Allowed

Bank of Baroda v. Sri Durgashree Cashews

DRT30 Jun 2026OA/315/2023

Case brief

AI extract

What is this about?

Debt Recovery Tribunal allowed the Bank of BarodaOriginal Application to issue a Recovery Certificate against a partnership firm and associated guarantors, rejecting defences based on leasehold property status and limitation. Interest was awarded at 9% simple rate.

What did the court decide?

Recovery certificate for Rs. 5.87 crore plus future interest at 9% simple p.a. from 24.09.2022 joint, several, and personal liability.

Bank of Baroda versus Sri Durgashree Cashews — Contract and Commercial Disputes | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL II, BENGALURU

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Dated this 30^th Day of June, 2026

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Present: Sri. T. RAJESH Presiding Officer

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OA.No.315/2023

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BETWEEN:

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Bank of Baroda, Brahmavar Branch, Holy Family Complex, PB No.21, Brahmavar, Udupi District, Karnataka -576213, Through its Chief Manager,

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…APPLICANT

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AND:

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M/s. Sri. Durgashree Cashews, A Partnership firm registered Having its registered office at:

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S. No. 207/3, Kadoor Udupi Taluk, Karnataka.

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Sri. Pramod Hegde, S/o. Late Krishnayya Hegde, Residing at: Hiliyana Halemane Haikady Village, Udupi Taluk, Karnataka.

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Sri. V Praveen Shetty, S/o. Late Chandrashekar Shetty, Residing at: Kattemane, Vandar Post & Village, Udupi Taluk, Karnataka.

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Sri. B. Adarsh Hegde, S/o. Late Sudhar Hegde, Residing at: Shivagowri House, Belthadi Kadoor Post and Village, Udupi Taluk, Karnataka.

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OA 315/2023

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Sri. Nagaraj M, S/o. Rathna Marakalti, Residing at: Billadi Village, Post Januvarkatte, Udupi Taluk, Karnataka.

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Smt. Shobha Hegde, D/o. Narayana Shetty, Residing at: Sankadabagilyu Vandaru Post and Village, Udupi District- Taluk, Karnataka.

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Smt. Shashikala S Shetty, D/o. Late Shekar Shetty, Residing at: Kadoor Post and Village, Dist. Udupi Taluk, Karnataka.

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...DEFENDANTS

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Counsel on record/appeared for:

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Applicant : VS Associates Defendants : M A Rajendra

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FINAL ORDER

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The present Original Application in short “OA” has been filed under

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section 19 of Recovery of Debts and Bankruptcy Act 1993 seeking issuance of Recovery Certificate for Rs. 5,87,04,485.34 (Rupees five crore eighty-

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seven lakh four thousand four hundred eighty-five and paisa thirty-four 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 partnership firm, and Defendant Nos. 2 to 7 are its partners as well as the guarantors for the credit facilities availed by Defendant No. 1. Initially, Defendant No.

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1 availed the following credit facilities from the Applicant: (i) Cash Credit Hypothecation (CCH) of Rs. 25,00,000/-, (ii) Cash Credit Pledge (CCP) of

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OA 315/2023

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Rs. 50,00,000/-, (iii) Mortgage Loan (ML) of Rs. 37,00,000/-, and (iv) Secured Loan (SL) of Rs. 45,00,000/- for the purpose of establishing a cashew processing unit. Subsequently, all the aforesaid loan accounts, except the CCH facility of Rs. 25,00,000/-, were fully closed.

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Thereafter, at the request of the Defendants, the CCH facility was enhanced from Rs. 1,25,00,000/- to Rs. 4,00,00,000/-. Simultaneously, a fresh Mortgage Loan of Rs. 21,00,000/- and a Secured Loan of Rs. 9,00,000/- were also sanctioned, thereby taking the aggregate credit exposure to Rs. 4,30,00,000/-. Subsequently, the Defendants further availed a sum of Rs. 47,50,000/- under the Covid Emergency Credit Line (CECL) Scheme and an additional Working Capital facility of Rs. 95,00,000/-.

