Allowed

Punjab National Bank v. R Sivakumar

DRT7 Aug 2026OA/376/2024

Case brief

AI extract

What is this about?

The Tribunal allowed the Recovery of Debts application filed by Punjab National Bank to recover dues from two borrowers totaling approximately Rs. 20.78 lakhs. The court validated the loan documents but directed the deduction of capitalized penal interest as prohibited by RBI guidelines before awarding the principal and lawful interest.

What did the court decide?

Directed respondents to pay Rs. 20,78,698.95 ps after deducting capitalized penal interest with interest at 9.6% p.a. and further interest till realization, authorizing sale of mortgaged properties if

Punjab National Bank versus R Sivakumar — Banking and Recovery | DRT (2026)

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OA No. 376/2024

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 07^th DAY OF AUGUST, 2026

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PRESENT: SEEMA SINHA,

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

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OA No. 376/2024

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Between

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Punjab National Bank, Circle Sastra Trichy, Circle Office, Kailasapuram, Trichy – 620 014. Rep. by its Chief Manager. --- Applicant Bank

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And

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Mr. R. Sivakumar

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S/o Rajangam No. 137, South Street, Sarvarajanpettai, Elleri Post, Kattumannar Kovil, Cuddalore – 608 303.

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Mr. D. Sasikumar

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S/o. Dhanapal No. 52, Anna Street, Kumaratchi Post, Kattumannar Koil Taluka, Cuddalore – 608 302. --- Defendants

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Counsel for the Applicant Bank : Mr. K. Ramesh & M. Sundaraj

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Page 1 of 8

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OA No. 376/2024

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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 have 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 29.07.2024 to recover from the Defendants for a sum of Rs. 20,78,698.95 ps (i.e) (i) Rs. 7,55,222.76 ps in Kishan Cash Credit A/c No. 0103008800012179 with further interest at the rate of interest at 9.6% p.a. with Monthly rest + 2% Penal Interest (ii) Rs. 6,67,454.19 ps in Term Loan A/c No. 010300NC00052248 with further interest at the rate of interest at 9.6% p.a. with Monthly rest + 2% Penal Interest and (iii) Rs. 6,56,022.00 in Over Draft Loan A/c No. 0103009900000170 with further interest at the rate of interest at 9.6% p.a. with Monthly rest + 2% Penal Interest from the date of application till the date of realization with cost and by sale of Mortgaged 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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(i) The applicant bank submitted that the defendants have availed Kishan Cash Credit Loan for a sum of Rs.7,00,000/-, Term Loan for a sum of Rs.7,00,000/- and Over Draft loan for a sum of Rs.6,00,000/- in totalling Rs.20,00,000/-. The defendants executed necessary loaning documents in favour of the Applicant.

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(ii) The Applicant Bank further submitted that the defendants have also deposited the original title deeds this immovable property with the applicant bank as security for the due repayment of loan availed by him. Further, the 1^st defendant has executed memorandum of deposit of title deeds on 25.01.2016 in Document No.139 of 2016, SRO Mannargudi, Chidambaram District and Supplementary Memorandum of deposit of titled deed on 22.02.2018 in Document No.477 of 2018, SRO Mannargudi, Chidambaram District. The following is the detail of loan availed by the defendants.

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Page 2 of 8

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OA No. 376/2024

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S. No .	Nature of loan & Account Number	Loan amount	Rate intere	of st	Outstanding amount as on 31.03.2024
1.	Kishan Cash Credit 0103008800012179	Rs.7,00,000/-	9.6% + 2% P.I	p.a	Rs. 7,55,222.76
2.	Term Loan 010300NC00052248	Rs.7,00,000/-	9.6% + 2%P.I	p.a	Rs. 6,67,454.19
3.	Over Draft loan 0103009900000170	Rs.6,00,000/-	9.6% + 2%P.I	p.a	Rs. 6,56,022.00
			T	otal	Rs. 20,84,698.95

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(iii). Further the applicant submits that as per the accounts of the applicant maintained in the name of the defendants kept in regular course of business and as certified under the Bankers Book of Evidence Act as on 31.03.2024 for a sum of Rs. 20,84,090.95/- has became due and they are liable to pay the said amounts with further interest till repayment.

