Allowed

Punjab National Bank v. K Ravichandran

DRT7 Aug 2026OA/14/2025

Case brief

AI extract

What is this about?

The Hyderabad Debt Recovery Tribunal allowed an application filed by Punjab National Bank to recover term and cash credit loans. While acknowledging RBI guidelines prohibit capitalizing penal interest, the Tribunal allowed recovery of the loan principal adjusted by deducting that capitalized interest, along with simple interest.

What did the court decide?

Directing defendants to repay the Term Loan amount (Rs.13,97,942.29) less capitalized penal interest plus 6% simple interest, and Cash Credit amount (Rs.6,58,416.96) plus 6% simple interest. Authoriza

Punjab National Bank versus K Ravichandran — Contract and Commercial Disputes | DRT (2026)

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OA No. 14/2025

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 07^th DAY OF AUGUST, 2026 PRESENT: SEEMA SINHA, [PR. DISTRICT & SESSIONS JUDGE – Retd] PRESIDING OFFICER

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OA No.14/2025

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Between

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Punjab National Bank, ARM Branch, Kailasapuram, Trichy- 620 014 Rep. by its Chief Manager. ---Applicant Bank

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And

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Mr.K.Ravichandran, S/o.Kaliyamoorthy, No.263/17, Keezha Street, Olaiyur, Udayarpalayam, Ariyalur District.

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Mr.S.Velmurugan, S/o.Soundararajan, No.432/204, Melatheru, Olaiyur, Ariyalur District. ---- Defendants

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Counsel for the Applicant Bank : M/s K.Ramesh & M.Sundaraj

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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

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Page 1 of 7

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OA No. 14/2025

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records and having stood over for consideration till this day, this Tribunal delivered the following:

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JUDGEMENT

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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 09.12.2024 to recover from the Defendants a sum of Rs.20,56,359.25p i.e., i) Rs.13,97,942.29p together with further interest at the rate of 11.05 % p.a. with monthly rests plus penal interest at the rate of 2% p.a. in respect of Term Loan & ii) Rs.6,58,416.96p together with further interest at the rate of 7 % p.a. with monthly rests plus penal interest at the rate of 2% p.a. in respect of Cash Credit Loan 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 Applicant Bank submits that the defendants have availed Term Loan for a sum of Rs.6,50,000/- and availed Cash Credit for a sum of Rs.3,50,000/- in totalling Rs.10,00,000/- . The defendant executed necessary loaning documents in favour of the Applicant. In addition to that, the defendants have also deposited the original title deeds this immovable property with the applicant bank as security for the due repayment of loan availed by him. Further, the defendant has executed memorandum of deposit of title deeds on 12.07.2017 in Document No.1474/2017, SRO Andimadam. The following is the detail of loan availed by the defendants.

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S.No.	Nature of Loan & Account Number	Loan Amount	Rate of Interest	Outstanding Amount as on 31.08.2024
1.	Term Loan 170200AO00015291	Rs.6,50,000/-	^{11.05% p.a} + 2% P.I	Rs.13,97,942.29/-
2.	Cash Credit 1702008800008950	Rs.3,50,000/-	^{7% p.a +} 2% P.I	Rs.6,58,416.96/-
	Total			Rs.20,56,359.25/-

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As per the accounts of the applicant maintained in the name of the defendants kept in regular course of business and as certified under the Bankers Book of Evidence Act, on 31.08.2024 for a sum of Rs.20,56,359.25/has became due and they are liable to pay the said amounts with further interest till repayment.

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Page 2 of 7

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OA No. 14/2025

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The applicant bank submits that the defendant, though had availed the entire sanctioned limits under the said facilities, the defendants have failed to repay the loan as per the sanction ticket, as agreed, despite the repeated demands and reminders made by the Applicant Bank. The Defendants have not paid the due amount. The borrower's loan account turned into NPA on 30.04.2021.

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In spite of repeated reminders, the defendant failed to repay the loan amount. Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs.20,56,359.25p i.e., i) Rs.13,97,942.29p together with further interest at the rate of 11.05 % p.a. with monthly rests plus penal interest at the rate of 2% p.a. in respect of Term Loan & ii) Rs.6,58,416.96p together with further interest at the rate of 7 % p.a. with monthly rests plus penal interest at the rate of 2% p.a. in respect of Cash Credit Loan from the date of filing of Application till the date of realization with cost.

