Allowed

Canara Bank v. Bhagyalakshmi Borewell Agency

DRT12 Jun 2026OA/969/2022

Case brief

AI extract

What is this about?

The Tribunal allowed the Original Application filed by Canara Bank for execution of a loan. It held that while sale proceeds of hypothecated vehicles were realized, the Defendant failed to prove that levied interest and charges were illegal or contrary to contractual terms. Consequently, the Tribunal issued a Recovery Certificate for the principal amount plus simple future interest.

What did the court decide?

Recovery Certificate issued for Rs. 1,71,03,975/- with future interest at 8.00% p.a. (simple); further recovery from personal assets and hypothecated schedule property.

Canara Bank versus Bhagyalakshmi Borewell Agency — Banking and Recovery | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL II, BENGALURU

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Dated this 12^th Day of June, 2026

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Present: Sri. T. RAJESH Presiding Officer OA.No. 969/2022

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BETWEEN:

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Canara Bank, Kanakapura Branch, Rep. by its GPA Holder,

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…APPLICANT

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AND:

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M/s. Bhagya Lakshmi Borewell Agency, Dombaradoddi, Kottgalu P. O., Harohally Hobli, Kanakapura Tq., Karnataka. Rep. by its Prop. C. R. Munishetty,

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...DEFENDANT

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Counsel on record/appeared for:

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Applicant : K. Vijendra Rao Defendant : Shrividya V

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FINAL ORDER

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The present Original Application in short “OA” has been filed under section 19 of Recovery of Debts and Bankruptcy Act 1993 seeking issuance of Recovery Certificate for Rs. 1,71,03,975.80 (Rupees one crore seventyone lakh three thousand nine hundred seventy-five and paisa eighty only) with further interest thereon and cost from the Defendant.

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It is the case of the Applicant that the Defendant availed a Term Loan of Rs. 143.00 lakhs under the OSL MSME Synd Vyapar Scheme of the

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OA 969/2022

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erstwhile Syndicate Bank. The total project cost was assessed at Rs. 180.53 lakhs. In consideration of the said credit facility, the Defendant executed a Composite Hypothecation Agreement and other necessary loan documents in favour of the Applicant Bank. Subsequently, at the request of the Defendant, the Applicant restructured the credit facility in accordance with the policy formulated by the Reserve Bank of India and as per its internal Circular dated 28.01.2019, whereby the outstanding loan limit was restructured and fixed at Rs. 137.31 lakhs. The Defendant agreed to abide by the terms and conditions of the restructured facility and executed the requisite documents in that regard.

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It is also the case of the Applicant that, in consideration of the aforesaid loan facility, the Defendant executed the necessary loan documents in favour of the Applicant Bank, including the loan application, quotations, Composite Hypothecation Agreement, and such other documents as required by the Applicant. The Defendant further created a charge by way of hypothecation over the movable assets described in the Schedule Property as security. Despite availing the credit facility, agreeing with the Terms and Conditions for the loans, failed in complying with the same, resulting in defaults and consequentially turning the loan accounts as Non-Performing Asset (NPA).

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In the above circumstances, the applicant approached this Tribunal by filing this OA seeking issuance of Recovery Certificate for the amount due in the accounts.

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OA 969/2022

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Summons were duly issued and served upon all the Defendants. Pursuant thereto, the Defendants appeared through their learned counsel, filed their Written Statement, and adduced evidence in support of their defence.

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The Applicant examined AW-1, who filed a proof affidavit reiterating the averments made in the OA and produced Exhibits A-1 to A-20, while the Defendant examined DW-1, who filed a proof affidavit and produced Exhibits D-1 and D-7, all of which were marked in evidence.

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In the Written Statement as well as in the affidavit of evidence filed by the Defendants, it is contended that the Defendants had applied for a loan of Rs. 143.00 lakhs and, after making an initial contribution/deposit of Rs. 38.00 lakhs towards the project cost, the loan was sanctioned and disbursed between 12.03.2018 and 22.06.2018, aggregating to a sum of Rs. 1,42,61,593/- (Rupees One Crore Forty-Two Lakhs Sixty-One Thousand Five Hundred and Ninety-Three Only). It is further contended that the vehicles forming part of the hypothecated Schedule Property were sold in a public auction conducted on 05.10.2022, pursuant to which a sum of Rs. 72,76,500/- (Rupees Seventy-Two Lakhs Seventy-Six Thousand Five Hundred Only) was realized. The auction notice has been marked as Ext. D6 and the statement of account has been marked as Ext. D1. The Defendants further contend that the interest, penal interest, and other charges levied by the Applicant Bank on the loan account are exorbitant, arbitrary, unfair, and illegal, and are therefore liable to be disallowed.

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OA 969/2022

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Heard for both side and considered the contentions as taken in the OA in the light of documentary evidence and the proof affidavits.

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The following issues arise for consideration in the light of pleading and evidence:

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i) Whether the applicant succeeded in proving the OA claim as against the Defendant?

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ii) If so, to what extent?

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Both these issues are gone into and decided together.

