Allowed

Federal Bank v. K Karthikeyan

DRT20 May 2026OA/57/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed an application by Federal Bank Limited to recover Rs. 1.83 crore from three defendants. The court validated the bank's claim based on filed documents proving loan default, rejection of penal interest capitalization, and ordered recovery with interest and a mandate to sell properties if the sum remains unpaid.

What did the court decide?

Directed defendants to pay Rs. 1,83,62,018.05 with 13.18% p.a. interest within one month; bank may sell mortgaged properties for deficiency; Recovery Certificate to be issued.

Federal Bank versus K Karthikeyan — Banking and Recovery | DRT (2026)

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OA No. 57/2023

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 20^TH DAY OF MAY, 2026 PRESENT: SEEMA SINHA,

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

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OA No.57/2023

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Between

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The Federal Bank Limited, Tiruchirapally Branch, D.No.75E/1, Salai Road, Thillai Nagar, Tiruchirapally – 620 018. Rep. By its Branch Manager.

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---Applicant Bank

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And

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Mr. K. Karthikeyan,

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S/o Krishnamoorthy, Prop. M/s Ayyappan Trading Company, Old.No.4A, New No.11, Gurunathan Street, Tennur, Trichy – 620 017.

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Also at:

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Mr. K. Karthikeyan, S/o Krishnamoorthy, Prop. M/s Ayyappan Trading Company, D.No.1/5G, Kulumani Main Road, Near Check Post, Woraiyur, Trichy – 620 003.

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Page 1 of 11

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OA No. 57/2023

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Mr. S.P.Kamal Prabhu,

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S/o S. Periyasamy, D.No.25, Promenade Road, C-5, Sri Maya Yaha Apartment, Cantonment,

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Trichy – 620 001.

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Mrs. K. Uma Makeshwari, W/o K. Karthikeyan, Old.No.4A, New No.11, Gurunathan Street, Tennur,

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Trichy – 620 017. ---Defendants

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Counsel for the Applicant Bank : M/s R. Pandivel

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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 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:

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JUDGEMENT

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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 17.11.2022 to recover from the Defendants a sum of Rs.1,83,62,018.05p together with interest at the rate of 13.18% p.a. plus penal interest at the rate of 4%p.a. with monthly rests in respect of Cash credit facility 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:The defendants approached the Applicant Bank for availing Cash Credit Facility towards Working capital for the Sole Proprietor. The Applicant Bank has sanctioned the Cash Credit Facility to the limit of Rs.2,00,00,000/-considering the request from the defendant on 26.03.20. In consideration of the said Cash Credit Facility, the defendants have executed a Demand Promissory Note on26.03.14 for a sum of Rs.2,00,00,000/- in favour of the Applicant Bank promising to repay the

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Page 2 of 11

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OA No. 57/2023

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loan amount on demand with interest at the rate of 14.10%o per annum with monthly rests or at such other rates & rests as prescribed by applicant bank from time to time.

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In consideration of the above said Cash Credit facility, the defendants have executed an Agreement for Cash Credit on 26.03.14 for a sum of Rs.2,00,00,000/- in favour of the Applicant Bank by hypothecating the goods mentioned in the 'A' Schedule hereunder and by promising to repay the loan amount with interest at 14.10% per annum with monthly rests or at such other rates & rests as may be revised by the Applicant Bank from time to time with penal interest at the rate of 2% per annum in case of default. The penal interest applicable at present is 4% p.a.

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In order to secure the Cash Credit Facility of Rs.2,00,00,000/sanctioned the defendants 1 & 2 have created equitable mortgage by deposit of Title Deeds with an intention to create equitable mortgage over Schedule 'B' property mentioned hereunder as well as a house site measuring 0.09^1/4 cents comprised in S.No.165 situated at pandamangalam village, Srirangam Taluk, Trichy District and another house site measuring 14,704^1/2 Sq.ft comprised in S.No.303/6 situated at Egirimangalam, Mnruthandakurichi village, Srirangam Taluk, Trichy District (subsequently which were sold under SARFAESI by the bank) as Security and thereby the defendants 1 & 2 deposited their Title Deeds on 26.03.2014 with the Applicant Bank pertaining to the said properties, with an intention to create an Equitable Mortgage over the said properties. To that effect and by confirming the same, the defendants 1 & 2 executed registered memorandum of deposit of title deeds on 26.03.2014 in favour of the Applicant Bank.