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(iv). The applicant bank submits that the defendant, though had availed the entire sanctioned limits under the said facilities, the defendants have failed to repay the loan as per the sanction ticket, as agreed, despite the repeated demands and reminders made by the Applicant Bank. The Defendants have not paid the due amount. The borrower’s loan account turned in to NPA on 22.05.2022.

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(v) Despite repeated demands and reminders, made by the Applicant Bank, the Defendant has failed and neglected to repay and adjust their liability. Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs. 20,78,698.95 ps (i.e) (i) Rs. 7,55,222.76 ps in Kishan Cash Credit A/c No. 0103008800012179 with further interest at the rate of interest at 9.6% p.a. with Monthly rest + 2% Penal Interest (ii) Rs. 6,67,454.19 ps in Term Loan A/c No. 010300NC00052248 with further interest at the rate of interest at 9.6% p.a. with Monthly rest + 2% Penal Interest and (iii) Rs. 6,56,022.00 in Over Draft Loan A/c No. 0103009900000170 with further interest at the rate of interest at 9.6% p.a. with Monthly rest + 2% Penal Interest from the date 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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Page 3 of 8

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OA No. 376/2024

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S. No.	Date	Description of document	Exhi	bits
1.	01.02.2016	Loan Application	Ex. No.	A-01
2.	---	Sanction Letter	Ex. No.	A-02
3.	11.02.2016	Sanction Letter	Ex. No.	A-03
4.	09.06.2017	Sanction Letter	Ex. No.	A-04
5.	30.03.2016	Hypothecation Agreement	Ex. No.	A-05
6.	11.02.2016	Agreement for HousingLoan	Ex. No.	A-06
7.	09.06.2017	Agreement of Overdraft Facility for Housing Loan Borrowers	Ex. No.	A-07
8.	11.02.2016	Agreement of Guarantee	Ex. No.	A-08
9.	25.01.2016	MOD. Doc. No. 139/2016	Ex. No.	A-09
10.	22.02.2018	Supplemental MOD Doc. No. 477/2018	Ex. No.	A-10
11	07.02.2019	Balance and SecurityConfirmation Letter	Ex. No.	A-11
12	28.03.2019	Balance and SecurityConfirmation Letter	Ex. No.	A-12
13	04.06.2020	Balance and SecurityConfirmation Letter	Ex. No.	A-13
14	04.02.2022	Balance and SecurityConfirmation Letter	Ex. No.	A-14
15	24.03.2022	Balance and SecurityConfirmation Letter	Ex. No.	A-15
16	02.06.2023	Balance and SecurityConfirmation Letter	Ex. No.	A-16
17	-----	Statement of Accounts	Ex. No.	A-17

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SCHEDULE OF PROPERTIES

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Mortgaged Property

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Chidambaram Registration District Mannargudi Sub Registry Kumaratchi Panchayat Union, Mariyammankoil Street, Sarvarajan Pettai Village, Patta No.103, Dry land R.S. No. 15/17B/14 as per Natham Nilavari Thooraya Adangal R.S. No. 15/19 East to West 194 feet, North to South Eastern 18 ½ feet, Western 19 feet = 3637 ½ sq. ft = 335 sq. meters = 0.08.34 cents

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Boundaries:

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South of house of S.Karunanithi

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North of the house of K.Pazhanisamy, West of Salai

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East of the garden of Uthirapathy.

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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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Page 4 of 8

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OA No. 376/2024

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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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5. 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. Manjunath Venkatagiri , who is the Chief Manager of the Applicant Bank.

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He has stated in his affidavit that the defendants have availed Kishan Cash Credit, Term Loan and Over Draft Loan from the Applicant Bank, Kailasapuram, Trichy, but they failed to pay the outstanding loan amount, hence he has filed the case. After that, for the administrative reasons, the entire loan accounts have been transferred to ARM, Trichy. Hence, the applicant bank has also filed the documents given by the defendant at the time of sanctioning the loan amount, which have been marked as Exhibits Nos. A-01 to A-17 in support of its claim in the OA.

