Allowed

City Union Bank Ltd. v. M/s Sree Gopala Krishna Flour and Oil Mill

DRT13 Aug 2026OA/258/2025

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed the bank's recovery application. Defendants failed to file written statement or adduce evidence. The Tribunal held that while validity of SARFAESI measures is sub judice under separate proceedings, the bank is entitled to its claim. Due to lack of proof for payments, no substantial amount was adjusted, but the penal interest rate was reduced to 12% p.a. simple a

What did the court decide?

Defendants jointly and severally liable to pay principal amounts with future interest @12% p.a. simple; bank entitled to proceed against mortgaged properties.

City Union Bank Ltd. versus M/s Sree Gopala Krishna Flour and… — Banking and Recovery | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL.iI^{AT HYDEMBAD}

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DATED THIS THE 13TH^{DAYOF AUGUST,2026}

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PRESENT: SH. RAMESHWAR^{KOTHE,B.COM. L.LB. (HONS.), M.A.} PRESIDING OFFICER

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ORIGINAL APPLICATION No:^{258 OF 2025}

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City Union Bank Ltd. Cuddapah Branch Rep by its Branch Manager

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. ....Applica nt

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Versus

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M/s Sree Gopala Krishna^{Flour & Oil Mill} Rep. by its Partners D.No.2/936, Devaki Nagar, Nagarajupeta, KadaPa-516001

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Mr. D. Ravi Kumar Gupta S/o D. Narasimhaiah Gupta, Aged: Major D.No.2/936, Devaki Nagar, Nagarajupeta Kadapa-516001

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Mr. D. Sree Rama GuPta S/o D. Narasimhaiah GuPta, Aged: Major D.No.2/936, Devaki Nagar, Nagarajupeta Kadapa-516001

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Mrs. D. Suseela W/o D. Sree Rama GuPta, Aged: Major D.No.2/936, Devaki^Nagar, Nagarajupeta Kadapa-516001

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Mrs. D. Sujatha Wo^{D. Ravi Kumar GuPta,} Aqed: Major D.No.2/936, Devaki^Nagar, Nagarajupeta Kadapa-516001

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D. Goparakrishna Gupta OW*"

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oA.NO.258/202s

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S/o D. Narasim haia h Gupta, Aged: Major D.No.21262, Potli Sree Ramulu Street, Kadapa-516001

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M/s Cuddapah Agro Oils Pvt. Ltd. Rep. by its Managing Director D.No. 1/37, Chennumiapet, Utu kur Post, Rayachuti Road, Kadapa Town Kadapa District-516003 ... Defendants

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Counsel for the Applicant : Smt. Ch. Laxmi Chaya counsel for the Defendants : Sri T. Vijay Kumar

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::^qLLE& ::

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The Applicant Bank flled the present OA for the recovery a total sum of Rs. 76,83,59,925/- from Defendant Nos. 1 to 7^jointly 1.e., Rs. 4,27 ,40,077 /-towards OLCC limit with future interest @ 13.25olo^p.a. monthly rests, Rs. 1,05,02,646/-towards OLCC limit with future interest @ 72o/o p.a. monthly rests, Rs. 8,57,27,3L3/ -towards OSL Term Emi limit with future interest @ 11% p.a. monthly rests and Rs. 2,93,95,889/-towards ECLGS 1.0 Extenslon with future interest @ 8.50o/o^p.a. monthly rests; along with 2olo^{p.a. penal} interest from the date of application till the date of realization along with costs, and in default by sale of OA mortgaged^properties.

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The averments of the applicant bank, as stated in the OA, in brief, are that defendants availed various credit facilities secured by deposit of title deeds in favour of the applicant bank. The defendants subsequently committed defaults in repayment of the installments, in consequence of which the bank declared the account as a NPA on 3l-O3-2O24 and 25.03.2021. Subsequently applicant bank issued a demand notice dated 13.06.2024 under section 13(2) of the SARFESI Act, 2002 and possession notice dated 03,09.2024, the Fame is under l////Xw,"pt'v

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oA.NO.258/2025

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challenge before this Tribunal in SA.N}.4f412024.^{While placing} reliance upon the Supreme Court^{judgmentin M/s Transcorev. Union} of India & Anr.^{(2008) 1 SCC125, applicant bank prays for allowance} of the^present OA.

