Allowed

Canara Bank v. Abinaya

DRT5 Jan 2026OA/682/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed an application filed by Canara Bank to recover Rs. 71,18,637.84 plus interest from a borrower who defaulted on term loans and cash credits. The court rejected the capitalization of penal interest as contrary to public policy but granted the principal amount with specific interest rates.

What did the court decide?

Directed the defendant to pay Rs. 71,18,637.84 plus interest at specified rates; authorized sale of hypothecated properties in case of default; ordered preparation of a Recovery Certificate.

Canara Bank versus Abinaya — Banking and Recovery | DRT (2026)

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OA No. 682/2022

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 05^TH DAY OF JANUARY, 2026 PRESENT: SEEMA SINHA, [PR. DISTRICT & SESSIONS JUDGE – Retd] PRESIDING OFFICER

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OA No.682/2022

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Between

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Canara Bank, Vasantha Nagar Branch, 21, Madurai Road, Madurai. Rep. By its Senior Manager. ---Applicant Bank

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And

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Ms. Abinaya, D/o Muthuvel, Prop. Sri Angala Eshwari Steel Industries, No.4, Periyar Nagar 2^nd Street, Madakulam, Madurai – 625 003. ---Defendant

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Counsel for the Applicant Bank : M/s C. Deepak, M. Vengatesh, S. Nowsath Ali, M. Chandraekar

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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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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

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Page 1 of 7

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OA No. 682/2022

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on 30.08.2022 to recover from the Defendant a total sum of Rs.71,18,637.84p i.e., (i) Rs.28,72,278.84p together with interest at the rate of 11.95% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Term Loan and (ii) Rs.42,46,359/- together with interest at the rate of 11.15% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of open Cash Credit 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 had approached the Applicant Bank with an Application form to avail loan under micro small & medium enterprises (MSEs) on 2.1.2021 and the applicant bank had sanctioned the said loan to the tune of Rs.30,00,000/- on 6.1.2021 with rate of interest fixed at 9.052%p.a. and the repayment of loan amount should be in 57 months.

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In consideration of loan facilities, the defendant had executed the agreement cum deed of hypothecation, the deed of hypothecation Re: Machinery, letter of undertaking, letter of proprietorship on 6.1.2021 and the defendant had executed the link letter be obtained from the existing borrower/guarantor who is opting for repo linked lending rate to (RLLR) for repayment/running limit on 6.1.2021.

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Again the defendant had applied another loan and the applicant bank had sanctioned the same to the tune of Rs.40,00,000-/- on 19.3.2021 with rate of interest fixed at 9.15% and the repayment of loan amount is tenable from the one year of date of sanction

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In consideration of loan facilities, the defendant had executed the cash credit agreement on 19.3.2021 and the defendant had executed the request for overdraft facilities, common hypothecation agreement, the letter of undertaking, the letter of proprietorship, Pro-Note. The link letter to be obtained from the existing borrower/guarantor who is opting for repo linked lending rate (RLLR) for repayment/running limit on 19.3.2021

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After availing the loan amount, the Defendant was not regular in repaying the loan and consequently defaulted in repayment as promised to the Applicant. The Applicant bank was insisting for repayment of loan amount and Defendant had evade from repaying and the Loan became NPA on 29.5.2022. 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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Page 2 of 7