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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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List of Documents

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Sl. No.	Date	Particulars	Exhibit No.
1.	----	Sanction Letter	Ex. No. A-01
2.	02.09.2017	Hypothecation Agreement	Ex. No. A-02
3.	22.09.2017	Deed of Guarantee	Ex. No. A-03
4.	16.08.2017	Loan Application	Ex. No. A-04
5.	18.08.2017	Hypothecation Agreement	Ex. No. A-05
6.	16.08.2017	Deed of Guarantee	Ex. No. A-06
7.	12.07.2017	MOD. Doc. No. 1474/2017	Ex. No. A-07
8.	----	Statement of Accounts	Ex. No. A-08

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SCHEDULE

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Mortgaged Property

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In Ariyalur Registration District, Andimadam Sub Registration District, Ariyalur Revenue District, Udayarpalayam Taluk, Olaiyur Village ,

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R.S. No. 356/6 – 0.38 cents out of 0.36.50 Hectare

Page 3 of 7

OA No. 14/2025

Boundaries:

South of Kaliyamoorthi’s land West of Kaliyamoorthi’s land North of Ramdoss land East of Ramadoss land

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R.S. No. 357/5C – 1.81 cents out of 1.39.00 Hectare, including bore well and 15 HP Motor, Electricity Service Connection .

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Boundaries:

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South of Ashokkumar's land West of Kannapan's land/ North of Kaliyamoorthi's land. East of Govindasami land

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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. Manjunath Venkatagiri , who is the Chief Manager of the Applicant Bank.

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He has stated in his affidavit that the defendants have availed agriculture Term Loan and agriculture Cash Credit Loan from the Applicant Bank, but they failed to pay the outstanding loan amount, hence she has filed the case. The applicant bank has also filed the documents signed by the defendants at the time of sanctioning the loan amount, which have been marked as exhibits No.A-01 to A-08 in support of its claim in the OA.

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I scrutinized the document filed by the applicant bank and I find that the Sanction Letter was marked as Ex. No. A-01; the Hypothecation Agreement dated 02.09.2017 was marked as Ex. No. A-02; the Deed of Guarantee dated 22.09.2017 was marked as Ex. No. A-03; the Loan Application dated 16.08.2017 was marked as Ex. No. A-04; the Hypothecation

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OA No. 14/2025

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Agreement dated 18.08.2017 was marked as Ex. No. A-05; the Deed of Guarantee dated 16.08.2017 was marked as Ex. No. A-06; MOD. Doc. No. 1474/2017 dated 12.07.2017 was marked as Ex. No. A-07; and the Statement of Accounts was marked as Ex. No. A-08 . 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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In this OA, from perusal of statement of Accounts Ex.No.A-08, I find that the applicant bank has capitalized the penal interest in the Term loan account of the defendants, which is against the policy of the Reserve Bank of India guidelines.

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“The Reserve Bank of India strictly prohibits the capitalization of penal charges. Under current RBI regulations, any penalty for non-compliance with loan terms must be treated as a distinct “Penal Charge” rather than added to the principal outstanding amount. This ensures that banks and NBFCs cannot compute further interest on the penalty amount themselves”

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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, 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 . Since the defendants have obtained loan for agriculture purpose, the Applicant Bank is entitled for a final order on the following lines: -

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OA No. 14/2025

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The Applicant Bank is entitled to recover from the Defendants, a sum of i) The capitalized penal interest component shall be deducted from the claimed outstanding Term Loan amount of Rs.13,97,942.29p and the Applicant Bank shall be entitled to recover only the balance amount due under Term loan after such deduction, together with simple interest at the rate of 6 % p.a. from the date of filing of the Application till the date of realization with costs & ii) Rs.6,58,416.96p together with simple interest at the rate of 6 % p.a. in respect of Cash Credit Loan from the date of filing of Application 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 to the Applicant bank i) the outstanding amount due under the Term Loan after deducting the capitalized penal interest component from the claimed amount of Rs.13,97,942.29p, together with simple interest at the rate of 6% p.a. on the balance amount due under the Term Loan from the date of filing of the Application till the date of realization with costs & ii) Rs.6,58,416.96p together with simple interest at the rate of 6 % p.a. in respect of Cash Credit Loan from the date of filing of Application 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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OA No. 14/2025

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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 within a period of one month from the date of receipt of this order, so as to prepare the recovery certificate with cost for the Term Loan and Cash Credit Loan 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 P N, taken down, transcribed, typed by him, corrected and pronounced by me in the Open Court in this the 07^th August, 2026.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 14.08.2026

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Punjab National Bank v. K Ravichandran

Case brief

What is this about?

What did the court decide?

Punjab National Bank v. K Ravichandran

Case brief

What is this about?

What did the court decide?

What the court decided

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