Partly allowed

Punjab National Bank v. Sai Poly Clininc

DRT6 Aug 2026OA/49/2024

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed the applicant bank's application for recovery of a term loan from defendants who failed to repay. The tribunal noted that capitalized penal interest violated RBI guidelines and Supreme Court law, ordering the deduction of such interest before calculating the final recovery amount and awarding pendent lite interest.

What did the court decide?

Directing defendants to pay the outstanding loan amount after deducting capitalized penal interest, plus interest at 12% p.a. with half-yearly rests and costs.

Punjab National Bank versus Sai Poly Clininc — Banking and Recovery | DRT (2026)

¶1

OA No.49/2024

¶2

Fair Order

¶3

IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 06^TH DAY OF AUGUST, 2026 PRESENT: SEEMA SINHA,

¶4

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

¶5

OA No.49/2024

¶6

Between

¶7

Punjab National Bank Represented by its Chief Manager, Circle SASTRA Trichy, Circle Office, Kailasapuram, Trichy-620 014. ….. Applicant Bank

¶8

And

¶9

M/s. Sai Poly Clinic Proprietor: M.Hariharan No.10, Rengasamy Complex, Vayalur Main Road, Rettaivaikkal Bus Stop, Trichy-620102.

¶10

M.Hariharan S/o.Murugadass, No.11, Gandhisalai, 3^rd Street, Kailash Nagar, Trichy-620019.

¶11

G.Sai Prasath S/o.Gunasekaran No.3, Keela New Paikkara Street, Woraiyur, Trichy-620003. ….. Defendants

¶12

Counsel for the Applicant Bank : M/s K. Ramesh & Co.

¶13

Page 1 of 5

¶14

OA No.49/2024

¶15

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:-

¶16

JUDGEMENT

¶17

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 29.12.2023 to recover from the Defendants for a sum of Rs.24,49,508.87/together with interest at the rate of 12% p.a. + 2% P.I with monthly rests in respect of Term 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.

¶18

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

¶19

The defendants approached the Applicant Bank for financial assistance for business activities. After due consideration, the Applicant Bank accepted the request of the defendants and sanctioned the Term Loan of Rs.18,00,000/- after executing necessary documents in favour of the Applicant Bank. The defendants agreed to repay the loan together with interest at the rate of 12% p.a. + 2% P.I with compounded Half Yearly rests together with costs and charges. Further, the defendants also agreed to pay interest as and when it is changed from time to time by the Applicant Bank. 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. The 1^st defendant represented by 2^nd 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.

¶20

Despite repeated demands and reminders, made by the Applicant Bank, the Defendants have failed and neglected to repay and adjust their liability

¶21

Page 2 of 5

¶22

OA No.49/2024

¶23

and the loan account turned in to NPA on 30.06.2019. Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs.24,49,508.87/- together with interest at the rate of 12% p.a. + 2% P.I with monthly rests in respect of Term Loan from the date of Application till the date of realization with cost.

¶24

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

¶25

S. No.	Date	Description of document	Exhibits
1.	14.11.2018	Loan Application	Ex.No.A-1
2.	---	Letter of Sanction	Ex.No.A-2
3.	14.11.2018	Agreement of Hypothecation of Assets to Secure Term Loans	Ex.No.A-3
4.	14.11.2018	Agreement of Guarantee	Ex.No.A-4
5.	25.11.2021	Balance and Security confirmation letter	Ex.No.A-5
6.		Statement of Accounts	Ex.No.A-6

¶26

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.

¶27

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?

¶28

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.

¶29

He has stated in his affidavit that the defendants have availed Term 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 signed by the defendants at the time of sanctioning the loan amount, which have been marked as exhibits No.A-01 to A-06 in support of its claim in the OA.

¶30

Page 3 of 5

¶31

OA No.49/2024

¶32

The loan application has been marked as Ex.No.A-01, Letter of Sanction as Ex.No.A-02, Agreement of Hypothecation of Assets to Secure Term Loans as Ex.No.A-03, Agreement of Guarantee as Ex.No.A-04, Balance and Security confirmation letter as Ex.No.A-05 and Statement of Accounts as Ex.No.A-06. So the averments of the applicant as well as the statement of the pleading have been corroborated by the above mentioned documents.

¶33

In this OA, from perusal of statement of Accounts Ex.No.A-06, I find that the applicant bank has capitalized the penal interest in the loan account of the defendant, which is against the policy of the Reserve Bank of India guidelines.

¶34

“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”.

¶35

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.

¶36

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).

¶37

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,

¶38

Page 4 of 5

¶39

OA No.49/2024

¶40

cannot be claimed on the amount of penal interest. Penal interest cannot be capitalized. It will be opposed to public policy ".

¶41

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

¶42

The capitalized penal interest component shall be deducted from the claimed outstanding Term Loan amount of Rs.2 4,49,508.87 /- and the Applicant Bank shall be entitled to recover only the balance amount due after such deduction, together with interest at the rate of 12% p.a. with halfyearly rests from the date of filing of the Application till the date of realization with costs. A ccordingly, it is hereby

¶43

ORDERED

¶44

(a) That the D efendants are directed to pay jointly/severally to the Applicant Bank the outstanding amount due under the Term Loan after deducting the capitalized penal interest component from the claimed amount of Rs.2 4,49,508.87 /-, together with interest at the rate of 12% p.a. with halfyearly rests from the date of filing of the Application till the date of realization with costs within one month from the date of receipt of this order.

¶45

(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.

¶46

(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 Term 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.

¶47

Dictated to P.P, taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 06^th August, 2026.

¶48

(SEEMA SINHA) PRESIDING OFFICER

¶49

Uploaded on 12.08.2026

¶50

Page 5 of 5

Punjab National Bank v. Sai Poly Clininc

Case brief

What is this about?

What did the court decide?

Punjab National Bank v. Sai Poly Clininc

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

Karur Vysya Bank versus Mangaiyarkarasi M

Punjab National Bank versus N Madhurajadhithan

South Indian Bank versus St Marys Associates

Canara Bank versus Raja

P Malairaj versus Canara Bank

Karur Vysya Bank versus P Alagarsamy