Allowed

Canara Bank v. a Ayyanan

DRT18 Feb 2026OA/178/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed the Application filed by Canara Bank to recover Rs. 20,99,228/- plus interest. While acknowledging the bank's evidence and multiple acknowledgments of debt, the Tribunal held that penal interest cannot be capitalized. It decreed the recovery of the principal amount plus simple interest at a rate of 6% per annum.

What did the court decide?

Defendants directed to pay Rs.20,99,228/- with simple interest at 6% p.a. plus costs; liberty to sell mortgaged/hypothecated properties in case of default.

Canara Bank versus a Ayyanan — Contract and Commercial Disputes | DRT (2026)

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OA No. 178/2022

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 18^TH DAY OF FEBRUARY, 2026 PRESENT: SEEMA SINHA,

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

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OA No.178/2022

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Between

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Canara Bank, Manamadurai Branch, Sivagangai District. Rep. By its Chief Manager. ---Applicant Bank

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And

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Mr. A. Ayyanan, S/o AyyaPitchai, 8/8, AR. Sangampatti, A.Kilathiri Village, Thamarakki Post, Sivagangai Taluk, Sivagangai District – 630 606.

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Mr. A. Neruthiammal @ Ponnupillai, W/o A. Ayyanan, 8/8, AR. Sangampatti,

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A. Kilathiri Village, Thamarakki Post, Sivagangai Taluk, Sivagangai District – 630 606. ---Defendants

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Counsel for the Applicant Bank : M/s P. Madhan Alexandar, P. Priyadharshini, S. Dhanapandian.

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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

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Page 1 of 8

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OA No. 178/2022

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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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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 30.12.2021 to recover from the Defendants a sum of Rs.20,99,228/together with interest at the rate of 14.70% p.a. with half yearly rests plus penal interest at the rate of 2%p.a. in respect of Term 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 approached the Applicant Bank for availing Term Loan for their agricultural business. The Applicant Bank had also sanctioned the said Term Loan for sum of Rs.4,25,000/-. In consideration of the said Term Loan, the 1^st Defendant executed a Memorandum of Agreement for Loan dt.07.10.05 for a sum of Rs.4,25,000/- in favour of the Applicant Bank containing various terms & conditions by hypothecating the standing crops & other accessories as mentioned in the 'A' Schedule hereunder, as security for repayment of the Loan and by agreeing to repay the loan amount in 5 yearly installments of Rs.1,05,000/- each with interest & cost in favour of the Applicant Bank. Further the 2^nd defendant who stood as co-obligant has executed covenant dt.07.10.05 in favour of the applicant bank by agreeing & undertaking various terms & conditions which is annexed with the above said memorandum of agreement for agricultural loans. Further the Defendants promised to repay the loan amount with compound interest at the rate of 11.25% Per annum with half yearly 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 above said loan, the 2^nd defendant offered her property which are fully mentioned in the "B" Schedule hereunder as security and thereby the 2^nd defendant deposited her Title Deeds on 22.09.05 with the applicant bank pertaining to the said property, with an intention to create an Equitable Mortgage over the said property and by confirming the same the 2^nd defendant executed a registered memorandum of deposit of title deeds on 23.09.05 in favour of the Applicant Bank.

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Page 2 of 8

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OA No. 178/2022

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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. By admitting & acknowledging the liabilities the defendants have executed Letters of Acknowledgement of debts & security on 08.09.08, 27.08.10, 26.07.13, 22.07.16, 04.08.18 & 15.09.20 in favour of the Applicant Bank.

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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 sum of Rs.20,99,228/- together with interest at the rate of 14.70% p.a. with half yearly rests plus penal interest at the rate of 2%p.a. in respect of Term 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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LOAN DOCUMENTS / ANNEXURE - I

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S. No.	Date	Description of document	Exhibits
1	07.10.05	Memorandum of Agreement for Loan executed by defendants in favour of the Applicant Bank	Ex.No.A-01
2	23.09.05	Registered memorandum of deposit of title deeds executed by defendant in favour of the Applicant Bank(Doc.No.1868/05)	Ex.No.A-02
3	08.09.08	Letter of Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank	Ex.No.A-03
4	27.08.10	Letter of Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank	Ex.No.A-04
5	26.07.13	Letter of Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank	Ex.No.A-05
6	22.07.16	Letter of Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank	Ex.No.A-06
7	04.08.18	Letter of Acknowledgement of Debt & Securityexecuted by1st defendant in favour	Ex.No.A-07

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Page 3 of 8

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OA No. 178/2022

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		of the Applicant Bank
8	15.09.20	Letter of Acknowledgement of Debt &	Ex.No.A-08
		Security executed by 1st defendant in favour of the Applicant Bank
9	*****	Statement of Accounts maintained by the Applicant Bank in regular course and conduct of the business	Ex.No.A-09

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LIST OF DOCUMENTS

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LOAN DOCUMENTS / ANNEXURE – II

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Title deeds deposited by the 2nd Defendant with regard 'B' Schedule Mortgage Property

