Allowed

State Bank of India v. M s Sri Sai Traders

DRT29 May 2026OA/241/2024

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed the bank's application for recovery of Rs.46.12 lakh principal and interest. The court found the bank's documents proved the loan liability submitted on adjournment. It directed payment and allowed sale of mortgaged properties for recovery.

What did the court decide?

Direct payment of Rs. 46,12,163/- with interest; liberty to sell hypothecated properties if payment fails.

State Bank of India versus M s Sri Sai Traders — Contract and Commercial Disputes | DRT (2026)

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OA No. 241/2024

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 29^TH DAY OF MAY, 2026 PRESENT: SEEMA SINHA,

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

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OA No.241/2024

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Between

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State Bank of India, Stressed Assets Recovery Branch, No.8, 1^st Floor, Dr. Ambedkar Road, Madurai – 625 020. Rep. By its Chief Manager.

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---Applicant Bank

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And

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M/s Sri Sai Traders,

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Rep. by its partner,

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110, SBK High School Road,

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Aruppukottai,

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Virudhunagar District – 626 101.

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Mrs. K. Sreelakshmikripa, W/o B. Kumaran,

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No.31, K S Shanmugavel Street,

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Aruppukottai,

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Virudhunagar District – 626 101.

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Mr. B. Kumaran,

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S/o Barathirajan,

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No.31, K S Shanmugavel Street,

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Aruppukottai,

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Virudhunagar District – 626 101. ---Defendants

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Counsel for the Applicant Bank : M/s P. Pethu Rajesh, M.C.Inbahar

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Page 1 of 9

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OA No. 241/2024

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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:

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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 10.04.2024 to recover from the Defendants a total sum of Rs.46,12,163/i.e., (i) Rs.44,26,826/- together with interest at the rate of 12.40% p.a. plus penal interest at the rate of 2%p.a. in respect of Cash Credit Facility and (ii) Rs.1,85,337/- together with interest at the rate of 9.25% p.a. plus penal interest at the rate of 2%p.a. in respect of working Capital Term Loan (WCTL-GECL 1.0)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 1^st Defendant herein is a Partnership Firm carrying on its business in procuring edible oil under the name and style of M/s. Sri Sai Traders through its Partners the 2 and 3 Defendants. The 1^st Defendant through its Partner, the 2^nd and 3^rd Defendant approached the Applicant Bank with the request to avail Cash Credit Facility to the tune of Rs.40,00,000-/- along with the Bank Guarantee of Rs.10,00,000-/- . The said Credit Facility was sanctioned on 19.04.2017. The said Credit Facility which will be available for 12 months and subject to review of every 12 months. The effective rate of interest for the said Facility availed is 11% per annum calculated on daily products at monthly rests. The rate of interest will be fluctuating as per the prevailing MCLR. To that effect a Letter of Arrangement dated 19.04.2017 was executed by the 1^st Defendant in favour of the Applicant Bank through its Partner the 2^nd and 3^rd Defendant by accepting the Terms and Conditions enclosed in it.

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On 19.04.2017, the 1^st to 3^rd Defendant executed an Agreement of Loan — Cum — Hypothecation and thereby agreed for the terms and conditions imposed in it and hypothecated the present and future stocks, raw materials, goods, book debts and vehicles and all other movable assets including the receivables, documents of title of goods, outstanding monies, bills invoices documents, contracts lying, stored and kept, machineries and

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Page 2 of 9

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OA No. 241/2024

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other accessories acquired by the them, insurance policies, guarantees, engagements, securities, investments and all the future machinery belonging to or in the possession of the borrower or with the third party and the same will stand as a Primary Security. The 2^nd and 3^rd Defendant also executed a Guarantee Agreement dated 19.04.2017 in favour of the said Bank and agreed to stand as a guarantor for the Credit facility availed by the 1^st Defendant firm. The Defendant executed a Partnership Letter on 19.04.2017 in favour of the Applicant Bank mentioning the name of the Partnership Firm and name of the Partner.

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The said Cash Credit Facility to the tune of Rs.40,00,000-/- and Bank Guarantee to the tune of Rs.10,00,000-/- was further extended by a Sanction dated 24.12.2018 with the validity of 12 months from the date of Sanction and subject to the renewal of every 12 months. The rate of interest for the said facility is 11.55% per annum at the existing MCLR rate of interest. Present and future stocks, raw materials, goods, book debts and vehicles and all other movable assets including the receivables, documents of title of goods, outstanding monies, bills invoices documents, contracts lying, stored and kept, machineries and other accessories acquired by the them, insurance policies, guarantees, engagements, securities, investments and all the future machinery belonging to or in the possession of the borrower or with the third party and the same will stand as a Primary Security. The 2^nd and 3^rd Defendant stand as a Personal Guarantor for the facility availed by the 1^st Defendant. A Letter of Arrangement dated 27.12.2018 was executed by the Defendants in favour of the Applicant Bank.

