1. The applicant bank i.e., Syndicate Bank, Kadapa Branch filed this Original Application u/s. 19 of the Recovery of Debts and Bankruptcy Act, 1993 for recovery of a total sum of Rs. 2,83,75,889/- from the defendants jointly and severally with future interest @14% p.a. with monthly rests from the date of application till the date of realization together with costs and for sale of OA schedule properties.
2. The case of the applicant, in brief, is;- that 1st defendant is an Educational Institution floated by 2nd defendant Trust. 1st defendant availed term loan facility of Rs. 2 crores from applicant bank on 01.12.2010 for construction of college building and executed loan documents such as loan agreement, stamped receipt on 18.12.2010. Defendants 3 to 5 executed guarantee agreement. Defendants 2 and 3 created registered equitable mortgage by deposit of title deeds in respect of OA schedule immovable properties as a security for the loan availed by the 1st defendant society and executed memorandum of deposit of title deeds. The defendants 2 and 3 also created second and subsequent mortgages to suit the security coverage on 14.05.2010 and 15.12.2010. The 1st defendant also availed overdraft limit of Rs. 20 lakhs on 12.02.2013. Defendants executed loan documents and 3rd defendant executed confirmation of mortgage to cover the additional facility. At the request of 1st defendant, the applicant bank rephased the loan on 03.10.2012. The 1st defendant executed rephasement agreement as per which the loan amount is repayable in 84 monthly instalments commencing from November, 2012. Defendants 3 and 6 executed acknowledgement of debt on 30.09.2015. After availing term loan and SOD facilities, defendants committed default in repayment of the same and therefore, the loan account became NPA on 01.11.2015. Applicant bank issued demand notice dated 19.11.2015 followed by possession notice dated 17.10.2016 under Securitization Act. There was no response from the defendants hence, this OA.
3. The defendants 1 to 6 filed written statement. The submissions of the defendants as per the written statement, in brief, are that;- the title deeds were deposited on 13.05.2010 whereas the letter handing over title deeds of properties and statements of assets and liabilities of defendants 3 and 6 is dated 13.07.2010. The loan application was made by 2nd defendant but not by 1st defendant. The 1st defendant does not have a separate legal entity. There are lot of differences between the OA averments and documentary evidence filed by the applicant bank as to the date of sanction of loan, deposit of title deeds, letter handing over title deeds by defendants 3 and 6, the purpose of loan in the loan application, execution of general agreement, guarantee agreement. Defendants 3 to 6 are trustees while as per loan application alleged to have been submitted on 01.12.2010, 4th defendant is not trustee of 2nd defendant managing the affairs of Engineering College. The 2nd defendant is the borrower and not the guarantor and defendants 1 to 5 which can be seen from general agreement and guarantee agreement. The loan application and general agreement dated 12.02.2013 in respect of second loan are signed by 4th defendant in his personal capacity and not by defendants 3, 5 and 6 who are the trustees of 2nd defendant and running the 1st defendant educational society. Copy of acknowledgment of debt is not filed by applicant bank. The rate of interest charged to loan account at 15.5% and penal interest are exorbitant. Therefore, the applicant bank is not entitled to any relief sought for.
4. In order to prove its case, the applicant bank examined P. Dheeraj Harsha, Manager as AW-1 and marked 31 documents through him as Ex. A.1 to A.31.
5. In order to substantiate the defence, A. Shilpa Reddy as 5th defendant and on behalf of defendants 1, 2 and 3 examined herself as DW-1.
6. Heard learned counsel appearing for the applicant bank, learned counsel appearing for the defendants. Perused the written arguments filed by the applicant bank as well as defendants and the material brought on record.
7. It is contended by learned counsel appearing for the applicant bank that 1st defendant is an educational institution managed by the 2nd defendant Trust which is represented by defendants 3 to 6 as trustees. The 1st defendant floated by 2nd defendant Trust, availed term loan facility of Rs. 2 crores for construction of college buildings. Defendants 2 and 3 offered their properties morefully described in OA schedule as a security to the term loan availed by 1st defendant represented by 2nd defendant. The defendants executed the loan documents Ex. A.2 to A.9. On the request of the defendants loan came to be restructured and the defendants executed Ex A.21 guarantee agreement. Defendants 3 and 4 executed Exs. A.23 and A.24 acknowledgements of debt. The defendants having availed credit facilities, committed default in repayment of the same. The loan account came to be classified as NPA followed by Ex. A.26 demand notice dated 19.11.2015 issued under Sec. 13(2) and Ex. A.27 possession notice dated 17.10.2016 issued under Sec. 13(4) of the SARFAESI Act. A further contention has been advanced that defendants agreed to pay variable rate of interest and the rate of interest being applied by the applicant bank at the time of filing OA is 15.5% p.a. The applicant bank examined P. Dheeraj Harsha, Manager as AW-1 and marked 31 documents through him as Ex. A.1 to A.31. According to learned counsel, the evidence of AW-1 coupled with recitals in Exs. A.1 to A.31 substantiates the OA claim against the defendants and OA schedule properties and therefore OA may be allowed.
