Allowed

State Bank of India v. T Manimala

DRT3 Aug 2026OA/531/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed the Applicant Bank's Original Application. The court directed the Defendant to pay the outstanding dues totaling Rs.53,99,775/-, with the specific direction to deduct capitalized penal interest from the cash credit account in accordance with RBI guidelines.

What did the court decide?

Direct the Defendant to pay Rs.53,99,775/- (deducting capitalized penal interest from CC) plus interest; grant liberty to sell mortgaged properties upon default.

State Bank of India versus T Manimala — Contract and Commercial Disputes | DRT (2026)

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OA No. 531/2022

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Fair Order

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

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

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OA No.531/2022

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Between

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State Bank of India, Siruthozhil Branch, 1^st Floor, Dharma Building, 185, Madurai Road, Aruppukottai, Virudhunagar District, Rep. by its Chief Manager. ---Applicant Bank

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And

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Mrs. T. Manimala, W/o. R. Thangapandian, Old No. 12, New No. 33, Vellaichamy Kothanar Street, Big Street, Aruppukottai, Virudhunagar District - 626 101.

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Also residing at

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Mrs. T. Manimala, W/o. R. Thangapandian, No. 194, Madurai Road, Aruppukottai, Virudhunagar District - 626 101. ---Defendant

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Counsel for the Applicant Bank : M/s A. Rangarajan.

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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 7

OA No. 531/2022

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 27.05.2022 to recover from the Defendant a total sum of Rs.53,99,775/i.e., i) Rs. 14,10,729/- together with subsequent interest at the rate of 10.65% p.a. with monthly rests in respect of Cash Credit ii) Rs. 38,85,705/together with subsequent interest at the rate of 9.90% p.a. with monthly rests in respect of WCTL iii) Rs. 1,03,341/- together with subsequent interest at the rate of 9.90% p.a. with monthly rests in respect of FITL 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.

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

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The defendant is the sole proprietrix of 'Queens Natchiyar Food Park' doing business in Food Items. Being its sole proprietor she is looking after the affairs of the said business. For running up of the said business, the defendant applied for a Cash Credit Limit of Rs. 45,00,000/- from the applicant bank. The defendant agreed to hypothecate all the stocks and receivables in her business establishment. The applicant Bank, on the strength of the hypothecation of stocks and receivables has sanctioned the said CC limit of Rs. 45,00,000/- on 27.02.2018 to the defendant. The defendant availed of the said CC facility of Rs. 45,00,000/- after executing the following documents infavour of the applicant bank on 27.02.2018

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1. Letter of Arrangement dt. 27.02.2018

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1. Agreement of Loan cum Hypothecation dt. 27.02.2018.

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As per the arrangement letter dated 27.02.2018 the credit facility is repayable on demand subject to annual review. The applicant bank submits that the defendants agreed to repay the loan amount together with an interest at the rate of 3% above MCLR, which was at the time of agreement at 7.95% p.a. and the effective rate at the time of agreement being at 10.95% p.a. with monthly rests. Further the defendant agreed to pay the interest as and when the Applicant Bank changed its rate of interest from time to time. The present rate of interest is at 10.65% p.a. at monthly rests.

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The defendants did not adhere to the terms and conditions of the agreement. Whenever the officials demanded the repayment of the loan amount the defendants gave evasive replies. There after the applicant bank sent a notice dated 14.10.2019 to the defendant requesting her to submit necessary documents and conduct the loan account periodically. She has

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Page 2 of 7

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OA No. 531/2022

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received it and after the receipt of the said notice she has requested the Applicant Bank to 'Restructure' her loan account by sending a request letter dated 03.11.2020. There after the Bank also restructured the existing loan as CC and WCTL and also sanction an additional facility of Rs. 94,000/- as FITL. By acknowledging and for availing the above said facilities, the defendant has executed a Letter of Arrangement dated 27.11.2020 and also executed a Supplemental Agreement of Loan -cum- Hypothecation dated 27.11.2020. As per the new agreement, the credit facilities have to be paid in installments as mentioned in the said Supplemental Agreement.

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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. Hence the applicant bank has sent a notice dated 13.07.2021 requesting her to remit the irregular amount immediately. Even after the receipt of it she did not respond to the request of the applicant Bank. She has not shown any inclination to settle the loan account. So, the applicant Bank has sent a legal notice to the defendant to both address mentioned above. But she has manipulated to return it as 'Unclaimed. Even after the legal notices, there is no response from the defendant. The attitude of the defendant will clearly shows that she has no inclination to settle the loan account with the applicant Bank. The defendants did not operate the loan account properly and became defaulter. Hence, the Applicant bank is constrained to file this application for recovery of the dues from the defendant.

