Allowed

Punjab National Bank v. K Kanagarathinam

DRT10 Aug 2026OA/17/2025

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed the bank's application for recovery of agricultural loans against defendants. The court deducted capitalized penal interest, held only one defendant liable for the cash credit, and directed recovery with simple interest instead of compound interest on the balance principal.

What did the court decide?

Deduction of capitalized penal interest; recovery of balance term loan with 6% simple interest from both defendants; recovery of cash credit with 6% simple interest from the sole signatory.

Punjab National Bank versus K Kanagarathinam — Specific Performance | DRT (2026)

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OA No. 17/2025

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 10^th DAY OF AUGUST, 2026 PRESENT: SEEMA SINHA, [PR. DISTRICT & SESSIONS JUDGE – Retd] PRESIDING OFFICER

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OA No.17/2025

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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.Kanagarathinam, S/o.Kuppusamy, No.141, East Street, Marungur, Vridhachalam, Cuddalore.

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Mr.K.V.Elambirai, No.141, East Street, Marungur, Vridhachalam,

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

Page 1 of 7

OA No. 17/2025

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 09.12.2024 to recover from the Defendants a sum of Rs.20,42,598.05p i.e., i) Rs.14,49,969.97p together with further interest at the rate of 12 % p.a. with monthly rests plus penal interest at the rate of 2% p.a. in respect of Term Loan & ii) Rs.5,92,628.08p 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 defendants have availed Term Loan for a sum of Rs.9,00,000/- and availed Cash Credit for a sum of Rs.4,09,000/- in total amounts to Rs.13,09,000/- . The defendants 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 11.05.2017 in Document No. 496/2017, SRO Kammapuram. 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 O	utstanding Amount as on 31.08.2024
1	Term Loan 170200AO00015176	Rs.9,00,000/-	^{12% p.a +} 2% P.I	Rs.14,49,969.97/-
2	Cash Credit 1702008800008747	Rs.4,09,000/-	^{7% p.a +} 2% P.I	Rs.5,92,628.08/-
	Total			Rs.20,42,598.05/-

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Further the applicant submits that 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 as on 31.08.2024 for a sum of Rs.20,42,598.05/- has become due and they are liable to pay the said amounts with further interest till repayment.

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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

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Page 2 of 7

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OA No. 17/2025

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not paid the due amount. The borrower’s loan account turned in to 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.20,42,598.05p i.e., i) Rs.14,49,969.97p together with further interest at the rate of 12 % p.a. with monthly rests plus penal interest at the rate of 2% p.a. in respect of Term Loan & ii) Rs.5,92,628.08p 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.	11.05.2017	Hypothecation Agreement	Ex. No. A-02
3.	10.05.2017	Loan Application	Ex. No. A-03
4.	11.05.2017	MOD in Doc No. 496/2017	Ex. No. A-04
5.	-----	Statement of Accounts	Ex. No. A-05

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SCHEDULE

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Mortgaged Property

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In Vridhachalam Registration Dist., In Kammapuram Sub Registration District in Cuddalore Revenue Dist., In Vridhachalam Taluk.

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S.No.	Village	R.S.No.	Aere	Hectors
1	Marungur	4/1	0.35	0.14.5
2	Marungur	4/2	0.35	0.14.5
3	Marungur	4/3	0.17	0.07.0
4	Marungur	4/4	0.17	0.07.0
5	Marungur	5/14	0.35	0.14.5
6	Marungur	66/2	0.33	0.13.5
7	Marungur	67/7	0.13	0.05.5
8	Marungur	67/9	0.12	0.05.0

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Page 3 of 7

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OA No. 17/2025

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S.No.	Village	R.S.No.	Aere	Hectors
9	Marungur	67/6B	0.13	0.05.5
10	Thozhur	82/8	0.58	0.23.5
11	Thozhur	82/4	0.24	0.09.5
12	Thozhur	82/5	0.20	0.08.0
13	Thozhur	82/6	0.45	0.18.0
14	Thozhur	82/7	1.40	0.57.0
15	Thozhur	82/2	0.72-1/2	0.29.0
16	Kodumanur	74/1	0.80 out of 1.60	0.32.5 out of 0.64.5
		Total	6.49-1/2	2.64.5

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Boundries for 16^th item:

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South of PWD Channel West of Thozhur Selliamman Koil Land North of Saraswathi Meganthan’s Land East of Ramasamy and Vairaselvi’s 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 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-05 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 documents relied upon are as follows: (1) Sanction Letter, marked as Ex. No. A-01; (2) Hypothecation Agreement dated 11.05.2017, marked as Ex. No. A-02; (3) Loan Application dated 10.05.2017, marked as Ex. No. A-03; (4) MOD in Document No. 496/2017 dated 11.05.2017, marked as Ex. No. A-04; and (5) Statement of Accounts, marked as Ex. No. A-05. So the averments of

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Page 4 of 7

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OA No. 17/2025

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the applicant as well as the statement of the pleading have been corroborated by the above mentioned documents.

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On perusal of the Cash Credit Loan documents, it is observed that only D-1 has signed the loan documents marked as Ex. No. A-03 (Loan Application).The Applicant Bank has not produced any additional loan document or other supporting documents to establish that D-2 had also executed the loan documents for cash credit. The Applicant Bank failed to prove that D-2 is also the party in this Cash Credit loan account. Hence, D- 1 alone is liable in respect of the Cash Credit Loan .

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In this OA, from perusal of statement of Accounts Ex.No.A-05, 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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Page 5 of 7

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OA No. 17/2025

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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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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.14,49,969.97p 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 from D-1 and D-2 & ii) Rs.5,92,628.08p together with simple interest at the rate of 6 % p.a. in respect of Cash Credit Loan from D- 1 only 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) (i) Defendants D-1 & D-2 are directed to pay jointly/severally to the Applicant bank the outstanding amount due under the Term Loan after deducting the capitalized penal interest component from the claimed amount of Rs.14,49,969.97p, 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 cost w ithin one month from the date of receipt of this order. &

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(ii) Further the defendant D-1 is directed to pay Rs.5,92,628.08p 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

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Page 6 of 7

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OA No. 17/2025

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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 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 10^th August, 2026.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 18.08.2026

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Punjab National Bank v. K Kanagarathinam

Case brief

What is this about?

What did the court decide?

Punjab National Bank v. K Kanagarathinam

Case brief

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What did the court decide?

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