Recovery Tribunal allowed the bank's original application for recovery of disputed cash credit loan. Defendants failed to file written statement. Court permitted pendente lite interest and awarded specific repayment order.
Recovery of Rs.36,34,526/- plus interest at 10.50% p.a. with half yearly rests from date of filing; direction to sell properties if needed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
OA No. 395/2023
Fair Order
IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 05th DAY OF AUGUST, 2026 PRESENT: SEEMA SINHA, [PR. DISTRICT & SESSIONS JUDGE – Retd] PRESIDING OFFICER
OA No.395/2023
Between
The Karur Vysya Bank Limited, Asset Recovery Branch, RS.No.170/9, Mattuthavani-Melur Road, Near Mattuthavani Bus Stand, Madurai- 625 107 Rep. by its Senior Manager. ---Applicant Bank
And
Counsel for the Applicant Bank : M/s. P.Madhan Alexandar, P.Priyadharshini & S.Dhanapandian Counsel for the Defendants : M/s. A.B.Jeeva, P.Karthickraja & P.Swathi
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OA No. 395/2023
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 Counsel for the Defendants D-1 & D-2 made appearance and filed Vakalat. After that, the defendants have not filed written statement in spite of sufficient opportunity given to them. Hence they were debarred from filing written statement. 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:
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 01.04.2023 to recover from the Defendants a sum of Rs.36,34,526/- together with subsequent interest at the rate of 19.50 % p.a. with monthly rests plus penal interest at the rate of 3 % p.a. in respect of Cash Credit Loan 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.
2 . The brief averments of the application filed by the Applicant Bank are as follows: -
The defendants approached the Applicant Bank for availing Open Cash Credit Facility for their business. The Applicant Bank has also sanctioned the said facility initially to the limit of Rs.7,50,000/- and subsequently enhanced to the limit of Rs.10,00,000/-
CASH CREDIT FACILITY
The Applicant Bank submits that in consideration of the said facility the letter of sanction along with terms & conditions were communicated to the defendants by the applicant bank through its sanction letter dt.17.06.13 and the same was duly accepted by the defendants by counter signing the same on 17.06.13. In consideration of the said facility the 1st defendant has executed a Demand Promissory Note on 17.06.13 for a sum of Rs.7,50,000/in favour of the Applicant Bank by promising to repay the loan amount on demand with interest at the rate of 14.75% Per annum with monthly rest or at such other rates & rests as may be revised by the Applicant Bank from time to time.
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The 1st defendant has executed Cash Credit Agreement & Credit Facility Agreement dt.17.06.13 in favour of the Applicant Bank.The 1st defendant has executed Agreements of Hypothecation for Cash Credit & Agreement of Hypothecation of Current Assets 17.06.13 for a sum of Rs.7,50,000/-in favour of the Applicant Bank containing various terms & conditions by hypothecating the goods & stocks and other accessories & implements which are fully described in the 'A'.
The 2nd defendant agreed to stand as continuing guarantor for the repayment of the said loan with interest & costs thereon and executed an Agreement of guarantee dt.17.06.13 in favour of the Applicant Bank. The 1st defendant has executed Letter of Continuity dt. 17.06.13 in favour of the Applicant Bank stating that the agreement & documents of the above said facility will be in addition to the documents executed already by the defendants.
ENHANCEMENT OF CASH CREDIT FACILITY
At the request of the 1st defendant, the applicant bank has enhanced the said Cash Credit facility from Rs.7,50,000/- to Rs. 10,00,000/-. In consideration of the said facility the letter of sanction along with terms & conditions were communicated to the defendants by the applicant bank through its sanction letter dt.30.05.14 and the same was duly accepted by the defendants by counter signing the same on 30.05.14. The 1st defendant has executed a Demand Promissory Note on 30.05.14 for a sum of Rs.10,00,000/- in favour of the Applicant Bank.
The 1st defendant has executed Cash Credit Agreement & Credit Facility Agreement dt.30.05.14 in favour of the Applicant Bank. The 1st defendant has executed Agreement of Hypothecation of Current Assets 30.05.14 for a sum of Rs.10,00,000/- in favour of the Applicant Bank containing various terms & conditions by hypothecating the goods & stocks and other accessories & implements which are fully described in the 'A' Schedule.
