Allowed

Canara Bank v. Vikas Distributors

DRT24 Jun 2026OA/1241/2022

Case brief

AI extract

What is this about?

The tribunal allowed the bank's application for a recovery certificate against debtors who failed to produce evidence despite raising defenses regarding asset sales and one-time settlements. Interest rates were awarded at contractual or 10% simple.

What did the court decide?

Allowed issuance of Recovery Certificate for Rs. 8,44,85,880.84 including interest, against Defendants. Directs bank to consider SARFAESI proceeds of Rs. 2.26 Crore.

Canara Bank versus Vikas Distributors — Contract and Commercial Disputes | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL II,

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BENGALURU

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Dated this 24^th Day of June, 2026

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Present: Sri. T. RAJESH

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Presiding Officer OA.No.1241/2022

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BETWEEN:

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Canara Bank, Chamrajpet Branch, No.6, 2^nd Cross, 2^nd Main, Chamrajpet,

Bangalore -560018.

…APPLICANT

AND:

M/s. Vikas Distributors, 48/Y, 59^th Cross, Revanna Complex, 14^th Main, 3^rd Block, Rajaji Nagar, Bengaluru -560010

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Sri. Anand Mulky, S/o. Late G R Mulky, 43/1, Dattaprasad Apartments, 10^th Main, Malleswaram, Bengaluru -560003.

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Smt. Vidhya Mulky, D/o. P. Bhavani Shankar, 43/1, Dattaprasad Apartments, 10^th Mian, Malleswaram, Bengaluru -560003.

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Sri. G. R. Mulky (Deceased) Rep by his son Sri. Anand Mulky,

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Smt. Vijayalakshmi (Deceased), Rep. by her son Sri. Anand Mulky,

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...DEFENDANTS

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Counsel on record/appeared for:

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Applicant : Skanda Legal Defendant Nos.1 & 2 : R. Ashok Kumar

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OA 1241/2022

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Defendant No.3 Defendant Nos. 4 and 5

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: Remined absent : Deceased

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FINAL ORDER

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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. 8,44,85,880.84 (Rupees eight crore fortyfour lakh eighty-five thousand eight hundred eighty and paisa eighty-four only) with further interest thereon and cost from the Defendants.

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It is the case of the Applicant that Defendant No. 1, represented by Defendant No. 2, had availed an Overdraft Facility of Rs. 35,00,000/(Rupees Thirty-Five Lakhs only) for the purpose of taking over the existing loan liability of Defendant No. 1, which facility was secured by the personal guarantees of Defendant No. 2 and 4. Defendant Nos. 4 and 5, who were the parents of Defendant No. 2, were among the guarantors to the said facility. Subsequently, both Defendant Nos. 4 and 5 passed away, and their estate devolved upon and was inherited by their son, namely Defendant No. 2, being their legal heir. Thereafter, Defendant No. 1, represented by Defendant No. 2, availed an Adhoc OCC Facility of Rs. 15,00,000/- (Rupees Fifteen Lakhs only), and thereafter, at the request of the Defendants, the existing credit facilities were renewed and enhanced by Rs. 15,00,000/-, thereby aggregating the total credit facilities to Rs. 50,00,000/- (Rupees Fifty Lakhs only). The renewed facility was secured by the personal guarantees of Defendant No. 2 and deceased Defendant No. 4. The aforesaid credit facilities were renewed on 14.09.2006, and Defendant

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OA 1241/2022

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Nos. 4 and 5 extended and confirmed their personal guarantees in respect thereof. Thereafter, Defendant No. 1, represented by Defendant No. 2, further renewed the existing credit facilities aggregating to Rs. 50,00,000/by executing the requisite Letter of Renewal dated 17.12.2007 in favour of the Applicant Bank.

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At the request of Defendant No. 1, represented by Defendant No. 2, the Overdraft Facility was enhanced from Rs. 50.00 Lakhs to Rs. 1.00 Crore, and the existing credit facilities were renewed by execution of a Letter of Renewal dated 28.05.2010, whereupon Defendant No. 5 became a guarantor to the said facility. Thereafter, upon the request of Defendant No. 1 represented by Defendant No. 2, the credit facilities were successively enhanced from Rs. 1.00 Crore to Rs. 1.50 Crores, and thereafter to Rs. 3.00 Crores, comprising an OCC/ODBD limit of Rs. 2.50 Crores and a Bank Guarantee limit of Rs. 50.00 Lakhs. Subsequently, the facilities were further enhanced to Rs. 4.00 Crores, consisting of an OCC/ODBD limit of Rs. 4.00 Crores for meeting working capital requirements, while the Bank Guarantee limit of Rs. 50.00 Lakhs continued. The said facilities were thereafter renewed from time to time at the existing levels, including renewal of the OCC/ODBD facility of Rs. 4.00 Crores with a sub-limit of Rs. 2.00 Crores towards ODBD and the Bank Guarantee limit of Rs. 50.00 Lakhs. Thereafter, at the request of the Defendants, the credit facilities were again renewed and subsequently enhanced from Rs. 4.00 Crores to Rs. 4.75 Crores, and the same were renewed in accordance with the terms and conditions stipulated by the

OA 1241/2022

Applicant Bank.