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Though defendants entered^{appearancethrough their counsel,} they did not choose to file^{written statement. Accordingly,defendants} right of flling written statement^{was forfeited vide docketorder dated} 28.lt.202s.

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The Applicant Bank examined I'lr. S.R. Baskaran,^{Field Recovery} Manager, as AW-1 and marked 73 documents through^{him as Ex A.1} to Ex.A.73.

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Despite seeking adjournment, the^{Defendantsfailed to adduce} evidence accordingly right to adduce^{evidence was forfeited on} 08.04.2026. IA No.f292/2026^{for setting aside the orderwas} rejected vide order dated^16.06.2026.

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Heard learned counsel appearing for^{the Applicant Bankand} learned counsel for the Defendants.^{Perusedthe written arguments} filed by the defendants and also^{perusedthe material placedon} record.

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During the course of arguments,^{learnedcounselfor the} Applicant Bank, reiterated^{the contents of the OA,and submittedthat} Defendants committed default in^{repaymentdespite serviceof the} Demand Notice and repeated^{reminders.The learned Counselfurther} contended that the Applicant^{Bank is therefore entitledto the full} relief claimed in the OA, having^{regard to the comprehensive} documentary evidence^{placed on recordas Exhibits A.1 to A.73} through AW.1 and the^recitals therein.^{Lealled.counsel opposed for} z'lw9/-.^'tt )' './'

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oA.NO.258/2025

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reduction in rate of interest stating that the defendants failed to make out any valid ground for such reduction whereas, the Applicant Bank having lent money to the Defendants, suffered loss as the account became non-performing and the claim of the Applicant Bank being amply proved. Accordingly learned counsel prayed to allow the OA together with contractual rate of interest and costs.

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Learned counsel for the defendants denies application contention and OA claim therein and submits that the Applicant Bank classified the loan account as NPA on 31.03.2024 and allegedly issued a demand notice dated 13.06.2024 under Section 13(2) of the SARFAESI Act, which, according to them, was not duly served, thereby depriving them of their statutory right under Section 13(3A). Counsel further challenge the Possession Notice dated 03.O9.2024 issued under Section 13(4) as being contrary to the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002, and state that they accordingly filed S.A. No.414 of 2024, wherein a conditional interim order dated 09.10.2024 was passed directing deposit of Rs.1,50,00,000/-. The counsel assert that, pursuant thereto and thereafter, they made substantial payments towards the loan and overdraft accounts, aggregating to Rs.4,57,01,000/-, which amounts were received and appropriated by the Applicant Bank. He further contend that the present O.A. was filed during the pendency of the securitisation proceedings despite such payments and that the dispute is confined to the legality and procedural compliance of the recovery measures and not to their willingness to repay the loan. The counsel speciflcally dispute the validity of the Section 13(2) notice for want of proper service and consequently challenge the subsequent measures under Section 13(4). On the question of interest, the counsel contend that the contractual and penal rates claimed by the Applicant are excessive and requested to grant reasonable rate @6010 or 7o/o p.a. simple. In this context, learned counsel relied upon 1ffitt*t

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oA.NO.258/2025

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judgement of Hon'ble Karnataka High Court in Syndicate Bank v. K. Chandrakala Bhaktha,^(IRL 2002 KAR 3602),^and the^{decision of the} Hon'ble DRAT, Kolkata in Appeal No.116 of 2023 decided^on 15,05.2024 (Smt.D. Sandhya^Bhaskar sridevi and^{Anr' v' Federal} Bank Limited), referring to the^{principleslaid down by the Supreme} Court in C.K. Sasankan v. Dhanalakshmi^Bank Limited [2009⁽¹¹⁾ SCC 601 case, to contend that the Tribunal^{has discretionin} determining a reasonable rate of future^{interesthaving regardto the} prevaillng lending conditions and circumstances of the case. Reliance is also^placed upon M/s. Tomorrowland^{Limited v, HUDCO(2025), for} the proposition that award of interest involves an^equitableand discretionary exercise and cannot be^{imposed mechanicallyor at an} unreasonably high rate without^{proper justification. Accordingly,} learned counsel^prays for dismissal of the OA.

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The point that arises for consideration is:^-

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Whether the Applicant Bank is entitled for the claim made in the OA against the^Defendant and OA mortgaged^properties?