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S. No.	Date	Description of document	Exhibits
1	27.09.93	Registered sale deed executed by Veerammal in favour of Neruthuiammal @ Ponnupillaim (Doc.No.1868/93)	Ex.No.A-10
2	17.02.03	Registered mortgage deed executed by Ayyanan 5 & another in favour of Sivagangai Co-Operative Primary Agricultural & Rural Development Bank Ltd(Doc.No.292/03)	Ex.No.A-11
3	10.08.05	Registered discharge receipt executed by Sivagangai Co-Operative Primary Agricultural & Rural Development Bank in favour of Ayyanan & another(Doc.No.1527/05)	Ex.No.A-12
4	01.08.05	Computerized Patta issued by Head Quarters Deputy Tahsildar, Tahsildar standing in the name of Neruthuiammal	Ex.No.A-13
5	04.08.05	Extract of Adangal for fasli 1415 issued by VAO, Kilathari Village standing in the name of Neruthuammal	Ex.No.A-14
6	04.08.05	FMB Sketch issued by issued by VAO, Kilathari Village	Ex.No.A-15
7	18.08.05	UDR 'A' Register issued by VAO, Kilathari Village	Ex.No.A-16
8	02.09.05	Valuation certificate issued by VAO Kilathari Village	Ex.No.A-17

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SCHEDULE OF PROPERTIES

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'A' SCHEDULE - HYPOTHECATED GOODS

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OA No. 178/2022

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All standing crops, motor pumpset, pipe lines etc situated at 'B' schedule mortgage properties

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"B" SCHEDULE - MORTGAGE PROPERTIES

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{PROPERTY BELONGING TO 2^nd DEFENDANT)

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(Vide Annexure II for the title deeds)

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Sivagangai District, Sivagangai Registration District, Joint No.II Sub Registry, Sivagangai Taluk, Kilathari Village, a land measuring 3 Acres 32 Cents comprised in RS.No.578/3 within the following boundaries

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On the North : Kothalangudi Canal On the East : Land belonging to Manickam On the South : Land belonging to Rajaram On the West : Land belonging to Neruthuiammal @ Ponnupillai

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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. S. Rajkumar, who is the Chief Manager of the Applicant Bank.

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He has stated in his affidavit that the defendants has availed Term Loan 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-17 in support of its claim in the OA.

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The Memorandum of Agreement for Loan executed by defendants in favour of the Applicant Bank has been marked as Ex.No.A-01, Registered memorandum of deposit of title deeds executed by defendant in favour of the Applicant Bank (Doc.No.1868/05) has been marked as Ex.No.A-02, 1^st Letter of Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank has been marked as Ex.No.A-03, 2^nd Letter of Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank has been marked as Ex.No.A-04, 3^rd Letter of

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Page 5 of 8

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OA No. 178/2022

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Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank has been marked as Ex.No.A-05, 4^th Letter of Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank has been marked as Ex.No.A-06, 5^th Letter of Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank has been marked as Ex.No.A-07, 6^th Letter of Acknowledgement of Debt & Security executed by 1st defendant in favour of the Applicant Bank has been marked as Ex.No.A-08, Statement of Accounts maintained by the Applicant Bank in regular course and conduct of the business has been marked as Ex.No.A-09, Registered sale deed executed by Veerammal in favour of Neruthuiammal @ Ponnupillaim (Doc.No.1868/93) has been marked as Ex.No.A-10.

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The Registered mortgage deed executed by Ayyanan 5 & another in favour of Sivagangai Co-Operative Primary Agricultural & Rural Development Bank Ltd (Doc.No.292/03) has been marked as Ex.No.A-11, Registered discharge receipt executed by Sivagangai Co-Operative Primary Agricultural & Rural Development Bank in favour of Ayyanan & another (Doc.No.1527/05) has been marked as Ex.No.A-12, Computerized Patta issued by Head Quarters Deputy Tahsildar, Tahsildar standing in the name of Neruthuiammal has been marked as Ex.No.A-13, Extract of Adangal for fasli 1415 issued by VAO, Kilathari Village standing in the name of Neruthuammal has been marked as Ex.No.A-14, FMB Sketch issued by issued by VAO, Kilathari Village has been marked as Ex.No.A-15, UDR 'A' Register issued by VAO, Kilathari Village has been marked as Ex.No.A-16, Valuation certificate issued by VAO Kilathari Village has been marked as Ex.No.A-17. 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

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OA No. 178/2022

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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 this is an Agricultural loan 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 Rs.20,99,228/- together with simple interest at the rate of 6% p.a. in respect of Term 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 a sum of Rs.20,99,228/- together with simple interest at the rate of 6% p.a. in respect of Term 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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Page 7 of 8

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OA No. 178/2022

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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 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 18^th February, 2026.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 26.02.2026

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Canara Bank v. a Ayyanan

Case brief

What is this about?

What did the court decide?

Canara Bank v. a Ayyanan

Case brief

What is this about?

What did the court decide?

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