Allowed

Karur Vysya Bank v. Umadevi

DRT3 Aug 2026OA/468/2023

Case brief

AI extract

What is this about?

Debts Recovery Tribunal, Madurai allowed an Original Application filed by Karur Vysya Bank Limited against two defendants for recovery of a housing loan balance of Rs. 55,93,566.89. The Tribunal held that non-capitalization of penal interest was in accordance with RBI guidelines and reserved powers to adjust the same.

What did the court decide?

Released an order directing respondents to pay Rs. 55,93,566.89 after deducting capitalized penal interest, along with subsequent interest at 8.60% p.a. and costs.

Karur Vysya Bank versus Umadevi — Banking and Recovery | DRT (2026)

¶1

OA No. 468/2023

¶2

Fair Order

¶3

IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 3^rd DAY OF AUGUST, 2026 PRESENT: SEEMA SINHA,

¶4

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

¶5

OA No.468/2023

¶6

Between

¶7

The Karur Vysya Bank Limited Asset Recovery Branch RS. No.170/9, Uthankudi Village, Near Mattuthavani Bus Stand, Madurai District, represented by its Senior Manager.

¶8

---Applicant Bank

¶9

And

¶10

Tmt.S.Umadevi, S/o RA Sadhasivam, Door No.A7-4C, Vasanthamaligai, 80 Feet Road,

¶11

K.K. Nagar, Madurai, Madurai District-625 020

¶12

Thiru.RA. Sadhasivam S/o Ramachandran, Door No.A7-4C, Vasanthamaligai, 80 Feet Road, K.K.Ngar, Madurai, Madurai District-625 020

¶13

---Defendants

¶14

Counsel for the Applicant Bank : M/s R. Pandivel, S. Iniyan Karthik.

¶15

Page 1 of 6

¶16

OA No. 468/2023

¶17

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:

¶18

JUDGEMENT

¶19

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 28.06.2023 to recover from the Defendants a sum of Rs.55,93,566.89/together with subsequent interest at the rate of 8.60% p.a. with monthly rests plus 3% penal interest in respect of Housing 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.

¶20

2 . The brief averments of the application filed by the Applicant Bank are as follows:-

¶21

The defendants approached the applicant bank for availing Housing Loan. The applicant bank has also sanctioned the said Housing Loan for a sum of Rs.1,00,00,000/-. The Applicant Bank submits that the terms of sanction along with terms & conditions were communicated to the defendants by the applicant bank through its sanction letter dt.21.08.17 and the same was duly accepted by defendants by counter signing the same on 21.08.17.

¶22

In consideration of the above said Housing Loan, the defendants executed a Demand Promissory Note on 21.08.17 for a sum of Rs.1,00,00,000/- in favour of the Applicant Bank promising to repay the loan amount on demand with interest at the rate of 9.35% per annum with monthly rest or at such other rates as may be revised by the Applicant Bank from time to time. The Applicant Bank submits that in consideration of the said Housing Loan, the defendants have executed Housing Loan Agreement on 21.08.17 in favour of the Applicant Bank and by promising to repay the loan in 300 monthly installments of Rs.86,329.24 with interest at the rate of 9.35% per annum with monthly rests or at such other rates or rest as may be revised by the applicant bank from time to time with penal interest at the rate of 2% p.a in case of default.

¶23

Page 2 of 6

¶24

OA No. 468/2023

¶25

The 1^st defendant offered her properties as security for the above said loan and thereby she deposited her Title Deeds on 21.08.17 with the Applicant Bank's Anna Nagar Branch pertaining to her properties with an intention to create an Equitable Mortgage over the said properties. To evidence the said fact as well as by confirming the same, the 1^st defendant executed Registered Memorandum of Deposit of title deeds dt.28.12.17 pertaining to her properties in favour of the Applicant Bank. The Applicant Bank submits that by admitting & acknowledging their liabilities, the defendants executed a revival letter dt. 15.07.2020 in favour of the applicant bank.

¶26

After availing the loan, defendants were not regular in the matter of repayment. The defendants made several promises, but they failed to keep up their promises. Thus the defendants have committed default in repaying the loan amount with interest & costs. Hence the Applicant Bank issued demand notice on 25.10.18. Even after the receipt of the said notice the defendants have not repaid the loan amount. Hence the applicant bank sold the mortgage properties under the Sarfaesi Act and thereby the sale proceeds were adjusted & appropriated towards the loan account. After crediting the sale proceeds, yet there is a balance amount to be payable by the defendants. As per the statement of account maintained by the Applicant Bank, the defendants have to pay a sum of Rs.55,93,566.89 as on 21.05.23.