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The Applicant Bank, in support of its claim^{examined AW-1and} marked Ex.A.1 to Ex.A.73, which establish^{the availment of the credit} facilities by the Defendants, creation of security^{in favour of the} Applicant Bank and the outstanding liability arising^there-from. Though the Defendants entered appearance, they failed to file^their wrltten statement accordingly right to file the same^{was forfeited. The} defendants also failed to adduce any oral or^{documentaryevidence} despite affording opportunity nor did they^choose to^{cross-examine} AW-1 to controvert the Exhibits^marked through^{AW-1. Undersuch} circumstances, the evidence affidavit of^AW-1 and^{Exs.A.1to A.73} remain unchallenged and un-rebutted. On the other^{hand, the} Applicant Bank substantiated its claim through tfuese^documents. -/7w,,s

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oA.NO.258/2025

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Admittedly the Defendants disputed the validity and service of the demand notice dated 13.06.2024 and the consequential possession notice dated 03.09.2024 by way of challenge in S.A.No.4t4/2024, therefore this Tribunal refrains from forming any opinion on the validity of the SARFAESI measures as the same are subject matter of adjudication under proceedings of another Act. It is well settled under the judgment of Hon'ble Apex Court in M/s Transcore v. Union of India, [(2008) 1 SCC 125,] that secured creditor has parallel remedy of recovery under the RDB Act, 1993 and the SARFAESI Acl, 2002 and that the remedies available under the DRT Act and the SARFAESI Act are complementary to each other.

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The Defendants have stated that substantial payments to a tune 0f Rs.4,57,01,000/- have been made. Having stated so, as observed supra, defendants did not adduce evidence and marked relevant document in order to substantiate such payments nor the applicant bank filed part-satisfaction memo if the payments have been made subsequent to filing of this OA. In the absence of any documentary evidence proving part-payments, this Tribunal cannot record such payments.

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The Defendants sought for reduction of penal interest between 60/o to 7o/o p.a. simple relying upon certain judgments supra. Firstly, there are no pleadings from the defendants but only arguments. However, the defendants are bound to adhere to the contractual rate of interest till filing of the OA and the Tribunal has no role to curtail the contractual rate. The Tribunal may have the discretion to qrant the pendent ,te and future interest but the same depends on the circumstances of each case. Even as per citation supra in M/s. Tomorrowland Limited v. HUDCO (2025) relied upon by the defendants, award of interest involves an equitable and discretionary exercise and cannot be imposed mechanically or at.an unreasonably /A%a* ()/

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oA.NO.258/202s

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high rate without^{properjustification.} In the^{present case, the very} ground of payment of Rs.4,57,01,000/- for reducing rate of^interest from the contractual one, cannot be taken^{into considerationfor want} of proper evidence as observed in the^{precedingparagraph.However,} in the^principles of natural^{justice,consideringthe circumstances of} the case and that the Applicant^{Bank should not be undulyprejudiced} due to substantial reduction of contractual^{rate of lnterest,this} Tribunal finds the average interest^rate of^{l2o/o p.a, simple instead of} monthly rests, as reasonable rate of interest.^{Accordinglyrate of} interest is being awarded.

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In view of the above observations,^{this Tribunalholds that the} Applicant Bank has established its claim^{against Defendant Nos. 1 to} 7 and accordingly Defendants 1 to⁷ are^{jointly and severally liable to} pay the OA claim to the Applicant Bank with future interest^{and costs.}

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In the result, the Present^{Original Application No.258/2025is} allowed as under:^-

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i) The Defendant Nos. 1 to 7 are^{jointly and} severally liable to^pay to the^{Applicant Bank a} total sum Rs, 16,83,59,925/- i.e',^Defendants1 to 7 a sum of Rs.4,27,40,07 7/- under^OLCC Limit, Defendants 2 to 7 sums^of Rs.1,05,02,646l-, Rs.8,57,27,3L3/-^and Rs.2,93,95,889/- under OLCC Limlt,^{OSL Term} EMI Limit account and^ECLGS 1.0^Extension respectively; with future interest @12olo^p.a. simple from the date of^{application till the date} of realization;

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ii) the OA claim is secured by^{way of mortgage of} properties as described in Schedules annexed^to the OA and applicant bank^{is entitled to proceed} asainst the same for^reallsatlon "t Or",:pft*rl

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OA.NO.2s8l202s

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