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The defendants had availed the cash credit Facility as per the particulars mentioned in the Statement of Accounts maintained by the Applicant Bank in the regular course and conduct of business. The defendants by admitting and acknowledging their liabilities have executed balance confirmation letters dt.02.03.2017 & 18.01.2020 in favour of the applicant bank.

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After availing the credit facility the defendants have not repaid the loans as agreed terms 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 issued demand notice dt.12.10.2017 under section 13 (2) of the SARFAESI Act, 2002 to the defendants under the Sarfaesi Act. Even after the said demand notice the defendants have not repaid the loan amount. Hence the applicant bank after duly complying all formalities under SARFAESI Act sold

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Page 3 of 11

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OA No. 57/2023

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the said house site measuring 0.09^1/4 cents comprised in S.No.l65 situated at Pandamangalam Village, Srirangam Taluk, Trichy District and another house site measuring 14704^1/4 Sq.ft cornprised in S.No.303/6 situated at Egirimangalam, Martrthandakurichi Village, Srirangam Taluk, Trichy District for sum of Rs.1,29,50,000/- under the SARFAESI Act and issued sale certificate and the same was registered. The applicant bank further submits that the sale proceeds were adjusted & appropriated towards the loan accounts. The applicant bank further submits that even after crediting the said sale proceeds yet there is a balance loan amount payable by the defendants. Despite the repeated demands the defendants have not repaid the balance amount.

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Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs.1,83,62,018.05p together with interest at the rate of 13.18% p.a. plus penal interest at the rate of 4%p.a. with monthly rests in respect of Cash credit facility from the date of filing 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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List of Documents

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Annexure – I

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Loan Documents executed by the defendants

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S. No.	Date	Description of document	Exhibits
1	26.03.2014	Demand Promissory Note executed by the Defendants in favour of the Applicant Bank	Ex.No.A-01
2	26.03.2014	Agreement of Cash Credit executed by the Defendants in favour of the Applicant Bank	Ex.No.A-02
3	26.03.2014	Registered Memorandum of Deposit of Title Deeds executed by Defendants 1 & 2 in favour of the Applicant Bank	Ex.No.A-03
4	02.03.2017	Balance Confirmation Letter executed by the Defendants in favour of the Applicant Bank	Ex.No.A-04
5	18.01.2020	Balance Confirmation Letter executed by the Defendants in favour of the Applicant Bank	Ex.No.A-05
6	12.10.2017	Demand Notice issued by the Applicant Bank to the Defendants	Ex.No.A-06
		Statement of Accounts maintained by the
7	—	Applicant Bank in the regular course and conduct of business	Ex.No.A-07

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Page 4 of 11

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OA No. 57/2023

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List of Documents

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Annexure II

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Title deeds deposited by the 1^st defendant with regard to ‘B’ Schedule properties

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S. No.	Date	Description of document	Exhibits
8	27.09.2004	Registered Sale Deed executed by Pushpa Sivagnanam in favour of Kamal Prabhu & Karthikeyan(Doc. No. 3984/04)	Ex.No.A-08
9	28.04.2K	Registered Sale Deed executed by Thiyagaraja in favour of Pushpa Sivagnanam (Doc. No. 1281/2K)	Ex.No.A-09
10	10.03.1997	Registered Sale Deed executed by Pushpa Sivagnanam in favour of Thiyagaraja (Doc. No. 723/97)	Ex.No.A-10
11	30.04.1993	Registered Sale Deed executed by Krishnammal & Others in favour of Pushpa Sivagnanam(Doc. No. 1162/93)	Ex.No.A-11
		Registered Partition Deed entered into
12	21.04.1969	between Sri Ramalu & Others (Doc. No. 1370/69)	Ex.No.A-12

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Schedule of Properties “A" Schedule - Hypothecated Goods

