Allowed

Canara Bank v. New Madhan Creation

DRT31 Jul 2026OA/2226/2024

Case brief

AI extract

What is this about?

Recovery Tribunal allowed an Original Application seeking a Recovery Certificate for outstanding loan dues. The court rejected the defendants' defences alleging blank cheques and lack of demand notice due to lack of evidence, and ordered payment of principal, interest, and costs.

What did the court decide?

Recovery Certificate issued for Rs. 28,17,898.71 with 10% simple per annum interest.

Canara Bank versus New Madhan Creation — Contract and Commercial Disputes | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL II, BENGALURU

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Dated this 31^st Day of July, 2026

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Present: Sri. T. RAJESH Presiding Officer OA.No.2226/2024

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BETWEEN:

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Canara Bank, Balepet Branch, (Formerly Chockpet-1 Branch), No. 349, Komarla Towers, 1^st Floor, OTC Road, Balepet, Bengaluru -560053, Rep. by its Chief Manager,

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…APPLICANT

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AND:

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M/s. New Madhan Creation,

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A proprietary concern, Carrying on Business at No. 50/1, Sri Banashankari Towers 2^nd Floor, A. T. Street, Narayanasetty pet Bengaluru -560002, Rep. by its Proprietor Sri. R Adiseshaiah S/o. Sri. Rangana Chowdaiah,

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Sri. R. Adiseshaiah, S/o. Sri. Rangana Chowdaiah, R/at No. 17, Kumaraswamy Nilayam, 3^rd Cross, West Link Road, Malleswaram, Bengaluru -560003.

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Smt. R. Hemalatha, W/o. Sri. R. Adiseshaiah, R/at No. 17, Kumaraswamy Nilayam, 3^rd Cross, West Link Road, Malleswaram, Bengaluru -560003.

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...DEFENDANTS

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Counsel on record/appeared for:

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Applicant : K Aswathanarayana Defendants : Y B Kuntoji

OA 2226/2024

FINAL ORDER

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. 28,17,898.71 (Rupees twenty-eight lakh seventeen thousand eight hundred ninety-eight and paisa seventy-one 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 is a proprietary concern represented by its proprietor, Defendant No. 2, and was carrying on the business of wholesale trading in silk sarees. Defendant Nos. 1 and 2, as borrowers, and Defendant No. 3, as guarantor, availed an MSME Cash Credit Loan of Rs. 24,00,000/- (Rupees Twenty-Four Lakh Only) under the Canara OD/OCC General Scheme. Defendant No. 2 also availed a Canara Credit Card facility with a credit limit of Rs. 25,000/- (Rupees Twenty-Five Thousand Only), and by using the said Canara Credit Card, withdrew a sum of Rs. 8,464.03 (Rupees Eight Thousand Four Hundred Sixty-Four and Paise Three Only).

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It is also the case of the Applicant that, in consideration of the aforesaid loan facilities, the Defendants executed the necessary loan and security documents in favour of the Applicant Bank and created a hypothecation over the schedule property as security for the due repayment of the said loan facilities.

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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,

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OA 2226/2024

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failed in complying with the same, resulting in defaults and consequentially 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. Defendants entered appearance through their counsel by filing Vakalat and also filed their Written Statement. However, despite being afforded sufficient opportunities, they failed to adduce any evidence in support of their contentions. Consequently, the evidence of Defendants were closed on 29.07.2026.

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The Defendants, in their Written Statement, have not raised any substantial or bona fide defence with respect to the availing of the loan facilities or the execution of the loan documents. The Written Statement consists of vague, evasive, and unsupported denials and fails to specifically traverse the material averments made by the Applicant. The Defendants have merely contended that the rate of interest was not within their knowledge, that at the time of sanction of the loan the Applicant obtained their signatures on blank papers and stamp papers, and that they were unaware of the terms and conditions of the loan documents. The Defendants have further alleged that they did not receive any demand notice and that there was non-compliance with Rule 26D; on such grounds, they have sought dismissal of the OA.

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OA 2226/2024

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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-19.

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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 aforesaid contentions of the Defendants are devoid of merit and are liable to be rejected. The Defendants have neither produced any documentary evidence nor substantiated their allegations by any cogent material. The loan documents placed on record establish that the Defendants voluntarily availed the credit facilities and executed the requisite loan and security documents after fully understanding their terms and conditions. The plea that blank signed papers and stamp papers were obtained is a bald allegation unsupported by any evidence and cannot be accepted. Likewise, the contention regarding non-receipt of the demand notice and alleged non-compliance with Rule 26D does not affect the Applicant's entitlement to recover the outstanding dues, particularly in the absence of any material demonstrating prejudice to the Defendants. The

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OA 2226/2024

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Applicant has duly established its claim through oral and documentary evidence, which has remained unshaken. Accordingly, the defences raised in the Written Statement are rejected.

