Allowed

Canara Bank v. Lare and Co.

DRT5 May 2026OA/292/2023

Case brief

AI extract

What is this about?

A Debt Recovery Tribunal adjudicated an Original Application for recovery of bank loans and interest by Canara Bank against corporate and individual borrowers. The court noted a prior partial sale of security property under SARFAESI. Relying on submitted documents and citing Supreme Court precedents on interest capitalization, the Tribunal allowed the application and directed payment of the outsta

What did the court decide?

Order That the Defendants shall jointly/severally pay Rs.90,20,239.28p comprising principal and interest on Secured Overdraft and GECL after deducting Rs.40,50,000/- realized from sale proceeds of mor

Canara Bank versus Lare and Co. — Contract and Commercial Disputes | DRT (2026)

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OA No. 292/2023

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 05^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.292/2023

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Between

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Canara Bank, Beach Road Branch, H.O.No.40, 55 PB, Beach Rd, Thoothukudi-628 001. Rep. By its Chief Manager.

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---Applicant Bank

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And

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M/s Lare & Co.,

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Rep.by its Partners, P. Mayilvel and R. Lingasamy, 62F, Kandasamypuram Main Road, Tuticorin.

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Mr. P. Mayilvel, S/o S. Ponnusamy, No.4/22/16, State Bank Colony North, Kumaran Nagar, Tuticorin – 628 002.

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Mr. R. Lingasamy, S/o R. Ramasamy, 1/28, Subramaniapuram, Sivakasi, Virudhunagar – 626 128. ---Defendants

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Counsel for the Applicant Bank : M/s C. Deepak, M. Vengatesh,

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M. Chandrasekar, S. Nowsath Ali.

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Page 1 of 9

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OA No. 292/2023

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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 31.03.2023 to recover from the Defendants a total sum of Rs.90,20,239.28p i.e., (i) Rs.79,23,209.05 with interest at the rate of 11.05%p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Secured Over Draft (ii) Rs.10,97,030.23p with interest at the rate of 9.25% with monthly rests plus penal interest at the rate of 2%p.a. in respect of GECL 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 approached the Applicant for availing the loan and the said loan was sanctioned on 4.12.2017 by applicant to the tune of Rs. 75,00,000/- as an SECURED OVERDRAFT with the Rate of Interest fixed at 9.85% of Tenability One year from the date of Sanction in Sanction Ref:- TUT B Rd : OCC 10255 : Sanc / 2017-18. In consideration of loan facilities, that the defendant has executed the Request for Overdraft Facilities on 4.12.2017 and the 2^nd and 3^rd defendant has executed the Guarantee Covering Letter along with Guarantee Agreement and the ProNote, the Link Letter to Common Hypothecation Agreement, the Common Hypothecation Agreement and the 2nd and 3rd defendant has executed the Partnership Letter and the Letter of Undertaking was executed by defendant and the Agreement Re: Advances against Book Debts as Prime Security and the Cash Credit Agreement.

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The defendant has renewed the loan and the same was sanctioned on 19.1.2019 by applicant to the tune of Rs. 75,00,000/- as a SECURED OVERDRAFT FACILITIES with the Rate of Interest fixed at 10.25% of Tenability One year from the date of Sanction in Sanction Ref :- TUT B Rd : OCC 10255 : Sanc / 2018-19. In consideration of loan facilities that the defendant has executed the Letter of Renewal on 19.1.2019 and the Request for Overdraft facilities and the 2^nd and 3^rd defendant has executed the Letter

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Page 2 of 9

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OA No. 292/2023

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from guarantor whenever limits are to be renewed on 19.1.2019 and the 2nd and 3rd defendant has executed the Partnership Letter the Acknowledgement of Debt and Security on 2.1.2019.

