rs.5,45,969.80p together with interest at the rate of 7.50% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of COVID GECL from the date of filing of Application till the date of realization with cost and by sale of mortgaged/hypothecated properties, more fully described in Schedules 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 defendants have availed Overdraft facility from erstwhile Syndicate Bank which is now amalgamated with Canara Bank.

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OVERDRAFT FACILITY

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In consideration of the above said Overdraft Facility, the 1^st defendant executed a "Terms & Conditions with regard to Overdraft Facility" on 12.07.18 for a sum of Rs.25,00,000/-containing various terms & conditions in favour of the Applicant Bank as security for repayment of the said overdraft with interest at the rate of 10.40% p.a. with monthly rests or at such other rates and rests as may be revised by the Applicant Bank from time to time and he had executed a Demand Promissory Note on 12.07.18 for a sum of Rs.25,00,000/- in favour of the Applicant Bank promising to repay the loan amount on demand with Compound interest at the rate of 10.40% p.a. with monthly rest or at such other rate as may be revised by the bank from time to time. Further he had executed a Composite Hypothecation Agreement on 12.07.18 for a sum of Rs.25,00,000/- by hypothecating the goods which are fully described in the 'A' Schedule hereunder. And also the 1^st defendant promised to repay the loan amount with compound interest at the rate of 10.40% per annum with monthly rest or at such other rates as may be revised by the bank from time to time with penal interest at the rate of 2% per annum in case of default.

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In consideration of the said Overdraft Facility, the 2^nd defendant agreed to stand as Continuing Guarantors in the individual capacity for the

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OA No. 116/2022

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repayment of the said loan with interest & costs thereon and executed separate Agreement of Continuing Guarantees dt. 12.07.18 in favour of the Applicant Bank.

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At the request of the defendants, the applicant bank has enhanced the limit of Cash Credit Facility for further sum of Rs.19,00,000/- and thereby the limit was enhanced from Rs.25,00,000 to Rs.44,00,000/-. To that effect the defendants have executed the fresh loan documents to the limit of Rs.44,00,000/-. The 1^st defendant executed a Demand Promissory Note on 29.07.19 for a sum of Rs.44,00,000/- in favour of the Applicant Bank promising to repay the loan amount on demand with Compound interest at the rate of 10.70% per annum with monthly rest or at such other rate as may be revised by the bank from time to time and also executed a Composite Hypothecation Agreement on 29.07.19 for a sum of Rs.44,00,000/- by hypothecating the goods which are fully described in the 'A' Schedule hereunder. Further the 1" defendant promised to repay the loan amount with compound interest at the rate of 10.70% per annum with monthly rest or at such other rates as may be revised by the bank from time to time with penal interest at the rate of 2% per annum in case of default,

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The 2^nd defendant agreed to stand as Continuing Guarantors in the individual capacity for the repayment of the said loan with interest & costs thereon and executed separate Agreement of Continuing Guarantees dt.29.07.19 in favour of the Applicant Bank.

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COVID FUNDED INTEREST TERM LOAN (CFITL)

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During COVID-19 pandemic period from 01.03.20 to 31.08.20, the interest accrued in the above said overdraft accounts was converted into COVID Funded Interest Term Loan (CFITL) and in consideration of the said CFITL, the applicant bank without any application or request, sanctioned the said term loan to the 1^st defendant as per Applicant bank's HO Circular No.634/2020 dt.26.08.20 and further the interest to the said term loan was charged as per the above said original overdraft agreement with extension of the existing mortgage as security.

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In consideration of the said CFITL, the 1^st defendant has to repay the loan amount in single installment on or before 31.03.21 and the 1^st defendant is permitted to prepay the said loan without any prepayment charges.

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OA No. 116/2022

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COVID SUPPORT GECL TERM LOAN

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During COVID-19 pandemic period, the 1^st defendant availed Covid Support GECL (Guaranteed Emergency Credit Limit) Term Loan for a sum of Rs.5,20,000/- further the interest to the said term loan was charged as per the agreement executed with extension of the existing mortgage as security. the 1^st defendant executed a Demand Promissory Note on 24.07.20 for a sum of Rs.5,20,000/- in favour of the Applicant Bank promising to repay the loan amount on demand with Compound interest at the rate of 7.50% per annum with monthly rest or at such other rate as may be revised by the bank from time to time.