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Upon consideration of the pleadings, oral evidence, and documentary evidence on record, this Tribunal finds that the sale of the hypothecated vehicles through public auction and the realization of sale proceeds therefrom stand substantiated by the records produced by the Defendants, including Ext. D6 and D1. The said fact is also not seriously disputed by the Applicant. However, the challenge to the interest, penal interest, and other charges levied in the loan account cannot be accepted in the absence of any cogent evidence demonstrating that such charges were imposed contrary to the contractual terms governing the loan transaction or in violation of any statutory or regulatory provisions. The Defendants have failed to place on record any material warranting interference with the Applicant's calculation of interest and other charges. Accordingly, the contention regarding the alleged illegality or arbitrariness of the interest and charges is rejected.

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OA 969/2022

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The Applicant Bank has produced the relevant loan documents, account statements, and other supporting records, which have been marked as Exhibits A1 to A20, establishing the sanction and disbursement of the loan facility, execution of the security documents, and the liability arising thereunder. The Defendant have also led evidence and produced documents in support of their defence. However, except to the extent of establishing the sale of the hypothecated vehicles and realization of the sale proceeds therefrom, the evidence adduced by the Defendants does not effectively dislodge or rebut the Applicant's claim. The documents produced by the Applicant are admissible in evidence and sufficiently substantiate the claim made in the OA. The OA has been filed within the prescribed period of limitation, and there is no material on record to indicate any impermissible capitalization of penal interest. Accordingly, the loan documents and account records produced by the Applicant are adequate to establish the availment of the loan facility and the consequent liability of the Defendant.

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Hence in view of the above findings this Tribunal comes to the conclusion that the OA is liable to be allowed.

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Taking into consideration the fact that the loan is availed by the Defendants for business purpose and also the fact that OA claim is arrived at by calculating interest at the agreed rate, pendente lite and future interest is awarded at 8.00% (simple). The prayer for interest with monthly rests and for penal interest for the future period is hereby declined.

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OA 969/2022

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In the result, OA.No.969/2022, is allowed,

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i) The Applicant is allowed to recover an aggregate sum of Rs.

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1,71,03,975/- (Rupees one crore seventy-one lakh three thousand nine

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hundred and seventy five only) along with pendente lite and future interest of 8.00% p.a. (simple), from the date of filing of the OA till the realization, from the Defendant personally after giving due credit to all amounts recovered and received during the pendency of the OA, including the sale proceeds, if any, realized from the auction of the hypothecated movable assets; and in the event the Schedule Property has not been sold, the Applicant shall be at liberty to proceed against the same in accordance with law. The said amount shall be recoverable from the Defendant personally and against its other assets in accordance with law. The Schedule Property described in the OA, to the extent it remains available and has not already been sold or otherwise appropriated, shall form part of the Recovery Certificate, and a Recovery Certificate shall be issued accordingly.

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ii) The Applicant bank is allowed cost of the proceedings for which Applicant to file cost memo within seven days from the date of receipt of the order.

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iii) The Recovery Certificate to be drawn in terms of this order and transferred to Recovery for execution.

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OA 969/2022

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iv) Interim application pending, if any, stands disposed of in terms

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of this final order.

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15. Communicate a copy of the order to the parties concerned in terms

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of Section 19(21)(i) of the RDB Act, read with Rule 16 of DRT (Procedure)

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Rules, 1993.

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(Dictated to PY directly on the Computer, after its transcription, corrected and pronounced by me in the open Court on this the 12^th day of June, 2026)

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Sd/-

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(T. RAJESH) PRESIDING OFFICER

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ANNEXURES

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WITNESSES EXAMINED FOR THE APPLICANT BANK:

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AW-1: Shekar, Sr Manager, of Applicant Bank.

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Exhibits on the part of the Applicant:

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Exhibit Nos.	Date	Particulars of Documents
A1	16.03.2018	Loan Application
A2	12.03.2018	Sanction letter
A3	27.03.2018	Composite hypothecation agreement
A4	20.04.2018	Receipt
A5	03.05.2018	Confirmation of Delivery of machine
A6	09.05.2018	Receipt
A7	21.05.2018	Receipt
A8	22.05.2018	Confirmation delivery of machinery/ Vehicle
A9	22.05.2018	Confirmation delivery of machinery/ Vehicle
A10	22.05.2018	Confirmation delivery of machinery/ Vehicle
A11	30.05.2018	Confirmation delivery of machinery/ Vehicle

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OA 969/2022

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A12	30.05.2018	Confirmation delivery of machinery/ Vehicle
A13	21.06.2018	Receipt
A14	23.06.2018	Confirmation delivery of machinery/ Vehicle
A15	29.11.2019	Sanction letter
A16	06.02.2020	Agreement of restructuring of loan
A17	08.07.2020	Recall notice
A18	10.02.2021	Letter of Revival
A19	10.05.2022	Statement of account
A20	--	Certificate under Banker’s Book evidence act

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Witness Examined for the Defendants:

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DW -1: C R Munishetty, Proprietor of Defendant No.1

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List of Documents Exhibited for the Defendants:

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Exhibit Nos.	Date	Particulars of Documents
D1	--	Loan letter & Bank statement
D2	--	Death certificate of son
D3	--	Death certificate of father
D4	--	Seizure notice
D5	--	Letter of consent of sale
A6	--	Vehicle auction notice
A7	--	Bank statement of CGTMSE Refund

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Sd/(T. RAJESH) PRESIDING OFFICER

Canara Bank v. Bhagyalakshmi Borewell Agency

Case brief

What is this about?

What did the court decide?

Canara Bank v. Bhagyalakshmi Borewell Agency

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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Case details

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