Allowed

Punjab National Bank v. M Poomalai

DRT7 Aug 2026OA/387/2024

Case brief

AI extract

What is this about?

The Tribunal allowed an Original Application filed by Punjab National Bank against a borrower for recovery of outstanding term loans totaling Rs. 25,45,832. While the claim was largely upheld based on filed documents, the Court directed the deduction of capitalized penal interest against RBI policy.

What did the court decide?

Direction to pay Rs. 25,45,832 less capitalized penal interest, plus applicable interest; power to sell mortgaged property in case of default.

Punjab National Bank versus M Poomalai — Banking and Recovery | DRT (2026)

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OA No. 387/2024

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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. 387/2024

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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. M. Poomalai, S/o Muthusamy, No. 118, Middle Street, Nidhinatham, Thittagudi, Cuddalore – 606 304. --- Defendant

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

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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 Defendant has 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:

Page 1 of 8

OA No. 387/2024

JUDGEMENT

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 05.08.2024 to recover from the Defendant for a sum of Rs. 25,45,832/(i.e) (i) Rs. 12,80,651/- in Term Loan A/c No. 1702008800009223 with further interest at the rate of interest at 12.5% p.a. with Monthly rest + 2% Penal Interest and (ii) Rs. 12,65,181/in Term Loan A/c No. 170200AO00014779 with further interest at the rate of interest at 7% 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 defendant has availed Term Loan for a sum of Rs.10,00,000/- and availed another Term Loan for a sum of Rs.8,00,000/- in totalling Rs.18,00,000/-. The defendant executed necessary loaning documents in favour of the Applicant.

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(ii) Further, the applicant bank submitted that the defendant has 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 defendant has executed memorandum of deposit of title deeds on 25.04.2019 in Document No.704/2019, SRO Pennadam. The following is the detail of loan availed by the defendants.

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S. No.	Nature of loan & Account Number	Loan amount	Rate of interest	Outstanding amount as on 31.03.2024
1	Term Loan - I 170200AO00014779	Rs.10,00,000/-	12.5% p.a. + 2% P.I	Rs. 12,80,651/-
2	Term Loan - II 1702008800009223	Rs.8,00,000/-	7% p.a. + 2% P.I	Rs. 12,65,181/-
			Total	Rs. 25,45,832/-

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Page 2 of 8

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OA No. 387/2024

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(iii). Further the applicant submitted that as per the accounts of the applicant maintained in the name of the defendant 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. 25,45,832/- 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 defendant has failed to repay the loan as per the sanction ticket, as agreed, despite the repeated demands and reminders made by the Applicant Bank. The Defendant has not paid the due amount. The borrower’s loan account turned in to NPA on 30.06.2022.

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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. 25,45,832/- (i.e) (i) Rs. 12,80,651/- in Term Loan A/c No. 1702008800009223 with further interest at the rate of interest at 12.5% p.a. with Monthly rest + 2% Penal Interest and (ii) Rs. 12,65,181/- in Term Loan A/c No. 170200AO00014779 with further interest at the rate of interest at 7% 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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S. No.	Date	Description of document	Exhibits
1.	25.09.2015	Hypothecation Agreement	Ex. No. A-01
2.	30.03.2019	Loan Application	Ex. No. A-02
3.	30.03.2019	Sanction Letter	Ex. No. A-03
4.	30.03.2019	Hypothecation Agreement	Ex. No. A-04
5.	25.04.2019	MOD.Doc.No.704/2019	Ex. No. A-05
6.	11.08.2021	Balance and Security Confirmation Letter	Ex. No. A-06
7.	11.09.2023	Balance and Security Confirmation Letter	Ex. No. A-07
8.	----	Statement of Accounts	Ex. No. A-08

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Page 3 of 8

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OA No. 387/2024

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SCHEDULE OF PROPERTIES

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Mortgaged Property

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In Virudhachalam Registration District, in Pennadam Sub Registration District, in Cuddalore Revenue District, in Tittagudi Taluk, in Nithinatham & Navalur Village

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S. No	Village	Survey No.	Extent Heactare	Patta No
1.	Nithinatham	206/6	0.24.5	577
2.	Nithinatham	207/13	0.14.0	577
3.	Nithinatham	207/3	0.20.5	577
4.	Nithinatham	207/9	0.38.5	577
5.	Nithinatham	208/1	0.35.5	577
6.	Nithinatham	215/10	0.04.5	577
7.	Nithinatham	215/13	0.20.0	577
8.	Nithinatham	215/3	0.49.0	577
9.	Nithinatham	216/2	0.03.5	577
10.	Nithinatham	51/8	0.47.0	577
11.	Nithinatham	74/10A	0.02.0	577
12.	Nithinatham	74/11	0.08.5	577
13.	Nithinatham	74/1B	0.02.0	577
14.	Nithinatham	74/2B	0.03.0	577
15.	Nithinatham	74/6A	0.02.5	577
16.	Navalur	6/1	0.79.5	423

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3 . On the other hand, Notices were issued to Defendant and since from the beginning of the case, there was no representation on behalf of the Defendant. Hence, Defendant was 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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Page 4 of 8

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OA No. 387/2024

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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 defendant has availed Term Loans 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-08 in support of its claim in the OA.

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Defendant executed the Hypothecation Agreement on 25.09.2015 in favour of the Applicant Bank, which has been marked as Ex. No. A-01. Loan Application, Sanction Letter and another Hypothecation agreement dated 30.03.2019 have been marked as Ex. Nos. A-02 to A-04.

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Further, the defendant also deposited the title deed with the Applicant Bank and also executed the MOD on 25.04.2019 in Document No. 704/2019. The same has been marked as Ex. No. A-05. The Balance and Security Confirmation Letters also executed for both loans on 11.08.2021 & 11.09.2023, which have been marked as Ex. No. A-06 & A-07. Statement of Accounts for both loans have been marked as Ex. No. A-08.

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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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As the Defendant 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-08), 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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Page 5 of 8

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OA No. 387/2024

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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 Defendant, a total sum of Rs. 25,45,832/- (i.e)

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(i) Rs. 12,80,651/towards the Term Loan (A/c No. 1702008800009223) together with interest at the rate of 12.5% p.a. with half yearly rests and

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(ii) The capitalized Penal Interest component shall be deducted from the claimed outstanding Term Loan (A/c No. 170200AO00014779) amount of Rs. 12,65,181/- and the Applicant Bank shall be entitled to recover only the balance amount due after such deduction, together with interest at the rate of 7% p.a. with half yearly rests

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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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OA No. 387/2024

ORDERED

(a) That the Defendant is directed personally to pay the outstanding amount to the Applicant Bank for a sum o f Rs. 25,45,832/- (i.e)

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(i) Rs. 12,80,651/towards the Term Loan (A/c No. 1702008800009223) together with interest at the rate of 12.5% p.a. with half yearly rests and

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(ii) The capitalized Penal Interest component shall be deducted from the claimed outstanding Term Loan (A/c No. 170200AO00014779) amount of Rs. 12,65,181/- and the Applicant Bank shall be entitled to recover only the balance amount due after such deduction, together with interest at the rate of 7% p.a. with half yearly rests

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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 Defendant, 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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(c) If the sale proceeds are not sufficient, after defraying the expenses of such sale, for the payment of all such amounts, the defendant is personally 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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Page 7 of 8

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OA No. 387/2024

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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 Term Loan Facility 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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Punjab National Bank v. M Poomalai

Case brief

What is this about?

What did the court decide?

Punjab National Bank v. M Poomalai

Case brief

What is this about?

What did the court decide?

What the court decided

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