The 2nd defendant agreed to stand as continuing guarantor for the repayment of the said loan with interest & costs thereon and executed an Agreement of guarantee dt.30.05.14 in favour of the Applicant Bank. The 1st defendant has executed Letter of Continuity & Link Document dt.30.05.14 in favour of the Applicant Bank stating that the agreement & documents of the above said facility will be in addition to the documents executed already by the defendants. The 1st defendant has executed Supplemental Agreement for Enhancement dt.30.05.14 in favour of the Applicant Bank by hypothecating the goods mentioned in the 'A' Schedule hereunder and by promising to repay the loan with interest at the rate of 15% per annum with monthly rests or at
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such other rates or rest as may be revised by the applicant bank from time to time
The 1st defendant by admitting & acknowledging his liabilities has made payments on 01.06.16 and executed revival letter to acknowledge the debt dt.10.05.19 & 20.05.22 in favour of the applicant bank.
The 1st defendant has offered her property which is fully mentioned in the "B" Schedule hereunder as Security and thereby 1st defendant has deposited/re-depoisted her Title deeds on 17.06.13 & 30.05.14 with the applicant bank pertaining to her property, with an intention to create an equitable mortgage over the said property. The 1st defendant has executed two registered memorandum of deposit of title deeds dt.17.06.13 & 30.05.14 pertaining to the said property in favour of the applicant bank.
The defendants have not repaid the loans as agreed and promised by them. Thus the defendants have committed default in repaying the loan amount with interest & costs. Despite repeated demands made by the Applicant Bank the defendants did not take any sincere steps to discharge the loan.
Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs.36,34,526/- together with subsequent interest at the rate of 19.50 % p.a. with monthly rests plus penal interest at the rate of 3 % p.a. in respect of Cash Credit Loan from the date of filing of Application till the date of realization with cost.
The Applicant Bank has submitted the following documents in support its claim in the OA, which are as follows:
List of Documents
| Sl. No. |
Date | Particulars | Exhibit No. |
|---|---|---|---|
| 1. | 17.06.2013 | Sanction Letter along with terms & conditions countersigned by the defendants in favouroftheApplicantBank |
Ex. No. A-01 |
| 2. | 17.06.2013 | Demand Promissory Note executed by the 1st Defendant in favour of the Applicant Bank |
Ex. No. A-02 |
| 3. | 17.06.2013 | Cash Credit Agreement executed by the 1st Defendantin favouroftheApplicantBank |
Ex. No. A-03 |
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OA No. 395/2023
| 4. | 17.06.2013 | Credit Facility Agreement executed by the 1st Defendant in favour of the Applicant Bank |
Ex. No. A-04 |
|---|---|---|---|
| 5. | 17.06.2013 | Hypothecation for Cash Credit executed by the 1st Defendant in favour of the Applicant Bank |
Ex. No. A-05 |
| 6. | 17.06.2013 | Deed of Hypothecation of Current Assets executed by the 1st Defendant in favour of theApplicantBank |
Ex. No. A-06 |
| 7. | 17.06.2013 | Guarantee Agreement executed by the 2nd Defendantin favouroftheApplicantBank |
Ex. No. A-07 |
| 8. | 17.06.2013 | Letter of Continuity executed by the 1st Defendantin favouroftheApplicantBank |
Ex. No. A-08 |
| 9. | 30.05.2014 | Sanction Letter along with terms & conditions countersigned by the defendants in favouroftheApplicantBank |
Ex. No. A-09 |
| 10. | 30.05.2014 | Demand Promissory Note executed by the 1st Defendant in favour of the Applicant Bank |
Ex. No. A-10 |
| 11. | 30.05.2014 | Cash Credit Agreement executed by the 1st Defendantin favouroftheApplicantBank |
Ex. No. A-11 |
| 12. | 30.05.2014 | Credit Facility Agreement executed by the 1st Defendant in favour of the Applicant Bank |