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OA No. 682/2022

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Despite repeated demands and reminders, made by the Applicant Bank, the Defendant had failed and neglected to repay and adjust her liability. Hence, the Applicant Bank has filed the OA for recovery of a total sum of Rs.71,18,637.84p i.e., (i) Rs.28,72,278.84p together with interest at the rate of 11.95% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of Term Loan and (ii) Rs.42,46,359/- together with interest at the rate of 11.15% p.a. with monthly rests plus penal interest at the rate of 2%p.a. in respect of open Cash Credit 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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S. No.	Date	Description of document	Exhibits
1	02.01.2021	Application form for loans to micro small & medium enterprises(MSES)	Ex.No.A-01
2	06.01.2021	Sanction Memorandum	Ex.No.A-02
3	06.01.2021	Agreement cum deed of hypothecation	Ex.No.A-03
4	06.01.2021	Deed of hypothecation Re:Machinery	Ex.No.A-04
5	06.01.2021	Letter of undertaking	Ex.No.A-05
6	06.01.2021	Letter of Proprietorship	Ex.No.A-06
7	06.01.2021	Link letter to be obtained from the existing borrower/guarantor who is opting for repo linked lending rate (RLLR) for repayment/runninglimit	Ex.No.A-07
8	19.03.2021	Sanction communication	Ex.No.A-08
9	19.03.2021	Cash credit agreement	Ex.No.A-09
10	19.03.2021	Request facilities for overdraft	Ex.No.A-10
11	19.03.2021	Common hypothecation agreement	Ex.No.A-11
12	19.03.2021	Letter of undertaking	Ex.No.A-12
13	19.03.2021	Letter of Proprietorship	Ex.No.A-13
14	19.03.2021	Pro-Note	Ex.No.A-14
15	19.03.2021	Link letter to be obtained from the existing borrower/guarantor who is opting for repo linked lending rate (RLLR) for repayment/runninglimit	Ex.No.A-15
16	----	Statement of accounts maintained by applicant bank in regular course and conduct of business	Ex.No.A-16

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Page 3 of 7

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OA No. 682/2022

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SCHEDULE OF PROPERTIES

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"A" SCHEDULE - HYPOTHECATION

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Hypothecation of CNC Hydraulic Press Brake

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Section Straightening Machine

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Hydraulic Ironworker

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Welding Machine

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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. M. Sathish, who is the Senior Manager of the Applicant Bank.

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He has stated in his affidavit that the defendant has availed Term Loan and Cash Credit from the Applicant Bank, but she failed to pay the outstanding loan amount, hence he has filed the case. The applicant bank has also filed the documents given by the defendant at the time of sanctioning the loan amount, which have been marked as exhibits No.A-01 to A-16 in support of its claim in the OA.

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The Application form for loans to micro small & medium enterprises (MSES) has been marked as Ex.No.A-01, Sanction Memorandum has been marked as Ex.No.A-02, Agreement cum deed of hypothecation has been marked as Ex.No.A-03, Deed of hypothecation Re:Machinery has been marked as Ex.No.A-04, Letter of undertaking has been marked as Ex.No.A05, Letter of Proprietorship has been marked as Ex.No.A-06, Link letter to be obtained from the existing borrower/guarantor who is opting for repo linked lending rate (RLLR) for repayment/running limit has been marked as Ex.No.A-07, Sanction communication has been marked as Ex.No.A-08, Cash credit agreement has been marked as Ex.No.A-09, Request facilities for overdraft has been marked as Ex.No.A-10.

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Page 4 of 7

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OA No. 682/2022

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The Common hypothecation agreement has been marked as Ex.No.A11, Letter of undertaking has been marked as Ex.No.A-12, Letter of Proprietorship has been marked as Ex.No.A-13, Pro-Note has been marked as Ex.No.A-14, Link letter to be obtained from the existing borrower/guarantor who is opting for repo linked lending rate (RLLR) for repayment/running limit has been marked as Ex.No.A-15, Statement of accounts maintained by applicant bank in regular course and conduct of business has been marked as Ex.No.A-16. 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 total sum of Rs.71,18,637.84p i.e., (i) Rs.28,72,278.84p together with interest at the rate of 11.95% p.a. with half yearly rests in respect of Term Loan and (ii) Rs.42,46,359/- together with interest at the rate of 11.15% p.a. with half yearly rests in respect of open Cash Credit from the date of filing of Application till the date of realization with cost. Accordingly, it is hereby

Page 5 of 7

OA No. 682/2022

ORDERED

(a) That the Defendants are directed to pay jointly/severally a total sum of Rs.71,18,637.84p i.e., (i) Rs.28,72,278.84p together with interest at the rate of 11.95% p.a. with half yearly rests in respect of Term Loan and (ii) Rs.42,46,359/- together with interest at the rate of 11.15% p.a. with half yearly rests in respect of open Cash Credit 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 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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Page 6 of 7

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OA No. 682/2022

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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 Term loan and Cash Credit 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 05^th January, 2026.

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Sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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uploaded on 12.01.26

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Canara Bank v. Abinaya

Case brief

What is this about?

What did the court decide?

Canara Bank v. Abinaya

Case brief

What is this about?

What did the court decide?

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