Subsequently, Defendant No. 1 availed a Working Capital Term Loan (WCTL) facility of Rs. 94.70 Lakhs under the COVID Relief Package/Guaranteed Emergency Credit Line (GECL) Scheme and thereafter availed an additional WCTL facility of Rs. 47.50 Lakhs under the said scheme. Defendant Nos. 1 and 2 executed the requisite documents and personal guarantees in respect of both facilities. Further, pursuant to the COVID-19 Regulatory Package issued by the Reserve Bank of India and upon the request of Defendant No. 1 for moratorium benefits, the Applicant Bank converted the accumulated interest debited to the Working Capital (OD/CC) account for the period from 01.03.2020 to 31.08.2020 into a COVID Funded Interest Term Loan (FITL) amounting to Rs. 25,39,571/-, in respect of which the borrowers also executed the necessary documents and personal guarantees. Additionally, Defendant Nos. 2 and 3 availed a Home Loan facility of Rs. 70.00 Lakhs from the Applicant Bank for the purchase of a villa.

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It is also the case of the Applicant that, in consideration of the aforesaid loan facility, the Defendants executed the necessary loan documents and created hypothecation and mortgage over the schedule properties in favour of the Applicant Bank as security for the said loan facility.

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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

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OA 1241/2022

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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 accounts.

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Summons were duly issued to all the Defendants. Defendant Nos. 1 and 2 entered appearance through counsel by filing their Vakalat and also filed their Written Statement. However, despite being afforded sufficient opportunities, they failed to adduce any evidence in support of their defence, and consequently, the evidence of Defendant Nos. 1 and 2 was closed on 12.05.2026. Defendant No. 3 remained absent and did not contest the proceedings. Defendant Nos. 4 and 5 had expired prior to the filing of the OA, and their estate was represented by and had devolved upon their legal heir, Defendant No. 2.

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The Defendants, in their Written Statement, have not raised any substantial or bona fide defence with regard to the availing of the loan facilities or the execution of the loan and security documents. The principal contention of the Defendants is that, out of the mortgaged properties, two secured assets were sold by the Applicant Bank under the provisions of the SARFAESI Act, 2002, and a sum of Rs. 2,26,00,000/- was realized and appropriated towards the loan accounts of the Defendants, which fact, according to the Defendants, has been conveniently suppressed by the Applicant. It is further contended that an amount of Rs. 40,00,000/- stated to have been paid towards One Time Settlement was neither accepted nor returned to the Defendants; on the contrary, the said amount was

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OA 1241/2022

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allegedly transferred to the current account and thereafter the account was blocked by the Applicant. The Defendants, therefore, contend that the Applicant is bound to either refund the said amount or furnish a proper explanation regarding the whereabouts and appropriation of the said payment.

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The Applicant led evidence through AW-1, who filed his Proof Affidavit reiterating the averments made in the Original Application and produced documents marked as Exhibits A-1 to A-11.

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Heard for both side and considered the contentions as taken in the OA in the light of documentary evidence and the proof affidavit.

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The following issues arise for consideration in the light of pleading and evidence:

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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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The contention of the Defendants that the Applicant Bank has suppressed the realization of Rs. 2,26,00,000/- from the sale of secured assets under the provisions of the SARFAESI Act, 2002, is contrary to the material available on record. A perusal of the Evidence Affidavit filed by the Applicant, clearly discloses the SARFAESI measures initiated by the Applicant Bank against the secured asset, namely Property No. II, including

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OA 1241/2022

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the sale thereof and the realization of sale proceeds. The Applicant has specifically disclosed the amount of Rs. 2,26,00,000/- realized through such sale and has duly appropriated the same towards the loan accounts of the Defendants. It is pertinent to note that the said sale was effected subsequent to the filing of the present OA. The Applicant has duly brought the subsequent developments on record through its Evidence Affidavit and has specifically disclosed the amount realized through such sale. Therefore, the allegation that the Applicant Bank has suppressed material facts relating to the SARFAESI proceedings and sale of the secured asset is devoid of merit and liable to be rejected.

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As regards the payment of Rs. 40,00,000/- allegedly made towards a One Time Settlement (OTS), the Defendants have failed to establish that any concluded OTS proposal came into existence or that the said amount was liable to be refunded. The material on record indicates that the amount, upon receipt, was duly accounted for and appropriated in the relevant account(s) of the Defendants in accordance with banking norms and the contractual relationship between the parties. Mere assertion that the amount was transferred to a current account and that such account was subsequently blocked does not, by itself, create any legal right in favour of the Defendants to seek refund of the said amount, particularly in the absence of cogent evidence demonstrating unauthorized retention or misappropriation by the Applicant Bank.