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ltem No.l

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Stock of cement and steels, all goods, raw materials, etc., all stored & kept at Door No.l/5G, Kulumani Main Road, Near Check post, Woraiyur, Trichy-620 003, Trichy District

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Item No.2

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All Book Debts, Outstandings, Money Receivables, Claims and Bills due and owing to the defendants

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“B” - Schedule - Mortgage Properties Property belonging to defendants I & 2 Vide Annexure-II for title deeds

Page 5 of 11

OA No. 57/2023

Item No.l

Trichy District, Trichy Registration District, Woraiyur Sub Registration District, Trichy Taluk, Trichy Town, Big Sourashtra Street, a house site measuring East-West 10 feet both on the Northern & Southern sides and North-South 11 feet both on the Eastern & Western sides totaling 110 Sq.ft comprised in old TS.No.2l56 corresponding to new TS.No.62 within the following boundaries:

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North by : Big Sourashtra Street South by : Property in Item No.2 herein and House belonging to Sivagnanam East by : Property belonging to Sivagnanam West by : Property belonging to Jaganatha Naidu

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ltem No.2

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Trichy District, Trichy Registration District, Woraiyur Sub Registration District, Trichy Taluk, Trichy Town, Big Sourashtra Street, a house site measuring East-West 7^1/2 feet both on the Northern & Southern sides and North-South l0 feet both on the Eastern & Western sides totaling 75 Sq.ft comprised in old TS.No.2156 corresponding to new TS.No.62 within the following boundaries:

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North by : Property in Item No.l herein South by : Property in Item No.3 herein East by : Property belonging to Sivagnanam West by : Property belonging to Jaganatha Naidu

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Item No.3

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Trichy District, Trichy Registration District, Woraiyur sub Registration District, Trichy Taluk, Trichy Town, Big Sourashtra Street, a house site measuring East-West 13^1/2 feet both on the Northern & Southern sides and North-South 2l feet both on the Eastern & Western sides totaling 283^1/2 Sq.ft comprised in old TS.No.2156 corresponding to new TS.No.62 within the following boundaries:

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North by : Property in Item No.2 herein South by : Property in Item No.4 herein and Property belonging to Sivagnanam East by : Property belonging to Sivagnanam West by : Property belonging to Jaganatha Naidu

Page 6 of 11

OA No. 57/2023

Item No.4

Trichy District, Trichy Registration District, Woraiyur Sub Registration District, Trichy Taluk, Trichy Town, Big sourashtra Street, a house site measuring East-West 7^1/2 feet both on the Northern & Southem sides and North-South l0 feet both on the Eastern & Western sides totaling 75 Sq.ft comprised in old TS.No.2l56 corresponding to new TS.No.62 within the following boundaries:

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North by : Property in Item No.3 herein South by : Property in Item No.5 herein East by : Property belonging to Sivagnanam West by : Property belonging to Jaganatha Naidu

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Item No.5

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Trichy District, Trichy Registration District, Woraiyur sub Rcgistration District, Trichy Taluk, Trichy Town, Big Sourashtra Street, a house site measuring East-West 13 feet both on the Northern & Southern sides and North-South 11 feet both on the Eastern & Western sides totaling 143 Sq.ft comprised in old TS.No.2l56 corresponding to new TS.No.62 within the following boundaries:

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North by : Property in Item No.4 herein and Property belonging to Sivagnanam South by : Property in Item No.6 herein East by : Property belonging to Sivagnanam West by : Property belonging to Jaganatha Naidu

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Item No.6

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Trichy District, Trichy Registration District, Woraiyur Sub Rcgistration District, Trichy Taluk, Trichy Town, Big sourashtra Street, a house site measuring East-west 13 feet both on the Northern & Southern sides and North-South 8 feet both on the Eastern & western sides totaling 104 Sq.ft comprised in old TS.No.2l56 corresponding to new TS.No.62 within the following boundaries:

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North by : Property in Item No.5 herein South by : Property in Item No.7 herein East by : Property belonging to Sivagnanam West by : Property belonging to Jaganatha Naidu