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As per statements of accounts, for CC A/c. No. 37564204828, a sum of Rs. 14,10,729/- as on 25.05.2022 is found to be due and payable by the defendant with subsequent interest at the rate of 10.65% p.a. together with other charges and expenses. As per statement of account, for WCTL A/c, No. 39833905992, a sum of Rs. 38,85,705/-as on 25.05.2022 is found to be due and payable by the defendant with subsequent interest at the rate of 9.90% p.a. together with other charges and expenses. As per statement of account, for FITL A/c. No. 39833907003, a sum of Rs. 1,03,341/- as on 25.05.2022 is found to be due and payable by the defendant with subsequent interest at the rate of 9.90% p.a. together with other charges and expenses. Thus the defendant has to pay, a sum of Rs. 53,99,775/- as on 25.05.2022 together with subsequent interest with contractual rate of interest with monthly rests.

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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 total sum of Rs.53,99,775/- i.e., i) Rs. 14,10,729/- together with subsequent interest at the rate of 10.65% p.a. with monthly rests in respect of Cash Credit ii) Rs. 38,85,705/- together with subsequent interest at the rate of 9.90% p.a. with monthly rests in respect of WCTL iii) Rs. 1,03,341/together with subsequent interest at the rate of 9.90% p.a. with monthly rests in respect of FITL from the date of filing of Application till the date of realization with cost.

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Page 3 of 7

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OA No. 531/2022

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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.	27.02.2018	Letter of Arrangement	Ex. No. A-01
2.	27.02.2018	Agreement of Loan cum Hypothecation	Ex. No. A-02
3.	14.10.2019	Notice sent to the defendant(office copy)	Ex. No. A-03
4.	03.11.2020	Request letter for Reconstruction of loan	Ex. No. A-04
5.	27.11.2020	Letter of Arrangement	Ex. No. A-05
6.	27.11.2020	Supplemental Agreement of Loan cum Hypothecation	Ex. No. A-06
7.	13.07.2021	Notice to the defendant	Ex. No. A-07
8.	29.04.2022	Statement of Accounts	Ex. No. A-08

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Schedule of properties

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Stocks and Receivables

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3 . On the other hand, Notice was 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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Having gone through the affidavit of the applicant and the documents filed by him 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. A. Vijayakumar, who is the Chief Manager of the Applicant Bank.

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He has stated in his affidavit that the defendant has availed Cash Credit, WCTL & FITL from the Applicant Bank, but the defendant failed to pay the outstanding loan amount, hence he has filed the case. The applicant bank has also filed the documents signed by the defendant at the time of sanctioning the loan amount, which have been marked as exhibits No. A-01 to A-08 in support of its claim in the OA.

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I perused the documents filed by the Applicant Bank and I find that The Letter of Arrangement has been marked as Ex. No. A-01, Agreement of Loan cum Hypothecation has been marked as Ex. No. A-02, office copy of the notice sent to the defendant has been marked as Ex. No. A-03, Request

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Page 4 of 7

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OA No. 531/2022

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Letter for Reconstruction of Loan has been marked as Ex. No. A-04, Letter of Arrangement has been marked as Ex. No. A-05, Supplemental Agreement of Loan cum Hypothecation has been marked as Ex. No. A-06, Notice to the Defendant has been marked as Ex. No. A-07, and the Statement of Accounts has been marked as Ex. No. A-08. 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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On the other hand 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 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.

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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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Page 5 of 7

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OA No. 531/2022

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The Applicant Bank is entitled to recover from the Defendant, a total sum of Rs.53,99,775/- i.e.,

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i) Amount arrived after deduction of capitalized penal interest included in the cash credit outstanding amount of Rs. 14,10,729/- till before the filing of the Original Application, together with subsequent interest at the rate of 10.65% p.a. with half yearly rests and

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ii) Rs. 38,85,705/- together with subsequent interest at the rate of 9.90% p.a. with half yearly rests in respect of WCTL and

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iii) Rs. 1,03,341/- together with subsequent interest at the rate of 9.90% p.a. with half yearly rests in respect of FITL from the date of filing of Application till the date of realization with cost. Accordingly, it is hereby

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ORDERED

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(a) That the Defendant is directed to pay personally for a total sum of Rs.53,99,775/- i.e.,

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ii) Rs. 38,85,705/- together with subsequent interest at the rate of 9.90% p.a. with half yearly rests in respect of WCTL and

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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 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.

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Page 6 of 7

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OA No. 531/2022

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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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(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, WCTL & FITL 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 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.

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Sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 07.08.2026

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State Bank of India v. T Manimala

Case brief

What is this about?

What did the court decide?

State Bank of India v. T Manimala

Case brief

What is this about?

What did the court decide?

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