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Defendants executed the Loan Documents in favour of the Applicant Bank. The Loan Application dated 01.02.2019 has been marked as Ex. No. A-01. Sanction Letters dated 11.02.2016 & 09.06.2017 have marked s Ex. Nos. A-02 to A-04. Hypothecation agreement dated 30.03.2016 has been marked as Ex. No. A-05. Agreement for Housing Loan dated 11.02.2016 has been marked as Ex. No. A-06. Agreement of Over Draft Facility for Housing Loan dated 09.06.2017 has been marked as Ex. No. A-07. Agreement of Guarantee has been marked as Ex. No. A-08.

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Further, the defendant also deposited the title deed with the Applicant Bank and also executed the MOD on 25.01.2016 in Document No. 139/2016. The same has been marked as Ex. No. A-09. Supplemental MOD also executed on 22.02.2018 vide Document No. 477/2018, which has been marked as Ex. No. A-10. The Balance and Security Confirmation Letters also executed for all loans on 07.02.2019, 28.03.2019, 04.06.2020, 04.06.2022, 24.03.2022 & 02.06.2023, which have been marked as Ex. No. A-11 to A-16. Statement of Accounts for all loans have been marked as Ex. No. A-17.

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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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Page 5 of 8

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OA No. 376/2024

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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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In this OA, from Perusal of Statement of Accounts (Ex. No. A-17), I find that Applicant Bank has capitalized the penal interest in the loan account of the defendants, which is against the policy of RBI guidelines.

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“ The Reserve Bank of India strictly prohibits the capitalization of Penal charges. Under current RBI regulations, any penalty for non-compliance with loan terms must be treated as a distinct “Penal Charge” rather than added to the Principal outstanding amount. This ensures that banks and NBFCs cannot compute further interest on the penalty amount themselves.”

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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, 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 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. 20,78,698.95 ps (i.e)

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(i) Rs. 7,55,222.76 ps in Kishan Cash Credit A/c No. 0103008800012179 with further interest at the rate of interest at 9.6% p.a. with half yearly rest

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Page 6 of 8

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OA No. 376/2024

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(ii) The capitalized Penal Interest component shall be deducted from the claimed outstanding Term Loan (A/c No. 010300NC00052248) amount of Rs. 6,67,454.19 ps and the Applicant Bank shall be entitled to recover only the balance amount due after such deduction, together with interest at the rate of 9.6% p.a. with half yearly rests and

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(iii) Rs. 6,56,022.00 in Over Draft Loan A/c No. 0103009900000170 with further interest at the rate of interest at 9.6% p.a. with half yearly rest

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from the date of application till the date of realization with cost.

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Accordingly, it is hereby

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ORDERED

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(a) That the Defendants are directed personally / jointly / severally to pay the outstanding amount to the Applicant Bank for a sum o f Rs. 20,78,698.95 ps (i.e)

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(i) Rs.7,55,222.76 ps in Kishan Cash Credit A/c No. 0103008800012179 with further interest at the rate of interest at 9.6% p.a. with half yearly rest

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(ii) The capitalized Penal Interest component shall be deducted from the claimed outstanding Term Loan (A/c No. 010300NC00052248) amount of Rs. 6,67,454.19 ps and the Applicant Bank shall be entitled to recover only the balance amount due after such deduction, together with interest at the rate of 9.6% p.a. with half yearly rests and

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(iii) Rs. 6,56,022.00 in Over Draft Loan A/c No. 0103009900000170 with further interest at the rate of interest at 9.6% p.a. with half yearly rest

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from the date of application till the date of realization with cost within one month from the date of receipt of this order.

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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 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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Page 7 of 8

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OA No. 376/2024

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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 personally / 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 defendant.

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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 Kishan Cash Credit, Term Loan and Over Draft Loan 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 SKP (Typist), taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 07^th August, 2026.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 13.08.2026

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Page 8 of 8

Punjab National Bank v. R Sivakumar

Case brief

What is this about?

What did the court decide?

Punjab National Bank v. R Sivakumar

Case brief

What is this about?

What did the court decide?

What the court decided

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