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Thereafter, at the request of the Defendants, the existing credit facilities were restructured. Under the restructuring, the existing Cash Credit Hypothecation (CCH) limit of Rs. 4,75,00,000/- was bifurcated into the following facilities: (i) Working Capital Term Loan (WCTL) of Rs. 3,67,50,000/-; (ii) Working Capital Cash Credit (WCC) of Rs. 60,00,000/; (iii) Covid Emergency Credit Line (CECL) of Rs. 47,50,000/-; and (iv) Additional Working Capital facility of Rs. 95,00,000/-.

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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 documents, and created Mortgage and hypothecation over the schedule properties in favour of the Applicant Bank.

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OA 315/2023

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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, 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 account.

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Summons were issued to the Defendants. The Defendants entered appearance through their counsel and Defendant No.4 filed their written statement on behalf of Defendant Nos. 1 to 3 and 5 to 7. However, despite being afforded sufficient opportunities to lead their evidence, the Defendants failed to do so. Accordingly, the Defendants' evidence was closed on 04.06.2026.

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The Defendants, in their written statement, contend that the Applicant cannot proceed against the leasehold property, as the schedule property had been leased to Defendant No. 1 under a valid Lease Deed dated 04.03.2012 for a period of 29 years. According to the Defendants, the Applicant has suppressed this material fact in the present application. It is further contended that only leasehold rights were created in respect of the schedule property and that no freehold rights were available or conveyed. Therefore, according to the Defendants, the Applicant Bank cannot proceed against the schedule property beyond the leasehold rights.

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OA 315/2023

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The Defendants have further contended that the claim of the Applicant is barred by limitation. It is also their contention that they have not executed any document authorizing the Applicant to levy overdue interest, penal interest, or compound interest.

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The Defendants further state that, during the COVID-19 pandemic, they submitted a representation dated 24.11.2021 to the Applicant Bank requesting sanction of additional credit facilities and extension of the repayment period, so as to enable the Defendant firm to recommence its business operations, generate income, and regularize the loan accounts. However, according to the Defendants, the Applicant failed to extend the requested financial assistance. It is their further case that, during the COVID-19 lockdown, no commercial, manufacturing, or processing activities could be carried on, and the entire country was facing unprecedented economic hardship. Despite these circumstances, the Applicant initiated recovery proceedings under the provisions of the Recovery of Debts and Bankruptcy Act, which, according to the Defendants, was harsh and unjustified.

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The Applicant adduced evidence through AW-1, who filed a proof affidavit reiterating the averments made in the Original Application. AW-1 also produced and got marked Exhibits A-1 to A-26 in support of the Applicant's case.

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Heard both sides and considered the contentions raised in the OA

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in the light of the documentary evidence and proof affidavit. Though the

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OA 315/2023

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Defendants filed their written statement, they failed to adduce any oral or documentary evidence in support of their defence despite being afforded sufficient opportunity. Consequently, the defence of the Defendants remains unsupported by evidence, and the matter is considered on the basis of the pleadings and the evidence adduced by the Applicant.

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The following issues arise for consideration in this matter:

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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 contention of the Defendants that the Applicant cannot proceed against the schedule property on the ground that it is a leasehold property is devoid of merit. The Applicant has produced the Memorandum of Deposit of Title Deeds (MODTD/MOTD) and the other security documents, which establish that the Defendants voluntarily created an equitable mortgage over their leasehold rights in favour of the Applicant Bank as security for the credit facilities. Having created the mortgage and availed the loan facilities on the strength of such security, the Defendants are estopped from contending that the Applicant is not entitled to enforce the security merely because the property is leasehold in nature. The Defendants have neither produced the lease deed nor adduced any evidence to show that the lease contained any restriction against the

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OA 315/2023

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creation of a mortgage or the enforcement of the leasehold rights by the mortgagee. The plea that the Applicant suppressed the existence of the lease deed is unsupported by any evidence and cannot be accepted, particularly when the mortgage was created by the Defendants themselves. In the absence of any cogent evidence substantiating the defence, the said contention is rejected.