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The said Cash Credit Facility to the tune of Rs.40,00,000-/- and Bank Guarantee to the tune of Rs.10,00,000-/- was further extended along with Stand by Line of Credit to the tune of Rs.10,00,000/- (Sanctioned on 10.03.2020). The said Stand by Line of Credit facility is repaid and closed. For the Cash Credit Facility and Bank Guarantee, the terms and conditions in the Letter of Arrangement dated 27.12.2018 will prevails. The 2^nd and 3^rd Defendant also executed a Guarantee Agreement on 21.03.2020. The Defendants executed a Supplemental Agreement of Loan - Cum — Hypothecation in favour of the Applicant Bank on 21.03.2020.

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The said Cash Credit Facility to the tune of Rs.40,00,000-/-, Bank Guarantee to the tune of Rs.10,00,000-/- and Stand by Line of Credit to the tune of Rs.10,00,000-/~(closed on payment of entire dues) was extended along with the fresh sanction of Working Capital Term Loan — Guaranteed Emergency Credit Line (GECL) 1.0 to the tune of Rs.7,00,000/- (Sanctioned on 30.05.2020). The Terms and Conditions for the Cash Credit Facility will be as per the Letter of Arrangement dated 27.12.2018. The repayment of the

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Page 3 of 9

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OA No. 241/2024

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Working Capital Term Loan under Guranteed Emergency Credit Line (GECL) 1.0 is 48 month including 12 months moratorium period. The Repayment will commences at June 2020 and ends at May 2024. Out of the said Period, June 2020 to May 2021 is a moratorium period and the defendants have to service the interest alone. From June 2021 to May 2024, totally 36 months the Defendants have to pay a sum of Rs.19,445-/- per installment. The rate of interest for the Cash Credit Facility is as per the Letter of Arrangement dated 27.12.2018 i.e.11.55% per annum and the Rate of Interest for the Working Capital Term Loan is 7.80% per annum ar the rate of EBLR. For the said Credit Facilities, the Defendants executed a Letter of Arrangement dated 30.05.2020. The 2^nd and 3^rd Defendants also executed a Guarantee Agreement on 30.05.2020. The Defendants executed a Supplemental Agreement of Loan - Cum — Hypothecation in favour of the Applicant Bank on 30.05.2020.

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Except the Stand By Line Credit Facility which was already cleared, the Defendants renewed the existing Cash Credit Facility to the tune of Rs.40,00,000/-, review of Working Capital Term Loan Facility under Guaranteed Emergency Credit Line — 1.0 to the tune of Rs.7,00,000-/- and Cancellation of Bank Guarantee Limit of Rs.10,00,000/- by making application dated 29.03.2022 and the same was sanctioned on 07.04.2022. The rate of interest for the Cash Credit Facility is 9.65% per annum at the prevailing EBLR and the rate of interest for the Working Capital Term Loan under GECL 1.0 is 7.80% per annum at the revailing EBLR. The Terms and conditions in the Letter of Arrangement dated 30.05.2020 will applicable for the Working Capital Term Loan under GECL 1.0. Hypothecated present and future stocks, raw materials, goods, book debts and vehicles and all other movable assets including the receivables, documents of title of goods, outstanding monies, bills invoices documents, contracts lying, stored and kept, machineries and other accessoried acquired by the them, insurance policies, guarantees, engagements, securities, investments and all the future machinery belonging to or in the possession of the borrower or with the third party and the same will stand as a Primary Security. In this regard a Letter of Arrangement dated 30.05.2022 was executed by the Defendants in favour of the Applicant Bank and a Revival Letter dated 30.05.2022 reviving the earlier loan documents dated 30.05.2022 namely Letter of Arrangement, Guarantee Agreement, Supplemental Agreeemnt of Laon — Cum — Hypothecation. The Defendants had confirmed the balance towards the facilities availed on 30.04.2019, 04.04.2020, 02.04.2021 and 21.04.2022

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The Defendants remain chronic defaulter in repaying the facility availed with accrued interest from the Applicant Bank, despite several reminders. In this regard a letter dated 01.12.2023 was issued by the Applicant Bank to the 1^st Defendant on 01.12.2023 mentioning the

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Page 4 of 9

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OA No. 241/2024

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irregularity in running both the loan accounts as stated above and the same came to be served to the 1^st Defendant on 02.12.2023. Since, the Defendants failed to clear the outstanding despite receipt of several communications, the accounts as specified above maintained by the 1^st Defendant becomes Non Performing Asset on 27.12.2023. In this regard a Demand Notice dated 29.12.2023 was issued by the Applicant Bank to the Defendant, demanding a sum of Rs.42,40,509.43p as on 28.12.2023.

