Allowed

Canara Bank v. M Venkatesh

DRT3 Jun 2026OA/638/2022

Case brief

AI extract

What is this about?

The Tribunal allowed the Original Application filed by Canara Bank for recovery of an MSME loan defaulting by a borrower. The Court held the documents proved the claim and awarded the principal amount with interest, while directing that penal interest cannot be capitalized.

What did the court decide?

Applicant directed to recover Rs.20,63,534.62p plus interest at 10.05% p.a. with half yearly rests from the date of application, with liberty to sell mortgaged properties.

Canara Bank versus M Venkatesh — Contract and Commercial Disputes | DRT (2026)

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OA No. 638/2022

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 03^rd DAY OF JUNE, 2026 PRESENT: SEEMA SINHA, [PR. DISTRICT & SESSIONS JUDGE – Retd] PRESIDING OFFICER

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OA No.638/2022

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Between

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Canara Bank, St Rita’s Convent Branch, 77/13, St Rita’s Convent Complex, Ramanputhur Junction, Nagercoil- 629 002 Kanyakumari District Rep. by its Branch Manager. ---Applicant Bank

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And

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Mr M Venkatesh S/o Manikaraj 59A, Periyavilai, Nagercoil Kanyakumari District-629 002 ---- Defendant

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Counsel for the Applicant Bank : M/s C Deepak, M Vengatesh , M Chandrasekar

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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 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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OA No. 638/2022

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 21.07.2022 to recover from the Defendant a sum of Rs.20,63,534.62p together with interest at the rate of 13.05% p.a. with monthly rests plus penal interest at the rate of 2 % p.a in respect of MSME 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.

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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 has approached the applicant bank and applied Loan for micro and small enterprises (MSEs) on 27.01.2014 and the applicant has sanctioned the loan to the tune of Rs.9,80,000/- as an MSME loan with the Rate of interest fixed at 10.35%. That in consideration of loan facilities, that the defendant has executed the agreement cum deed of hypothecation on 27.01.2014 and the defendant has executed the acknowledgement of debt and security on 03.10.2019 and 19.01.2022.

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After receiving the loan amount from the applicant, the Defendant was not regular in repaying the loan and consequently defaulted in repayment as promised to the Applicant bank. The Applicant bank was insisting for repayment of loan amount and Defendant have been giving one reason or other to evade from repaying and the Loan has become NPA on 26.08.2015 and that the defendant did not adhere to the terms of repayment despite demands. In spite of several demands made by the Applicant, the defendant failed and neglected to settle the amount.

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Hence, the Applicant Bank has filed the OA for recovery of a sum of Rs.20,63,534.62p together with interest at the rate of 13.05% p.a. with monthly rests plus penal interest at the rate of 2 % p.a in respect of MSME loan 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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Sl. No.	Date	Description	Exhibit No.

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Page 2 of 6

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OA No. 638/2022

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1	27.01.2014	^{Application form for Loans to Micro & Small} Enterprises (MSEs)	Ex. No. A-01
2	27.01.2014	Sanction	Ex. No. A-02
3	27.01.2014	Agreement cum Deed of Hypothecation	Ex. No. A-03
4	03.10.2019	Acknowledgement of Debt Security	Ex. No. A-04
5	19.01.2022	Acknowledgement of Debt Security	Ex. No. A-05
6	-----	Statement of Accounts Maintained by the applicant bank in regular course and conduct of business	Ex. No. A-06

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SCHEDULE OF PROPERTIES

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“A” SCHEDULE - HYPOTHECATION

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Hypothecation of Machineries

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3 . On the other hand, Notices were 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 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 V Deepak Bright , who is the Senior Manager of the Applicant Bank.

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He has stated in his affidavit that the defendant has availed MSME Loan from the Applicant Bank, but they failed to pay the outstanding loan amount, hence he has filed this 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-06 in support of its claim in the OA.

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The Applicant Bank relies upon the following documents in support of its claim and also I scrutinized the documents filed by the bank and the Application Form for Loans to Micro & Small Enterprises (MSEs) dated 27.01.2014 marked as Ex. No. A-01; the Sanction Letter dated 27.01.2014

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Page 3 of 6

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OA No. 638/2022

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marked as Ex. No. A-02; the Agreement-cum-Deed of Hypothecation dated 27.01.2014 marked as Ex. No. A-03; the Acknowledgement of Debt Security dated 03.10.2019 marked as Ex. No. A-04; the Acknowledgement of Debt Security dated 19.01.2022 marked as Ex. No. A-05; and the Statement of Accounts maintained by the Applicant Bank in the regular course and conduct of business marked as Ex. No. A-06. These documents collectively evidence the sanction and disbursement of the loan, the creation of security, the acknowledgment of liability by the borrower, and the outstanding dues claimed by the Applicant Bank. 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 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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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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The Applicant Bank is entitled to recover from the Defendant , a sum of Rs.20,63,534.62p together with interest at the rate of 10.05% p.a.(as per Exhibit No.A-06) with half yearly rests in respect of MSME 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. 638/2022

ORDERED

(a) That the Defendant is directed to pay a sum of Rs.20,63,534.62p together with interest at the rate of 10.05% p.a. with half yearly rests in respect of MSME 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.

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

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OA No. 638/2022

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prepare the recovery certificate with cost for the MSME 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.

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Dictated to P N, taken down, transcribed, typed by him, corrected and pronounced by me in the Open Court in this the 03^rd June, 2026.

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Sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 20.06.26

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Canara Bank v. M Venkatesh

Case brief

What is this about?

What did the court decide?

Canara Bank v. M Venkatesh

Case brief

What is this about?

What did the court decide?

What the court decided

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