¶27

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 sum of Rs.55,93,566.89/- together with subsequent interest at the rate of 8.60% p.a. with monthly rests plus 3% penal interest in respect of Housing Loan from the date of filing of Application till the date of realization with cost.

¶28

The Applicant Bank has submitted the following documents in support its claim in the OA, which are as follows:

¶29

S. No.	Date	Description of document	Exhibits
1.	21.08.17	Sanction Letter along with Terms & Conditions countersigned by the Defendants in favour of the Applicant Bank	Ex. No. A-01
2.	21.08.17	Demand Promissory Note executed by the Defendantsin favouroftheApplicantBank	Ex. No. A-02
3.	21.08.17	Housing Loan Agreement executed by the Defendants in favour of the Applicant Bank	Ex. No. A-03

¶30

Page 3 of 6

¶31

OA No. 468/2023

¶32

4.	28.12.17	Registered Memorandum of Deposit of Title Deeds executed by the 1^stDefendant in favour of the Applicant Bank(Doc. No. 2216/2017)	Ex. No. A-04
5.	05.07.20	Revival Letter executed by the Defendants in favour of the Applicant Bank	Ex. No. A-05
6.	25.10.18	Demand Notice issued by the Applicant Bank to the Defendants	Ex. No. A-06
		Statement of Accounts maintained by the	Ex. No. A-07
7.	—	Applicant Bank in the regular course and conduct of its business

¶33

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.

¶34

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?

¶35

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. S. Dhandapani, who is the Chief Manager of the Applicant Bank.

¶36

He has stated in his affidavit that the defendants has availed Housing Loan 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-07 in support of its claim in the OA.

¶37

I perused the documents filed by the Applicant Bank and I find that The Sanction Letter along with the Terms & Conditions countersigned by the Defendants in favour of the Applicant Bank has been marked as Ex.No.A-01, The Demand Promissory Note executed by the Defendants in favour of the Applicant Bank has been marked as Ex. No. A-02, The Housing Loan Agreement executed by the Defendants in favour of the Applicant Bank has been marked as Ex. No. A-03, The Registered Memorandum of Deposit of Title Deeds executed by the 1^st Defendant in favour of the Applicant Bank (Document No. 2216/2017) has been marked as Ex. No. A-04.

¶38

The Revival Letter executed by the Defendants in favour of the Applicant Bank has been marked as Ex. No. A-05, The Demand Notice issued by the Applicant Bank to the Defendants has been marked as Ex. No. A-06, The Statement of Accounts maintained by the Applicant Bank in the

¶39

Page 4 of 6

¶40

OA No. 468/2023

¶41

regular course and conduct of its business has been marked as Ex.No. A-07. So the averments of the applicant as well as the statement of the pleading have been corroborated by the above mentioned documents.

¶42

On the otherhand 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.

¶43

In this OA, from perusal of Statement of Accounts (Ex. No. A-07), I find that the Applicant Bank has capitalized the penal interest only in the Cash Credit Loan account of the defendant, which is against the policy of RBI guidelines.

¶44

“ 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.”

¶45

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).

¶46

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 ".

¶47

Therefore, this Original Application is allowed . The Applicant Bank is entitled for a final order on the following lines:-

¶48

The Applicant Bank is entitled to recover from the Defendants, a sum of Rs.55,93,566.89ps ( after deduction of the capitalized penal interest from the outstanding amount i.e Rs. 55,93,566.89ps till before the filing of the Original Application ) together with subsequent interest at the rate of 8.60% p.a. with half yearly rests in respect of Housing Loan from the date of filing of Application till the date of realization with cost. Accordingly, it is hereby

Page 5 of 6

OA No. 468/2023

ORDERED

(a) That the Defendants are directed to pay jointly/severally for a sum of Rs.55,93,566.89ps ( after deduction of the capitalized penal interest from the outstanding amount i.e Rs. 55,93,566.89ps till before the filing of the Original Application ) together with subsequent interest at the rate of 8.60% p.a. with half yearly rests in respect of Housing 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.

¶53

(b) 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.

¶54

(c) 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 Housing 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.

¶55

Dictated to P. Sharmila, LDC, taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 3^rd August, 2026.

¶56

Sd/- (SEEMA SINHA) PRESIDING OFFICER

¶57

Uploaded on 07.08.2026

¶58

Page 6 of 6

Karur Vysya Bank v. Umadevi

Case brief

What is this about?

What did the court decide?

Karur Vysya Bank v. Umadevi

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

A Vasakar versus Canara Bank

Karur Vysya Bank versus Elangovan

Sri Ramakrishna Tabovanam versus Indian Bank

Punjab National Bank versus K Banumathy

State Bank of India versus T Manimala

Babu versus Aptus Finance India Private Limited