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The documents exhibited and proved by the Applicant satisfactorily establish the sanction, disbursement, renewal and enhancement of the

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OA 1241/2022

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credit facilities availed by the Defendants, as well as the execution of the requisite loan, security and other allied documents. The Defendants have neither seriously disputed the availing of the credit facilities nor the execution of the said documents. Though sufficient opportunities were afforded, the Defendants failed to adduce any oral or documentary evidence in support of their defence or to substantiate the averments made in their Written Statement. Consequently, the defence set up by the Defendants remains unsubstantiated and does not inspire confidence. In the absence of any cogent evidence to rebut the case of the Applicant, this Tribunal finds no merit in the defence raised by the Defendants and accepts the case of the Applicant as duly proved.

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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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It is evident from the affidavit on record that a sum of Rs. 2,26,00,000/- was realized by the Applicant Bank through the sale of Property No. II under the SARFAESI proceedings. The said amount has been duly appropriated towards the loan liability of the Defendants and shall be given due credit while determining the amount recoverable from the Defendants.

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The OA has been filed within the prescribed period of limitation and the claim of the Applicant is found to be legally tenable. Taking into consideration the fact that the credit facilities were availed by the Defendants for their business purposes and that the claim has been

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OA 1241/2022

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computed based on the respective contractual rates of interest applicable to the different loan accounts, this Tribunal deems it appropriate to award pendente lite and future interest as prayed for in the OA in respect of the respective facilities, namely the 2^nd (GECL facility), 3^rd (Working Capital Term Loan), and 5th (Housing Loan) facilities at simple rate of interest. In respect of the 1^st (overdraft) and 4th (Funded Interest Term Loan) credit facilities, pendente lite and future interest is awarded at 10% per annum simple. The claim of the Applicant for interest with monthly rests and for penal interest for the pendente lite and future period is hereby declined.

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In the result, OA.No.1241/2022, is allowed, i) The Applicant is allowed to recover an aggregate sum of Rs.

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8,44,85,880.84 (Rupees eight crore forty-four lakh eighty-five thousand eight hundred eighty and paisa eighty-four only) consisting of:

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1. Rs. 6,11,35,113.10 (Rupees six crore eleven lakh thirty-five

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thousand one hundred thirteen and paisa ten only) along with pendente lite and future interest of 10.00% p.a. (simple),

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Rs. 1,06,69,701.21 (Rupees one crore six lakh sixty-nine thousand seven hundred one and paisa twenty-one only) along with pendente lite and future interest of 7.90% p.a. (simple),

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1. Rs. 54,02,485/- (Rupees fifty-four lakh two thousand four

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hundred and eighty-five only) along with pendente lite and future interest of 8.05% p.a. (simple),

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1. Rs. 29,93,767/- (Rupees twenty-nine lakh ninety-three thousand seven hundred and sixty-seven only) along with pendente

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OA 1241/2022

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lite and future interest of 10.00% p.a. (simple) and,

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Rs. 42,84,814.50 (Rupees forty-two lakh eighty-four thousand eight hundred fourteen and paisa fifty only) along with pendente lite and future interest of 7.50% p.a. (simple),

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from the date of filing of the OA till realization, from Defendant Nos. 1 to 3, jointly, severally and personally, after giving due credit to all amounts recovered and received during the pendency of the OA, including a sum of Rs. 2,26,00,000/- (Rupees Two Crore Twenty-Six Lakh only) realized by sale of Property No. II. The Applicant Bank shall be entitled to recover the balance amount by proceeding against the remaining schedule properties. The remaining schedule of properties to the OA shall form part of the Recovery Certificate.

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ii) If the sale proceeds are found insufficient to clear the loan amount due from the Defendant No.1 to 3 jointly, severally and personally, then the Applicant Bank shall be at liberty to proceed against their other assets for recovery of the balance amount due.

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iii) The Applicant bank is allowed cost of the proceedings for which 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 transferred to Recovery for execution.

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v) Interim application pending, if any, stands disposed of in terms of this final order.

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OA 1241/2022

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20. 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 24^th day of June, 2026)

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Sd/-

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(T. RAJESH)

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PRESIDING OFFICER

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ANNEXURES

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WITNESSES EXAMINED FOR THE APPLICANT BANK:

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AW-1: Sri. Pitabasha Acharya, Manager, of Applicant Bank.

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Exhibits on the part of the Applicant:

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Exhibit Nos.	Date	Particulars of Documents
A1	24.04.2004	Letter evidencingDeposit of title deeds
A2	20.01.2012	Letter evidencing Deposit of title deeds
A3	13.06.2013	Letter evidencing Deposit of title deeds
A4	28.09.2014	Letter evidencing Deposit of title deeds
A5	29.06.2020	Sanction memorandum
A6	26.04.2021	Demand notice
A7	16.04.2004	CERSAI
A8 to A11	--	Certified statement of accounts

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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/(T. RAJESH) PRESIDING OFFICER

Canara Bank v. Vikas Distributors

Case brief

What is this about?

What did the court decide?

Canara Bank v. Vikas Distributors

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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Case details

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