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The defendant has renewed the loan and the same was sanctioned on 16.4.2020 by applicant to the tune of Rs. 75,00,000/- as SECURED OVERDRAFT FACILITIES with the Rate of Interest fixed at 8.95% of Tenability One year from the date of Sanction in Sanction Ref :- TUT B Rd : OCC 10255 : Sanc / 2018-19. In consideration of loan facilities, the Letter of Renewal was executed by defendant on 16.4.2020 and the defendant has executed the Link Letter to be Obtained from the Borrower on 16.04.2020 and the defendant has executed the Letter of Undertaking on 16.4.2020 and the 2nd and 3rd defendant has executed the Letter from guarantor whenever limits are to be renewed on 16.4.2020 and the 2nd and 3rd defendant has executed the Partnership Letter on 16.4.2020 and the Acknowledgement of Debt and Security on 16.4.2020.

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Again the defendant has applied for another loan (Government Emergency Credit Line — GECL) Micro Small & Medium Enterprises on 31.10.2020 and the applicant has sanctioned the said loan to the tune of Rs.14,66,000/-as an Working Capital Term Loan Under GECL Scheme on 18.11.2020 with the Rate of Interest fixed at 7.50% of Repayment Rs.40,722 X 36 months of Interest to be serviced as and when applied (Including interest during moratorium) in Sanction Ref :- MDUC SMES § 277 2020-21. In consideration of loan facilities, the defendant has executed the Agreement Cum Deed of Hypothecation on 18.11.2020 and the Supplemental Common Hypothecation Agreement, the Term Loan Agreement on 31.10.2020 and the Pro-Note, the Undertaking Letter from Borrower on 31.10.2020.

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The defendant has renewed the loan and the same was sanctioned by applicant to the tune of Rs. 75,00,000/- as an SECURED OVER DRAFT on 21.5.2021 with the Rate of Interest fixed at 9.15% of tenability one year from the date of sanction in Sanction Ref :- TUT B Rd : OCC 10255 : Sanc / 2021-22. 10. In consideration of loan facilities that the defendant has executed the Letter of Renewal on 21.5.2021 and the Letter of Undertaking was executed by defendant and the 2^nd & 3^rd defendant has executed the Partnership Letter and the Letter of Undertaking was executed by defendant on 21.5.2021 and the defendant has executed the Acknowledgement of Debt and Security.

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The defendant has executed the Registered Memorandum of Deposit of Title Deeds Doc No. 3706/2017 on 30.11.2017 and Doc No. 4764/2020 on 18.11.2020. The Applicant was insisting for repayment of loan amount and Defendants have been giving one reason or other to evade from repaying and

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Page 3 of 9

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OA No. 292/2023

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the Loan has become NPA on 16.11.2022. The defendant did not adhere to the terms of repayment despite demands. In spite of several demands made by the Applicant, the defendant failed and neglected to settle the amount. The defendant visited the Branch and executed Acknowledgement of Debt and Security dated 21/05/2021 in favor of the Plaintiff and thereby acknowledged the liability due and payable to the Applicant.

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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.90,20,239.28p i.e., (i) Rs.79,23,209.05 with interest at the rate of 11.05%p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Secured Over Draft (ii) Rs.10,97,030.23p with interest at the rate of 9.25% with monthly rests plus penal interest at the rate of 2%p.a. in respect of GECL from the date of filing of Application till the date of realization with cost.

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During the pendency of the O.A the Applicant bank has sold the 1^st schedule mentioned property in OA to one AJ Anandaraj S/o JeyaSubramanian by invoking the powers conferred under SARFEASI Act, 2002 for a sum of Rs. 40,50,000/- (Forty Lakhs Fifty Thousand Rupees only) the sale certificate dated 30.6.2023 and the same was marked as Ex.A42 handed over the original property documents to the Auction purchasers so the applicant has not marked the property documents.

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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	Description of document	Exhibits
1	04.12.2017	Sanction	Ex.No.A-01
2	04.12.2017	Request for Overdraft Facilities	Ex.No.A-02
3	04.12.2017	Guarantee Covering Letter along with Guarantee Agreement of Lingasamy	Ex.No.A-03
4	14.12.2017	Guarantee Covering Letter along with Guarantee Agreement of Mayilvel	Ex.No.A-04
5	14.12.2017	Pro-Note	Ex.No.A-05
6	04.12.2017	Link Letter to Common Hypothecation Agreement	Ex.No.A-06
7	14.12.2017	Common Hypothecation Agreement	Ex.No.A-07
8	14.12.2017	PartnershipLetter of Mayilvel and Lingasamy	Ex.No.A-08
9	04.12.2017	Letter of Undertaking	Ex.No.A-09
10	14.12.2017	Agreement re: Advances against Book Debts as Prime Security	Ex.No.A-10
11	04.12.2017	Cash Credit Agreement	Ex.No.A-11
12	—	Sanction	Ex.No.A-12