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The documents marked and relied upon by the Applicant establish that Defendant Nos. 1 and 2, as borrowers, and Defendant No. 3, as guarantor, availed the MSME Cash Credit Loan facility under the Canara OD/OCC General Scheme and that Defendant No. 2 also availed the Canara Credit Card facility. The statements of account and other records maintained by the Applicant Bank substantiate the outstanding liability payable by the Defendants arising out of the said credit facilities. Though the Defendants entered appearance and filed their Written Statement raising various contentions regarding the rate of interest, alleged execution of blank documents, non-awareness of the terms and conditions, nonreceipt of demand notice, and alleged non-compliance with Rule 26D, they have failed to produce any oral or documentary evidence to substantiate such allegations or to rebut the documentary evidence produced by the Applicant. The defences raised by the Defendants are mere bald assertions without any supporting evidence and are insufficient to displace the Applicant’s claim. Accordingly, this Tribunal finds no merit in the defence raised by the Defendants and holds that the Applicant has established its claim through the documents placed on record.

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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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The OA has been filed within the period of limitation prescribed

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OA 2226/2024

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under law, and the claim of the Applicant is found to be legally maintainable. Considering that the loan facilities were availed by the Defendants for business purposes and that the claim amount has been computed by the Applicant by applying the agreed rate of interest, this Tribunal deems it appropriate to award pendente lite and future interest at the rate of 10.00% per annum (simple interest) on the adjudicated amount. However, the claim of the Applicant for interest with monthly rests and penal interest for the future period is not allowed and is hereby declined.

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In the result, OA.No. 2226/2024, is allowed,

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i) The Applicant is allowed to recover an aggregate sum of Rs.

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28,17,898.71 (Rupees twenty-eight lakh seventeen thousand eight hundred ninety-eight and paisa seventy-one only)

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a) Defendants jointly, severally and personally are liable to pay a sum of Rs. 28,05,192.71 (Rupees twenty-eight lakh five thousand one hundred ninety-two and paisa seventy-one),

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b) Defendant No.2 personally is liable to pay a sum of Rs. 12,706/(Rupees twelve lakh seven hundred and six only)

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both along with pendente lite and future interest of 10.00% p.a. (simple), from the date of filing of the OA till the realization, from the respective Defendants after giving credit to all the amounts recovered and received during the pendency of the OA if any, and the Applicant is permitted to recover the said amounts by proceeding against the respective Defendants and their assets to the extent of their respective liabilities including the schedule movable property. Properties schedule to the OA

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OA 2226/2024

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be the schedule to the Recovery Certificate.

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ii) Defendant No.1 and 3 and their other assets are liable only

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toward the first loan ie., MSME OD/OCC Loan.

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iii) The Applicant bank is allowed cost of the proceedings for which

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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

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of this final order.

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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 31^st day of July, 2026).

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Sd/-

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(T. RAJESH)

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PRESIDING OFFICER ANNEXURES

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WITNESSES EXAMINED FOR THE APPLICANT BANK:

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AW-1: Sri. Rajnish Kumar, Chief Manager, of Applicant Bank.

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Exhibits on the part of the Applicant:

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Exhibit	Date	Particulars of Documents
Nos.
A1	12.07.2022	Loan application
A2	24.06.2022	Sanction memorandum
A3	20.07.2022	Request for Overdraft

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OA 2226/2024

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A4	20.07.2022	Cash Credit Agreement
A5 & A6	20.07.2022	Link letters
A7 & A8	20.07.2022	Guarantee Covering Letter and Guarantee Agreement
A9	20.07.2022	Letter of Revival
A10	23.09.2022	Credit Card Application
A11	29.02.2024	Legal notice
A12 to A14	29.02.2024	Postal Registration Receipts
A15 to A17	01.03.2024	Acknowledgement Cards
A18	31.07.2024/ 19.08.2024	Certified statement of account
A19	31.07.2024/ 19.08.2024	Certified statement of account

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Witness Examined for the Defendants: List of Documents Exhibited for the Defendants:

-Nil -

-Nil -

Sd/(T. RAJESH)

PRESIDING OFFICER

Canara Bank v. New Madhan Creation

Case brief

What is this about?

What did the court decide?

Canara Bank v. New Madhan Creation

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

Parties & counsel

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Case details

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