Ex. No. A-12 |
| 13. | 30.05.2014 | Hypothecation for Cash Credit executed by the 1st Defendant in favour of the Applicant Bank |
Ex. No. A-13 |
| 14. | 30.05.2014 | Deed of Hypothecation of Current Assets executed by the 1st Defendant in favour of theApplicantBank |
Ex. No. A-14 |
| 15. | 30.05.2014 | Guarantee Agreement executed by the 2nd Defendantin favouroftheApplicantBank |
Ex. No. A-15 |
| 16. | 30.05.2014 | Letter of Continuity executed by the 1st Defendantin favouroftheApplicantBank |
Ex. No. A-16 |
| 17. | 30.05.2014 | Link Document executed by the 1st Defendantin favouroftheApplicantBank |
Ex. No. A-17 |
| 18. | 10.05.2019 | Revival Letter executed by the 1st Defendant in favouroftheApplicantBank |
Ex. No. A-18 |
| 19. | 29.05.2022 | Revival Letter executed by the 1st Defendant in favouroftheApplicantBank |
Ex. No. A-19 |
| 20. | — | Statement of Accounts maintained by the Applicant Bank in the regular course of business |
Ex. No. A-20 |
| 21. | 17.06.2013 | Registered Memorandum of Deposit of Title Deeds executed by the 1st Defendant in favour of the Applicant Bank (Doc. No. 2322/2013) |
Ex. No. A-21 |
| 22. | 30.05.2014 | Registered Memorandum of Deposit of Title Deeds executed by the 1st Defendant in favour of the Applicant Bank (Doc. No. 1894/2014) |
Ex. No. A-22 |
| 23. | 07.01.1982 | Registered Sale Deed executed by Sri Chinnasamy in favour of Rosammal (Doc. No. 22/1982) |
Ex. No. A-23 |
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OA No. 395/2023
| 24. 02.09.1987 | Registered Sale Deed executed by Rosammal in favour of Santhanam (Doc. No. 1685/1987) |
Ex. No. A-24 |
|---|---|---|
| 25. 12.10.1987 | Registered Sale Deed executed by Santhanam in favour of Parvathi (Doc. No. 1890/1987) |
Ex. No. A-25 |
| 26. 25.03.2013 | Registered Sale Deed executed by Sri Perumal & Others in favour of Mangaiyarkarasi(Doc.No.1315/2013) |
Ex. No. A-26 |
| 27. 01.10.2012 | Death Certificate of Parvathy issued by VAO, Vandalai Koodalur Village |
Ex. No. A-27 |
| 28. 07.11.2012 | Legal Heir Certificate of Parvathy issued by theTahsildar,Lalgudi Taluk |
Ex. No. A-28 |
SCHEDULE OF PROPERTIES
‘A’ SCHEDULE - HYPOTHECATED GOODS
Item No. 1
All stocks of raw materials, goods-in-process, all finished & manufactured goods, all stored & kept at Door No.652, New Colony, North Neikuppai, Lalgudi Taluk, Trichy District - 621 111.
Item No. 2
All the Hypothecated Book Debts, Outstandings, Money Receivables, Claims and Bills due owing to the 1st defendant.
‘B’ SCHEDULE - MORTGAGED PROPERTIES
(Property belonging to 1st Defendant vide Annexure-I for the title deeds)
Tiruchirapalli District, Ariyalur Registration District, Lalgudi Sub Registry, Lalgudi Taluk, Angarai Village, a house site measuring East-West 36 feet both on the Northern & Southern sides & North-South 36 ¼ feet both on the Eastern & Western sides totaling 1,308 Sq.ft comprised in S.No.35/1 with all easementary rights thereon within the following boundaries
On the North : Property belonged to Sri Rathinasamy On the East : North-South Street On the South : Property belonged to Sri Lourdu On the West : Property belonged to Sri Muthaiyan
3 . On the other hand, Notices were issued to Defendants and the Counsel for the Defendants D-1 & D-2 made appearance and filed Vakalat. After that, the defendants have not filed written statement in spite of sufficient opportunity given to them. Hence they were debarred from filing written statement.
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OA No. 395/2023
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?
He has stated in his affidavit that the defendants have availed Cash Credit Loan from the Applicant Bank, but they failed to pay the outstanding loan amount, hence she has filed the case. The applicant bank has also filed the documents signed by the defendants at the time of sanctioning the loan amount, which have been marked as exhibits No.A-01 to A-28 in support of its claim in the OA.