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Page 4 of 9

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OA No. 292/2023

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13	19.01.2019	Letter of Renewal	Ex.No.A-13
14	19.01.2019	RequestforOverdraftFacilities	Ex.No.A-14
15	19.01.2019	Letter from Guarantor whenever limits are to berenewed of limitsMayilvel P	Ex.No.A-15
16	19.01.2019	Letter from Guarantor whenever limits are to berenewed of limitsLingasamyR	Ex.No.A-16
17	19.01.2019	PartnershipLetter of Mayilvel and Lingasamy	Ex.No.A-17
18	02.01.2019	Acknowledgement of Debt and Security	Ex.No.A-18
19	16.04.2020	Sanction	Ex.No.A-19
20	16.04.2020	Letterof Renewal	Ex.No.A-20
21	16.04.2020	Link Letter to be obtained from borrower	Ex.No.A-21
22	16.04.2020	Letter of Undertaking	Ex.No.A-22
23	16.04.2020	Letter from Guarantor whenever limits are to be renewed of Lingasamy	Ex.No.A-23
24	16.04.2020	Letter from Guarantor whenever limits are to berenewed of Mayilvel P	Ex.No.A-24
25	16.04.2020	PartnershipLetter of Mayilvel and Lingasamy	Ex.No.A-25
26	16.04.2020	Acknowledgement of Debt and Security	Ex.No.A-26
27	31.10.2020	Application form for Loans to MSME	Ex.No.A-27
28	18.11.2020	Sanction	Ex.No.A-28
29	18.11.2020	Agreement Cum Deed of Hypothecation	Ex.No.A-29
30	31.10.2020	Supplemental Common Hypothecation Agreement	Ex.No.A-30
31	31.10.2020	Term Loan Agreement	Ex.No.A-31
32	—	Pro-Note	Ex.No.A-32
33	—	UndertakingLetter from Borrower	Ex.No.A-33
34	21.05.2021	Sanction	Ex.No.A-34
35	21.05.2021	Letter of Renewal	Ex.No.A-35
36	21.05.2021	LetterofUndertaking	Ex.No.A-36
37	21.05.2021	PartnershipLetter	Ex.No.A-37
38	21.05.2021	Undertaking	Ex.No.A-38
39	21.05.2021	Letter of Undertaking	Ex.No.A-39
40	21.05.2021	Acknowledgement of Debt and Security	Ex.No.A-40
41	—	Statement of Accounts maintained by Applicant Bank	Ex.No.A-41
42	30.06.2023	Sale Certificate	Ex.No.A-42
43	—	Statement of Accounts maintained by Applicant Bank	Ex.No.A-43

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SCHEDULE OF PROPERTIES

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“A” SCHEDULE - HYPOTHECATION

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Hypothecation of stocks such as Amaron Batteries & accessories

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Within these four boundaries area 0.16.5 hectors equal to 40.75 cents of Punja Schedule correct.

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Page 5 of 9

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OA No. 292/2023

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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. G. V. Subrahmanyeswara Rao, who is the Chief Manager of the Applicant Bank.

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He has stated in his affidavit that the defendants has availed Secured Over Draft and GECL 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-43 in support of its claim in the OA.

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The Sanction has been marked as Ex.No.A-01, Request for Overdraft Facilities has been marked as Ex.No.A-02, Guarantee Covering Letter along with Guarantee Agreement of Lingasamy has been marked as Ex.No.A-03, Guarantee Covering Letter along with Guarantee Agreement of Mayilvel has been marked as Ex.No.A-04, Pro-Note has been marked as Ex.No.A-05, Link Letter to Common Hypothecation Agreement has been marked as Ex.No.A06, Common Hypothecation Agreement has been marked as Ex.No.A-07, Partnership Letter of Mayilvel and Lingasamy has been marked as Ex.No.A08, Letter of Undertaking has been marked as Ex.No.A-09, Agreement re: Advances against Book Debts as Prime Security has been marked as Ex.No.A-10.