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The 1^st defendant executed an Agreement cum Deed of Hypothecation dt.24.07.20 for a sum of Rs.5,20,000/- in favour of the Applicant Bank containing various terms & conditions by hypothecating goods mentioned in the "A" Schedule hereunder, as security for repayment of the Loan and by agreeing to repay the loan amount in 36 equated monthly installments of Rs.14,444/- each with interest & cost in favour of the Applicant Bank. Further the Defendants promised to repay the loan amount with compound interest as enumerated in the agreement with monthly rest or at such other rates as may be revised by the bank from time to time

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COMMON TO ALL LOANS

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The 1^st defendant offered his properties which are fully mentioned in the 'B' Schedule hereunder as Security and thereby the 1^st defendant deposited/re-deposited their Title Deeds on 09.07.18 with the applicant bank pertaining to said properties, with an intention to create an Equitable Mortgage over the said properties and by confirming the same the 1^st defendant executed a Registered Memorandum of Deposit of Title Deeds on 09.07.18 & 26.07.19 in favour of the Applicant Bank.

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After availing the loan, defendants were not regular in the matter of repayment. The defendants made several promises, but they failed to keep up their promises. 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 total sum of Rs.56,39,768.02p i.e., (i) Rs.48,29,983.71p together with interest at the rate of 10.70% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Overdraft Facility (ii) Rs.2,63,814.51p together with interest at the rate of 10.70% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of COVID FITL (iii) Rs.5,45,969.80p together with interest at the rate of 7.50% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of

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OA No. 116/2022

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COVID GECL from the date of filing of Application till the date of realization with cost.

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During the pendency of the O.A., the Applicant Bank has brought the schedule "B" Property situated at Dindigul District for Auction sale vide its Auction Sale under the provisions of SARFAESI Act. I further submit that that during the auction held, the said schedule B property was sold for a sum of Rs.40,10,000/- and sale certificate issued by the Applicant Bank to the auction purchaser and the same was registered as document No.1904/2022 before the S.R.O., Dindigul Joint-1 on 09.06.2022. I further submit that the said amount received from auctioning of the schedule B property has been given due credit into the loan account by the Applicant Bank.

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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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S. No.	Date	Description of document	Exhibits
1	12.07.2018	Term & Conditions for Overdraft facility executed by 1st Defendant in favour of the Applicant Bank	Ex.No.A-01
2	12.07.2018	Demand Promissory Note executed by 1st Defendant in favour of the Applicant Bank	Ex.No.A-02
3	12.07.2018	Composite agreement Hypothecation executed by 1st Defendant in favour of the Applicant Bank	Ex.No.A-03
4	12.07.2018	Agreement of Guarantee executed by 2nd Defendant in favour of the Applicant Bank	Ex.No.A-04
5	29.07.2019	Demand Promissory Note executed by 1st Defendant in favour of the Applicant Bank	Ex.No.A-05
6	29.07.2019	Composite Hypothecation agreement executed by 1st Defendant in favour of the Applicant Bank	Ex.No.A-06
7	29.07.2019	Agreement of Guarantee executed by 2nd Defendant in favour of the Applicant Bank	Ex.No.A-07
8	----	Statement of Accounts for Overdraft facility	Ex.No.A-08
9	26.08.2020	Applicant Bank's HO Circular A No.634/2020with regard ofCFITL	Ex.No.A-09
10	---	Statement of Accounts for A Overdraft facility	Ex.No.A-10
11	24.07.2020	Demand Promissory Note A executed by 1st Defendantin favouroftheApplicantBank	Ex.No.A-11
12	24.07.2020	Agreement Deed cum of A Hypothecation agreement executed by 1st Defendant in favouroftheApplicantBank	Ex.No.A-12
13	---	Statement of Accounts for GECL	Ex.No.A-13

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OA No. 116/2022

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14 09.07.2018	Registered Memo deeds executed favour of the no.1888/2018)	randum of by the 1st Applicant	Deposit of title Defendant in Bank (Doc	Ex.No.A-14
15 26.07.2019	Registered Memo deeds executed favour of the no.2003/2019)	randum of by the 1st Applicant	Deposit of title Defendant in Bank (Doc	Ex.No.A-15
16 09.06.2022	Sale certificate is in favour of Aucti	sued by the onpurchaser	Applicant Bank	Ex.No.A-16

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Schedule of Properties

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"A" Schedule - Hypothecated Goods

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All the Hypothecated Book Debts, Outstanding, Money Receivables, Claims and Bills due and all Stocks of raw materials, stocks, stocks-intrade, finished goods, semi finished goods and current assets, machineries etc., and owing to the defendants

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

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He has stated in his affidavit that the defendants has availed Overdraft facility, COVID FITL, COVID GECL from the Applicant Bank, but they 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-07 in support of its claim in the OA.