8. Per contra, learned counsel appearing for defendants submits that the 1st defendant does not have any separate legal existence or identity. Learned counsel would also submit that as per the pleadings of applicant bank in OA, defendants 3 to 6 are trustees whereas as per the loan application alleged to have been submitted on 01.12.2010, the 4th defendant is not a trustee of 2nd defendant Trust. The loan application was submitted by 2nd defendant but not 1st defendant as averred in OA. There are various defects in the loan documents and therefore OA based on defective documents is not maintainable. The rate of interest charged to the loan account is excessive and exorbitant. The learned counsel refers the evidence of DW-1 who is 5th defendant and authorized signatory of defendants 1 and 2 in support of his submissions. With these submissions, learned counsel sought for dismissal of the OA.
9. Now, the points that arise for adjudication are:-
i) Whether the applicant proved the OA claim against the defendants and OA schedule properties?
ii) To what relief?
Point No. (i):-
10. Ex. A.1 is the loan application submitted by 2nd defendant Trust. The purpose of loan indicated in Ex. A.1 loan application is for 1st defendant educational institute. Defendants 3 to 6 are trustees of 2nd defendant Trust. The applicant bank considered the Ex. A.1 and sanctioned term loan of Rs. 2 crores. Defendants 3, 5 and 6 created mortgage over the OA schedule properties as a security for the credit facilities availed by the 1st defendant and confirmed the same under Ex. A.2 letter of handing over title deeds of the OA schedule properties. Defendants 3, 5 and 6 also executed Ex. A.4 guarantee agreement. The 3rd defendant representing the 2nd defendant as well as in her individual capacity, confirmed the deposit of title deeds under Ex. A.7. Exs. A.8 and A.9 are the registered memorandum of deposit of title deeds. Ex. A.11 to A.17 are the copies of title deeds deposited with the applicant bank as a security. Defendants 3 to 6 submitted Ex. A.18 application for restructuring the loan account and applicant bank considered the same and restructured the loan account. Defendants 3 to 6 executed Exs. A.21 guarantee agreement on 12.02.2013. The 3rd defendant representing 2nd defendant and in her individual capacity extended the securities under Ex. A.22. Defendants 3 and 4 also executed Exs. A.23 and A.24 acknowledgements of debt dated 30.09.2015. Ex. A.26 is the demand notice dated 19.11.2015 issued under Sec. 13(2) and Ex. A.27 is the possession notice dated 17.10.2016 issued under Sec. 13(4) of the SARFAESI Act. Ex. A.28 is bunch of postal acknowledgements. The evidence of AW-1 coupled with the material documents brought on record clearly establishes the availment of loan by 2nd defendant for construction of college buildings for 1st defendant educational institution. Defendants 3 to 6 stood as guarantors for the loan whereas the 3rd defendant representing 2nd defendant Trust and in her individual capacity, deposited title deeds of the OA schedule properties as a security.
11. The plea advanced by the defendants is that the interest charged to the loan account by the applicant bank is excessive and exorbitant. It is evident from Ex. A.3 agreement that rate of interest applicable is a variable one but not fixed rate of interest and therefore, the plea advanced by the defendants in this regard has no merit.
12. With regard to limitation, as per Ex. A.3, any one of the executants is competent to acknowledge the debt and the same is binding on the other executants. For better appreciation, I may refer clause 10 of Ex. A.3 and it reads as hereunder:
"10. Authorises and agrees that the payment, acknowledgement or undertaking made or given by any one of us or surety towards the above transaction shall be binding on all of us jointly or severally and each of us constitute the other among us and the surety the duly authorised agent and the payment of acknowledgement or undertaking so made or given by any of us including payment by way of debit to SB/OD/Current A/c and credit to the loan/overdraft account, is binding on us jointly and severally, and be treated as part payment/acknowledgement for the purpose of limitation."
13. Ex. A.23 is the acknowledgement of debt dated 30.09.2015 executed by 3rd defendant and Ex. A.24 is the acknowledgement of debt dated 30.09.2015 executed by 4th defendant whereas OA is filed on 30.12.2017 and therefore OA claim is well within limitation. DW-1 is the 5th defendant who is the Secretary-Trustee of 2nd defendant Trust and authorized signatory of the defendants 1 and 2. She does not dispute availment of credit facilities from the applicant bank and also mortgage of OA schedule properties as a security for the loan. Therefore, the evidence of AW-1 coupled with recitals in Exs. A.1 to A.31 amply proves the OA claim against the defendants and OA schedule prope
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rties and accordingly OA deserves to be allowed. Point No. (ii):- i) The defendants 1 to 6 jointly and severally are liable to pay to the applicant bank a sum of Rs. 2,83,75,889/- with future interest @14% p.a. simple from the date of filing of the OA till the date of realization; ii) The claim of the applicant bank is secured by way of mortgage of OA schedule properties and the applicant bank is entitled to proceed against the same towards realization of its dues; iii) The applicant bank is entitled to proceed against the properties of 1st defendant educational institution and 2nd defendant Trust and against the person and properties of defendants 3 to 6 towards realization of its debt; iv) The applicant bank is entitled to the costs of the OA. 14. The applicant bank is directed to file cost memo within 2 weeks from the date of this Order. 15. Issue Recovery Certificate accordingly. 16. Communicate a copy of this order to the parties concerned. (Dictated to the PS, transcribed by him, corrected, signed and pronounced by me in the open court on this the 03rd February, 2020).