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Canara Bank V/S Subhagya Agro Tech. Pvt. Ltd.

    O.A. No. 124 of 2000

    Decided On, 04 March 2002

    At, Debt Recovery Appellate Tribunal At Allahabad



Judgment Text

1. Under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 this original application No. 124 of 2000 has been filed against the defendant Nos. 1 to 5 for realization of Rs. 1,00,94,872.27 (Rs. one crore ninety-four thousand eight hundred seventy-two and paise twenty-seven) only together with interest pendente life and future thereon @ 18.50% per annum with quarterly rests. The applicant-Bank prays in this petition that the recovery of the said amount after selling of the hypothecated and mortgaged properties of the defendants. The applicant-Bank further claims for the costs of the application.

2. The facts of the case as contained in the application are that the applicant-Bank is a body corporate duly constituted under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. Mr. R.N. Prasad is the Senior Manager of the applicant-Bank is authorized to sign, verify and institute all legal proceedings on behalf of the applicant-Bank.

3. The defendant Nos. 2 to 5 are Directors and Guarantors of defendant No. 1 that is a Private Limited Company. Defendant No. 2 of the defendant No. 1 approached the applicant-Bank and requested for O.C.C. (Hypothecation) limit and Term Loan (ML) for infrastructures development, purchase of machineries and equipments. The applicant-Bank considered on their loan proposal and advanced Rs. 6.00 lakhs by way of O.C.C. (Hypothecation) and a Term Loan (ML) of Rs. 39.50 together with interest @ 17.75% per annum compounded quarterly and 15.5% per annum with half yearly rests respectively. These defendants provided security in order to due repayment of the Banks dues by executing some security documents in favour of the applicant-Bank on 30.01.1996 :

A Demand Promissory note for a sum of Rs. 6.00 lakhs promising to pay the same on demand together with interest @ 5.75% per annum above the R.B.I. rate with a minimum of 17.75% per compounded quarterly (Exhibit A/2); A letter of request for overdraft facilities (Exhibit A/3);
Cash Credit Agreement whereby it was agreed that an account styled cash credit account is opened/shall be opened in the books of the Bank under the style of defendant No. 1 (Exhibit A/4).

4. The defendants opened a open cash credit limit account in the name of defendant No. 1 in order to keep an account of the limit availed by it and of payments made towards liquidation of the outstanding dues. The applicant-Bank has accordingly maintained an open cash credit account in regular course of business. The defendant Nos. 2, 3, 4 and 5 jointly and severally guaranteed the due repayment of the advances to the extent of Rs. 50.00 lakhs (Exhibit A/5 to Exhibit A/8) to this application.

5. It is stated that the said term loan (ML) was repayable in 25 equal quarterly instalments of Rs. 58 lakhs each along with interest commission, cost, charges etc., agreed rate of interest was 15.5% per annum with half yearly rest and in the event of default in payment of any instalment as per terms stipulated the defendant Nos. 1 to 5 shall be liable to pay interest overdue @ 2% per annum over and above the agreed rate. In order to secure the Term Loan (ML) the defendant No. 2 executed Memorandum of Agreement on 22.03.1995, Minutes of Meeting of Board of Directors of defendant No. 1 and registered mortgage under Section 132 of Companies Act (Exhibit-A/9 to Exhibit A/11) to this application. And further defeated an equitable mortgage in respect of their immovable properties in favour of the applicant-Bank on 22.03.1995 and 27.03.1995. The details of these properties narrated at pages 13 to 15 as also Exhibit A/12 and Exhibit A/13 to this application.

6. It is further stated that the defendants availed the Term Loan (ML) facility and Open Cash Credit Facility but they failed to maintain satisfactory account and they did not adhere to financial discipline. On 6.10.1997 and 28.11.1997 the defendants acknowledged their debts. The applicant-Bank had been asking them from time to time to bring your account in order but the defendants did not respond to it. Ultimately the applicant-Bank sent a legal notice on 17.03.1998 calling them to liquidate the outstanding dues. But they did not pay single farthing against their outstanding amount. Hence this application filed before the Tribunal for recovery of Rs. 1,00,94,872.26 (Rs. one crore ninety-four thousand eight hundred seventy two and paise twenty six) only together with interest pendente life and future @ 18.50% per annum with quarterly rests.

7. Notice served upon the defendants through postal service and subsequently paper publication was made against the defendant Nos. 1, 2 and 3 calling them to file show cause along with evidence as to why the case of the applicant-Bank be now allowed. In response to notice, the defendant Nos. 4 and 5 appeared and sought time for filing reply by 08.01.2001 when they could not filed their reply upto 08.01.2001, then in the interest of justice the defendant were afforded another opportunity on the condition that they will deposit a sum of Rs. 5.00 lakhs with the applicant-Bank before the date fixed and file the receipt. The amount so deposited shall be adjusted in the final recovery certificate if issued against them. But they did not comply the order of the Tribunal. Therefore, the case was taken up for ex pane hearing against all the defendants.

8. Heard the Learned Counsel for the applicant-Bank and perused the relevant documents available on the records. It appears from the records and oral argument of the applicant-Bank, the case of the applicant-Bank is established. An Affidavit sworn by Mr. Chandra Sekharan an officer of the applicant-Bank has been filed. In the affidavit Mr. Sekharan has stated that he is well acquainted with the facts of the case. He also submitted that an amount of Rs. 1,00,94,872.27 is still due against the defendants upto the date of filing of the application. The defendants did not contradict the claim of the applicant-Bank thus the claim of the applicant-Bank stands proved. It is also proved that the application is within limitation as the defendants have acknowledged their liabilities. The Tribunal has territorial and pecuniary jurisdiction to decide the case.


The application for the recovery of Rs. 1,00,94,872.27 (Rs. one crore ninety-four thousand eight hundred seventy-two and paise twenty-seven) only is decreed ex pane with ex pane costs against defendant Nos. 1 to 5. The defendants shall pay pendente lite and future interest @ 18.50% per annum with quarterly rest on the amount due until the full and final payment of the amount outstanding. The applicant-Bank can recover the Bank dues from the defendants after the sale of the properties mortgaged and hypothecated with the Bank.

Defendants are restrained from depleting, transferring, encumbering or in any way dealing with the assets without first paying the claim of the applicant-Bank.

Let a recovery certificate be issued under Section 19(22) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.