I scrutinized the document filed by the applicant bank and I find that the Applicant Bank produced and marked the following documents as exhibits: the Sanction Letter dated 17.06.2013 along with the terms and conditions countersigned by the defendants was marked as Ex. A-01; the Demand Promissory Note dated 17.06.2013 was marked as Ex. A-02; the Cash Credit Agreement dated 17.06.2013 was marked as Ex. A-03; the Credit Facility Agreement dated 17.06.2013 was marked as Ex. A-04; the Hypothecation for Cash Credit dated 17.06.2013 was marked as Ex. A-05; the Deed of Hypothecation of Current Assets dated 17.06.2013 was marked as Ex. A-06; the Guarantee Agreement dated 17.06.2013 executed by the 2nd Defendant was marked as Ex. A-07; the Letter of Continuity dated 17.06.2013 was marked as Ex. A-08; the Sanction Letter dated 30.05.2014 along with the terms and conditions countersigned by the defendants was marked as Ex. A- 09; the Demand Promissory Note dated 30.05.2014 was marked as Ex. A-10; the Cash Credit Agreement dated 30.05.2014 was marked as Ex. A-11; the Credit Facility Agreement dated 30.05.2014 was marked as Ex. A-12; the Hypothecation for Cash Credit dated 30.05.2014 was marked as Ex. A-13; the Deed of Hypothecation of Current Assets dated 30.05.2014 was marked as Ex. A-14; the Guarantee Agreement dated 30.05.2014 executed by the 2nd Defendant was marked as Ex. A-15; the Letter of Continuity dated 30.05.2014 was marked as Ex. A-16; the Link Document dated 30.05.2014 was marked as Ex. A-17; the Revival Letter dated 10.05.2019 was marked as Ex. A-18; the Revival Letter dated 29.05.2022 was marked as Ex. A-19; the Statement of Accounts maintained by the Applicant Bank in the regular course of business was marked as Ex. A-20; the Registered Memorandum of Deposit of Title Deeds dated 17.06.2013 (Document No. 2322/2013) was marked as Ex. A- 21; the Registered Memorandum of Deposit of Title Deeds dated 30.05.2014 (Document No. 1894/2014) was marked as Ex. A-22; the Registered Sale Deed dated 07.01.1982 executed by Sri Chinnasamy in favour of Rosammal (Document No. 22/1982) was marked as Ex. A-23; the Registered Sale Deed dated 02.09.1987 executed by Rosammal in favour of Santhanam (Document
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No. 1685/1987) was marked as Ex. A-24; the Registered Sale Deed dated 12.10.1987 executed by Santhanam in favour of Parvathi (Document No. 1890/1987) was marked as Ex. A-25; the Registered Sale Deed dated 25.03.2013 executed by Sri Perumal and Others in favour of Mangaiyarkarasi (Document No. 1315/2013) was marked as Ex. A-26; the Death Certificate of Parvathy dated 01.10.2012 issued by the VAO, Vandalai Koodalur Village was marked as Ex. A-27; and the Legal Heir Certificate of Parvathy dated 07.11.2012 issued by the Tahsildar, Lalgudi Taluk was marked as Ex. A-28. So the averments of the applicant as well as the statement of the pleading have been corroborated by the above mentioned documents.
As the Defendants did not filed written statement, 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.
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).
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 ".
Therefore, this Original Application is allowed . The Applicant Bank is entitled for a final order on the following lines: -
The Applicant Bank is entitled to recover from the Defendants, a sum of Rs.36,34,526/- together with interest at the rate of 10.50 % p.a. with half yearly rests in respect of Cash Credit Loan from the date of filing of Application till the date of realization with cost. Accordingly, it is hereby
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OA No. 395/2023
ORDERED
(a) That the Defendants are directed to pay jointly/severally a sum of Rs.36,34,526/- together with interest at the rate of 10.50 % p.a. with half yearly rests in respect of Cash Credit Loan from the date of filing of Application till the date of realization with cost within one month from the date of receipt of this order.
(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.
(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.
(d) Any amount remitted during the course of this proceedings shall be given due credit, to the loan account of the defendants.
(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 Cash Credit 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.
Dictated to P N, taken down, transcribed, typed by him, corrected and pronounced by me in the Open Court in this the 05th August, 2026.
Sd/- (SEEMA SINHA) PRESIDING OFFICER
Uploaded on 12.08.2026
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3 issues framed by the court
Whether the applicant bank has proved its claim for recovery of dues based on filed documents in the absence of a written statement by defendants?
What is the rate of interest the tribunal is empowered to award for pendente lite interest depriving penal interest carving?
Whether the application for recovery of loan with interest and costs should be allowed?
Colour shows how this judgement treated each authority
N.M. Veerapa Vs Canara BankExplained¶65
N.M. Veerapa Vs Canara Bank (reported in AIR 98(1), 1101)
Central bank of India Vs Ravindra and OSExplained¶65
Central bank of India Vs Ravindra and OS (AIR, 2001(1), 3095) · Who else cites this
1 provisions across 1 enactments
The Karur Vysya Bank Limited
Mrs. Mangaiyarkarasi
Mr. A. Mathiyalagan
Seema Sinha
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