Page 7 of 11

OA No. 57/2023

Item No.7

Trichy District, Trichy Registration District, Woraiyur Sub Rcgistration District, Trichy Taluk, Trichy Town, Big sourashtra Street, a house site measuring East-west 9 feet both on the Northern & Southern sides and North-South 11 feet both on the Eastern & western sides totaling 99 Sq.ft comprised in old TS.No.2l56 corresponding to new TS.No.62 within the following boundaries:

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North by : Property in Item No.6 herein South by : Property in Item No.8 herein East by : Property belonging to Sivagnanam West by : Property belonging to Jaganatha Naidu

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Item No.8

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Trichy District, Trichy Registration District, Woraiyur Sub Registration District, Trichy Taluk, Trichy Town, Big sourashtra street, a house site measuring East-West 7 feet both on the Northern & Southern sides and North-South 9 feet both on the Eastern & Western sides totaling 63 Sq.ft comprised in old TS.No.2l56 corresponding to new TS.No.62 within the fbllowing boundaries:

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North by : Property in Item No.7 herein South by : Property in Bellea Krishnasamy Chettiar East by : Property belonging to Sivagnanam West by : Property belonging to Jaganatha Naidu Item Nos.l to 8 all totaling 952^1/2 Sq.ft and buildings constructed thereon bearing Door No.47A.

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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.

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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 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. Gowtham. C, who is the Associate Vice President & Branch Head Manager of the Applicant Bank.

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Page 8 of 11

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OA No. 57/2023

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He has stated in his affidavit that the defendants has availed Cash Credit Facility 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-12 in support of its claim in the OA.

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The Demand Promissory Note executed by the Defendants in favour of the Applicant Bank has been marked as Ex.No.A-01, Agreement of Cash Credit executed by the Defendants in favour of the Applicant Bank has been marked as Ex.No.A-02, Registered Memorandum of Deposit of Title Deeds executed by Defendants 1 & 2 in favour of the Applicant Bank has been marked as Ex.No.A-03, Balance Confirmation Letter executed by the Defendants in favour of the Applicant Bank has been marked as Ex.No.A-04, Balance Confirmation Letter executed by the Defendants in favour of the Applicant Bank has been marked as Ex.No.A-05, Demand Notice issued by the Applicant Bank to the Defendants has been marked as Ex.No.A-06.

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The Statement of Accounts maintained by the Applicant Bank in the regular course and conduct of business has been marked as Ex.No.A-07, Registered Sale Deed executed by Pushpa Sivagnanam in favour of Kamal Prabhu & Karthikeyan (Doc. No. 3984/04) has been marked as Ex.No.A-08, Registered Sale Deed executed by Thiyagaraja in favour of Pushpa Sivagnanam (Doc. No. 1281/2002) has been marked as Ex.No.A-09, Registered Sale Deed executed by Pushpa Sivagnanam in favour of Thiyagaraja (Doc. No. 723/97) has been marked as Ex.No.A-10, Registered Sale Deed executed by Krishnammal & Others in favour of Pushpa Sivagnanam (Doc. No. 1162/93) has been marked as Ex.No.A-11, and Registered Partition Deed entered into between Sri Ramalu & Others (Doc. No. 1370/69) has been marked as Ex.No.A-12. 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 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.

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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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Page 9 of 11

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OA No. 57/2023

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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 Defendants, a sum of Rs.1,83,62,018.05p together with interest at the rate of 13.18% p.a. with half yearly rests in respect of Cash credit facility 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 Defendants are directed to pay jointly/severally a sum of Rs.1,83,62,018.05p together with interest at the rate of 13.18% p.a. with half yearly rests in respect of Cash credit facility 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.

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(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.

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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 defendants are jointly/severally liable to pay the amount of such deficiency with interest mentioned above until realization.

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Page 10 of 11

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OA No. 57/2023

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(d) Any amount remitted during the course of this proceedings shall

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be given due credit, to the loan account of the defendants.

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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 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 T.P, taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 20^th May, 2026.

Sd/- (SEEMA SINHA)

PRESIDING OFFICER

Uploaded on 29.05.26

Page 11 of 11

Federal Bank v. K Karthikeyan

Case brief

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What did the court decide?

Federal Bank v. K Karthikeyan

Case brief

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