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The Term & Conditions for Overdraft facility executed by 1st Defendant in favour of the Applicant Bank has been marked as Ex.No.A-01, Demand Promissory Note executed by 1st Defendant in favour of the Applicant Bank has been marked as Ex.No.A-02, Composite agreement Hypothecation executed by 1st Defendant in favour of the Applicant Bank

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OA No. 116/2022

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has been marked as Ex.No.A-03, Agreement of Guarantee executed by 2nd Defendant in favour of the Applicant Bank has been marked as Ex.No.A-04, Demand Promissory Note executed by 1st Defendant in favour of the Applicant Bank has been marked as Ex.No.A-05, Composite Hypothecation agreement executed by 1st Defendant in favour of the Applicant Bank has been marked as Ex.No.A-06, Agreement of Guarantee executed by 2nd Defendant in favour of the Applicant Bank has been marked as Ex.No.A-07, Statement of Accounts for Overdraft facility has been marked as Ex.No.A-08, Applicant Bank's HO Circular A No.634/2020 with regard of CFITL has been marked as Ex.No.A-09, Statement of Accounts for A Overdraft facility has been marked as Ex.No.A-10.

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The Demand Promissory Note A executed by 1st Defendant in favour of the Applicant Bank has been marked as Ex.No.A-11, Agreement Deed cum of A Hypothecation agreement executed by 1st Defendant in favour of the Applicant Bank has been marked as Ex.No.A-12, Statement of Accounts for GECL has been marked as Ex.No.A-13, Registered Memorandum of Deposit of title deeds executed by the 1st Defendant in favour of the Applicant Bank (Doc no.1888/2018) has been marked as Ex.No.A-14, Registered Memorandum of Deposit of title deeds executed by the 1st Defendant in favour of the Applicant Bank (Doc no.2003/2019) has been marked as Ex.No.A-15, Sale certificate issued by the Applicant Bank in favour of Auction purchaser has been marked as Ex.No.A-16. 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 Defendants 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 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,

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OA No. 116/2022

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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 . After deduction of Sale proceeds (09.06.22) 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 Defendants, a total sum of Rs.56,39,768.02p i.e., (i) Rs.48,29,983.71p together with interest at the rate of 10.70% p.a. with half yearly rests in respect of Overdraft Facility (ii) Rs.2,63,814.51p together with interest at the rate of 10.70% p.a. with half yearly rests in respect of COVID FITL (iii) Rs.5,45,969.80p together with interest at the rate of 7.50% p.a. with half yearly rests in respect of COVID GECL from the date of filing of Application till the date 08.06.22 and further defendants are directed to pay the amount after deducting sale proceeds of Rs.40,10,000/- from the amount as on 08.06.22 at the rate of 10.70%p.a. with Half yearly rests from the date 09.06.22 till the date of realization with cost. Accordingly, it is hereby

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ORDERED

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(a) That the Defendants are directed to pay jointly/severally a total sum of Rs.56,39,768.02p i.e., (i) Rs.48,29,983.71p together with interest at the rate of 10.70% p.a. with half yearly rests in respect of Overdraft Facility (ii) Rs.2,63,814.51p together with interest at the rate of 10.70% p.a. with half yearly rests in respect of COVID FITL (iii) Rs.5,45,969.80p together with interest at the rate of 7.50% p.a. with half yearly rests in respect of COVID

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OA No. 116/2022

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GECL from the date of filing of Application till the date 08.06.22 and further defendants are directed to pay the amount after deducting Sale proceeds of Rs.40,10,000/- from the amount as on 08.06.22 at the rate of 10.70%p.a. with Half yearly rests from the date 09.06.22 till the date of realization with cost within one month from the date of receipt of this order.

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(b) In case of default of payment by the above mentioned Defendants, the Applicant Bank is at liberty to sell the movable / immovable properties more fully described in Schedule of the original application for appropriation of sale proceeds towards the satisfaction of amount due to the Applicant Bank.

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(c) If the sale proceeds are not sufficient, after defraying the expenses of such sale, for the payment of all such amounts, the defendants are jointly/severally liable to pay the amount of such deficiency with interest mentioned above until realization.

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(d) Any amount remitted during the course of this proceedings shall be given due credit, to the loan account of the defendants.

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(e) 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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(f) It is further ordered that the Applicant Bank shall file cost memo

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within a period of one month from the date of receipt of this order, so as to

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OA No. 116/2022

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prepare the recovery certificate with cost for the Overdraft facility, COVID FITL, COVID GECL and the Recovery Officer is also directed to proceed with the matter in accordance 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 20^th January, 2026.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 22.01.2026

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Canara Bank v. K Maheswaran

Case brief

What is this about?

What did the court decide?

Canara Bank v. K Maheswaran

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Cases cited

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