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The Cash Credit Agreement has been marked as Ex.No.A-11, Sanction has been marked as Ex.No.A-12, Letter of Renewal has been marked as Ex.No.A-13, Request for Overdraft Facilities has been marked as Ex.No.A14, Letter from Guarantor whenever limits are to be renewed of limits Mayilvel P has been marked as Ex.No.A-15, Letter from Guarantor whenever limits are to be renewed of limits Lingasamy R has been marked as Ex.No.A16, Partnership Letter of Mayilvel and Lingasamy has been marked as Ex.No.A-17, Acknowledgement of Debt and Security has been marked as Ex.No.A-18, Sanction has been marked as Ex.No.A-19, Letter of Renewal has been marked as Ex.No.A-20.

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Page 6 of 9

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OA No. 292/2023

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The Link Letter to be obtained from borrower has been marked as Ex.No.A-21, Letter of Undertaking has been marked as Ex.No.A-22, Letter from Guarantor whenever limits are to be renewed of Lingasamy has been marked as Ex.No.A-23, Letter from Guarantor whenever limits are to be renewed of Mayilvel P has been marked as Ex.No.A-24, Partnership Letter of Mayilvel and Lingasamy has been marked as Ex.No.A-25, Acknowledgement of Debt and Security has been marked as Ex.No.A-26, Application form for Loans to MSME has been marked as Ex.No.A-27, Sanction has been marked as Ex.No.A-28, Agreement Cum Deed of Hypothecation has been marked as Ex.No.A-29, Supplemental Common Hypothecation Agreement has been marked as Ex.No.A-30.

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The Term Loan Agreement has been marked as Ex.No.A-31, Pro-Note has been marked as Ex.No.A-32, Undertaking Letter from Borrower has been marked as Ex.No.A-33, Sanction has been marked as Ex.No.A-34, Letter of Renewal has been marked as Ex.No.A-35, Letter of Undertaking has been marked as Ex.No.A-36, Partnership Letter has been marked as Ex.No.A-37, Undertaking has been marked as Ex.No.A-38, Letter of Undertaking has been marked as Ex.No.A-39, Acknowledgement of Debt and Security has been marked as Ex.No.A-40, Statement of Accounts maintained by Applicant Bank has been marked as Ex.No.A-41, Sale Certificate has been marked as Ex.No.A-42, Statement of Accounts maintained by Applicant Bank has been marked as Ex.No.A-43. 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 interest, which is charged by way of penalty for non payment, cannot be capitalized. Further interest, i.e interest on interest, whether simple,

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Page 7 of 9

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OA No. 292/2023

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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 with cost . 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 total sum of Rs.90,20,239.28p i.e., (i) Rs.79,23,209.05p with interest at the rate of 11.05%p.a. with half yearly rests in respect of Secured Over Draft (ii) Rs.10,97,030.23p with interest at the rate of 9.25%p.a. with half yearly rests in respect of GECL from the date of filing of Application till the date of sale proceeds (29.06.23)

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and after deducting Rs.40,50,000/- from the outstanding amount realized on 29.06.23 by selling the schedule mentioned property, together with interest at the rate of 11.05%p.a with half yearly rests in respect of Secured Over Draft and interest at the rate of 9.25%p.a. with half yearly rests in respect of GECL from the date of sale proceeds (30.06.23) till the date of realization. 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.90,20,239.28p i.e., (i) Rs.79,23,209.05p with interest at the rate of 11.05%p.a. with half yearly rests in respect of Secured Over Draft (ii) Rs.10,97,030.23p with interest at the rate of 9.25%p.a. with half yearly rests in respect of GECL from the date of filing of Application till the date of sale proceeds (29.06.23)

Page 8 of 9

OA No. 292/2023

(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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(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 Secured Over Draft and GECL 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 05^th May, 2026.

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Sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 08.05.26

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Canara Bank v. Lare and Co.

Case brief

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Canara Bank v. Lare and Co.

Case brief

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