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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 total sum of Rs.46,12,163/- i.e., (i) Rs.44,26,826/- together with interest at the rate of 12.40% p.a. plus penal interest at the rate of 2%p.a. in respect of Cash Credit Facility and (ii) Rs.1,85,337/- together with interest at the rate of 9.25% p.a. plus penal interest at the rate of 2%p.a. in respect of working Capital Term Loan (WCTL-GECL 1.0) 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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S. No.	Date	Particulars	Exhibit No.
1	19.04.2017	Letter of Arrangement	Ex.No.A-01
2	19.04.2017	Agreement of Loan–Cum Hypothecation	Ex.No.A-02
3	19.04.2017	Guarantee Agreement	Ex.No.A-03
4	27.12.2018	Sanction Letter	Ex.No.A-04
5	27.12.2018	Letter of Arrangement	Ex.No.A-05
6	21.03.2020	Letter of Arrangement	Ex.No.A-06
7	21.03.2020	Supplemental Agreement of Loan–Cum Hypothecation	Ex.No.A-07
8	21.03.2020	Guarantee Agreement	Ex.No.A-08
9	28.05.2020	Pre-Approved Loan Facility Guaranteed Emergency Credit Line (GECL) Offer Letter	Ex.No.A-09
10	30.05.2020	Letter of Arrangement	Ex.No.A-10
11	30.05.2020	Supplemental Agreement of Loan–Cum	Ex.No.A-11

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Page 5 of 9

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OA No. 241/2024

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		Hypothecation
12	30.05.2020	Guarantee Agreement	Ex.No.A-12
13	30.05.2022	Letter of Arrangement	Ex.No.A-13
14	30.05.2022	Revival Letter	Ex.No.A-14
15	01.02.2023	Notice Regarding the Position of the Loan Account with Acknowledgment	Ex.No.A-15
16	30.04.2019	Balance Confirmation Certificate	Ex.No.A-16
17	04.04.2020	Balance Confirmation Certificate	Ex.No.A-17
18	02.04.2021	Balance Confirmation Certificate	Ex.No.A-18
19	21.04.2022	Balance Confirmation Certificate	Ex.No.A-19
20	29.12.2023	Notice to the Borrower with Acknowledgment Card	Ex.No.A-20
21	04.04.2024	Statement of Account in Account No. 36749074544	Ex.No.A-21
22	04.04.2024	Statement of Account in Account No. 3936360764	Ex.No.A-22

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SCHEDULE - “A”

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Current Assets, Stocks, Hypothecated Goods, Book debts, outstanding, moneys receivables, claims and bills due and owing to the Defendants and in the name of the Defendants and the Machineries and equipments in the premise.

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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. A. Vijayakumar, who is the Chief Manager of the Applicant Bank.

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Page 6 of 9

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OA No. 241/2024

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He has stated in his affidavit that the defendants has availed Cash Credit Facility and WCTL-GECL-1.0 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-22 in support of its claim in the OA.

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The Letter of Arrangement has been marked as Ex.No.A-01, Agreement of Loan–Cum Hypothecation has been marked as Ex.No.A-02, Guarantee Agreement has been marked as Ex.No.A-03, Sanction Letter has been marked as Ex.No.A-04, Letter of Arrangement has been marked as Ex.No.A-05, Letter of Arrangement has been marked as Ex.No.A-06, Supplemental Agreement of Loan–Cum Hypothecation has been marked as Ex.No.A-07, Guarantee Agreement has been marked as Ex.No.A-08, PreApproved Loan Facility Guaranteed Emergency Credit Line (GECL) Offer Letter has been marked as Ex.No.A-09, Letter of Arrangement has been marked as Ex.No.A-10.

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The Supplemental Agreement of Loan–Cum Hypothecation has been marked as Ex.No.A-11, Guarantee Agreement has been marked as Ex.No.A12, Letter of Arrangement has been marked as Ex.No.A-13, Revival Letter has been marked as Ex.No.A-14, Notice Regarding the Position of the Loan Account with Acknowledgment has been marked as Ex.No.A-15, Balance Confirmation Certificate has been marked as Ex.No.A-16, Balance Confirmation Certificate has been marked as Ex.No.A-17, Balance Confirmation Certificate has been marked as Ex.No.A-18, Balance Confirmation Certificate has been marked as Ex.No.A-19, Notice to the Borrower with Acknowledgment Card has been marked as Ex.No.A-20, Statement of Account in Account No. 36749074544 has been marked as Ex.No.A-21, and Statement of Account in Account No. 3936360764 has been marked as Ex.No.A-22. 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

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OA No. 241/2024

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(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 . The Applicant Bank

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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 total sum of Rs.46,12,163/- i.e.,

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(i) Rs.44,26,826/- together with interest at the rate of 12.40% p.a. in respect of Cash Credit Facility

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(ii) Rs.1,85,337/- together with interest at the rate of 9.25% p.a. in respect of working Capital Term Loan (WCTL-GECL 1.0) 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 total sum of Rs.46,12,163/- i.e.,

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(i) Rs.44,26,826/- together with interest at the rate of 12.40% p.a. in respect of Cash Credit Facility

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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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OA No. 241/2024

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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 Cash Credit Facility and WCTL-GECL-1.0 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 29^th May, 2026.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 06.06.26

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State Bank of India v. M s Sri Sai Traders

Case brief

What is this about?

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State Bank of India v. M s Sri Sai Traders

Case brief

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