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The said contentions regarding the limitation and interest rate are devoid of merit. The documents produced by the Applicant establish that the credit facilities were restructured at the request of the Defendants and that fresh loan and security documents were executed by them, thereby constituting valid acknowledgements of liability and keeping the claim within limitation. The statement of account also discloses that interest has been levied in terms of the contractual documents executed by the Defendants. The Defendants have not adduced any evidence to substantiate their allegations or to establish any illegality in the levy of interest or the recovery proceedings. Mere financial hardship during the COVID-19 pandemic or the non-sanction of additional credit facilities does

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not absolve the Defendants of their contractual liability to repay the dues. Accordingly, the said contentions stand rejected.

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The evidence tendered by the Applicant remains uncontroverted

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and undisputed. The evidence put forth by the Applicant is found

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OA 315/2023

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admissible and sufficient to prove the averments made in the OA, and the default committed by the Defendants in repaying the loan amount due. The liability of the Defendants and the loan amount due are also proved by the above documents.

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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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Taking into consideration of the fact that the loans are availed for business purposes and also the fact that OA claim is arrived at by calculating interest at the agreed rate, pendente lite and future interest is awarded at 9.00% (simple). The prayer for interest with compounded monthly rests and for penal interest for the future period is hereby declined.

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In the result, OA.No. 315/2023, is allowed,

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i) The Applicant is allowed to recover an aggregate sum of Rs. 5,87,04,485.34 (Rupees five crore eighty-seven lakh four thousand four hundred eighty-five and paisa thirty-four only) with pendente lite and future interest of 9.00% p.a. (simple) from 24.09.2022 till the realization from the Defendants jointly, severally and personally after giving credit to all the amounts recovered and received during the pendency of the OA if

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any, and allow the same to be recovered by proceeding against the

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OA 315/2023

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schedule properties. Properties schedule to the OA be the schedule to the Recovery Certificate.

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ii) If the sale proceeds are found insufficient to clear the loan

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amount due from the Defendants jointly, severally, and personally then the Applicant Bank shall be at liberty to proceed against Defendants and

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their other assets for recovery of the balance amount due.

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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

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the order.

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iv) The Recovery Certificate to be drawn in terms of this order and

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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 30^th day of June, 2026).

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Sd/-

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(T. RAJESH)

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PRESIDING OFFICER

OA 315/2023

ANNEXURES

WITNESSES EXAMINED FOR THE APPLICANT BANK:

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AW-1: Sakharam Bhandarkar, Chief Manager, of Applicant Bank.

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Exhibits on the part of the Applicant:

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Exhibit Nos.	Date	Particulars of Documents
A1	10.01.2012	Sanction Letter
A2	16.01.2012	Memorandum of Deposit of Title Deeds
A3	09.02.2015	Sanction letter
A4	13.02.2015	Supplementary agreement
A5	13.02.2015	Letter of guarantee
A6	16.07.2020	Sanction letter
A7	16.07.2020	Loan cum hypothecation agreement
A8	16.07.2020	Demand promissory note
A9	16.07.2020	Declaration cum undertaking cum authority
A10	16.07.2020	General form of guarantee
A11	16.07.2020	Letter
A12	29.10.2020	Sanction letter
A13	29.10.2020	Loan cum Hypothecation agreement
A14	29.10.2020	Demand promissory note
A15	29.10.2020	Declaration cum Undertaking cum authority
A16	29.10.2020	General Dorm of Guarantee
A17	31.03.2021	Sanction letter
A18	31.03.2021	Demand promissory notes
A19	31.03.2021	Letter confirming creation of mortgage
A20	31.03.2021	Letter
A21	07.01.2022	Separate Letters
A22	01.02.2022	Notice
A23	--	Certified account extract
A24	--	Certified account extract
A25	--	Certified account extract
A26	--	Certified account extract

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OA 315/2023

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Witness Examined for the Defendants:

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-Nil-

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List of Documents Exhibited for the Defendants:

-Nil -

Sd/-

(T. RAJESH)

PRESIDING OFFICER

Bank of Baroda v. Sri Durgashree Cashews

Case brief

What is this about?

What did the court decide?

Bank of Baroda v. Sri Durgashree Cashews

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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