Ajoy Khanderia vs Barclays Bank And Anr

The appellant is a certificate debtor against whom the Debts Recovery Tribunal(DRT) has issued a recovery certificate for a sum of Rs. 11,14,85,036,.86 with interest vide order dated 29.08.2013 passed in Original Application(O.A.) No.60/2011 filed by the respondent no.1 Bank against the appellant and one Company, respondent no. 2 herein, of which at one time he was the Managing Director, under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993('RDDBFI Act' in short) for recovery of Rs.11,23,81,505.06 on account of outstanding dues in the loan account of respondent No.2 Company (borrower Company). This Company was sanctioned financial facility of fifteen crores of rupees by the respondent bank in the year 2007. To secure its repayment the appellant had pledged two lacs shares which he had in the borrower Company and which shares thereafter came to be delisted and the shares held by the Bank became junk. Upon the borrower Company committing default in repayment of the loan dues the Bank filed the O.A. against the borrower Company as well as the appellant. None of the two defendants in the O.A. had contested the O.A. The fact that the shares of the borrower Company got delisted from the stock exchange and except for the pledged shares held by the appellant in the borrower Company there was no other security offered by the appellant appears to have emboldened him not to clear the dues of the Bank which his Company owed to it and since he was harbouring under the impression that his shares had become of zero value and his Company had also become defunct he chose not to contest the O.A. and allowed the recovery certificate to be issued under the impression that the Bank will never be able to execute the same. in which eventually the DRT directed issuance of joint and several recovery certificate against the borrower Company as well as the appellant herein for a sum of Rs. 11,14,85,036,.86 alongwith interest thereon.

The appellant alone is challenging the final order passed by the DRT in the O.A. The impugned order is being re-produced below:-

"1. The applicant has filed the O.A. on 31.3.2011 for the recovery of Rs 11,23,81,505,06.00 ( Rupees Eleven crore Twenty- three lacs Eighty -one Thousand Five Hundred Five) only with pendent lite and future interest at the rate of 17.50% p.a with monthly rests from 1.3.2011 and the costs of the O.A. As per the affidavit filed by Shri Vineet Aggarwal, Regional Manager of the applicant bank after deducting the amount of penal interest, the amount to be recovered stands reduced to Rs. 11,14,85,036,86 ( Rupees Eleven crore Fourteen lacs Eighty-five Thousand Thirty-six and paise Eighty-six) only.

It has been stated that the applicant is a body corporate constituted under the laws of England and is a Scheduled Commercial Bank within the meaning of Banking Regulations Act, 1949 and that Shri Bineet Aggarwal, Regional Manager is the principal Officer in terms of Order 29 Rule 1 CPC and is duly authorizes and empowered to sign, verify and file the O.A .Hold a General Power of Attorney from the applicant bank in his favour.

Further, it has been stated that defendant No.1 is a company it corporate and registered under the Companies Act and engaged in the business of Information Technology Services and at the relevant time defendant No.2 was the Managing Director of the defendant No. 1 He pledged his 2 lakh shares held by him in the defendant No1 as a security for the facilities granted by the defendant No. 1 in favour of defendant No.2.On 23.11.2007 the Board of Directors of the defendant No 1 passed a resolution for availing facilities up to 15 crore from the applicant bank.

Further, at the request of the defendants the applicant bank vide letter No. Barclays/ Mumbai/231/07 dated 26.12.2007 sanctioned credit facilities aggregating Rs 15.00 crore which included short Term Loan, Letter of Credit limit, Bonds and Guarantees, Letter of Undertaking subject to the condition that fund based facilities mat be utilized subject to a maximum of 7.50 crore and non fund based facilities may be utilized subject to maximum of 10 crores but the aggregate of the sub limits for the fund based and non fund based facilities shall not exceed Rs 15.00 crore. These facilities were sanctioned on the terms and conditions mentioned in the letter dated 26.12.2007 and the defendant No. 2 agreed to pledged his 2.00 lacs shares of defendant No.1 as a collateral security for repayment of the credit facilities. The facilities were sanctioned at bank's Benchmark Prime Lending Rate or at such other rate of interest was 11% p.a. with monthly rests at the relevant point of time. The defendant had also agreed to pay additional/ penal interest at the rate of 2% over the contractual rate of interest.

In consideration of the credit facilities the defendants executed the following documents:-

i) Multi option Facility Agreement dated 15.1.2008.

ii) Demand Promissory Note dated 15.1.2008.

iii) Take delivery letter dated 15.1.2008.

iv) Letter of continuing security dated 15.1.2008

v) Share pledge agreement dated 15.1.2008.

Further, as per terms of Multi option Facility agreement dated 15.1.2008 the said facilities were to be secured by a pari passu charge on the current assets of defendant No. 1 company eighth in six months from the first disbursement, else the limits had to be repaid in three equal monthly instalments beginning from the seventh month from the date of disbursement. Further, the defendant No.1 availed the Short Term Loan Facility of Rs. 7.50 crore but other sub limits were not utilizes. The defendant no.1 had been requesting the applicant bank for roll over of the Short Term Loan facility.

Further, the defendant No. 1 vide letter dated 23.7.2008 requested the applicant for some more time for taking the applicant bank into consortium but did not include the applicant into consortium and also did not create the stipulated security of pare- passu charge on its current assets in favour of the applicant bank. On the request of the applicant bank made vide letter dated 12.1.2009 the applicant bank re-structured the loan and the terms of the some were communicated to the defendant No.1 by the applicant bank vide its letter No. Barclays/ Mumbai231/07 dated 27.5.2009 but despite and failed to pay the dues of the bank and committed breach of the restructuring., and the concessions granted to the defendant No.1 have become null and void and the defendant 1IIo 1 is liable to pay the original outstanding amount as per contractual rate of interest and as such the applicant bank vide letter dated 23.3.2010 called upon the defendant No 1 to repay the outstanding dues of Rs. 9,44,58,836.00 alongwith future interest within three days failing which the bank shall take steps to sell the pledged shares and appropriate the amount towards their over dues. However, the pledged share could not be sold as the defendant No1 has been delisted from the Bombay Stock Exchange/ National Stock Exchange. The defendants have failed to liquidate the dues of the applicant bank and the applicant bank has no option except to initiate legal proceedings and sent legal notice dated 15.7.2010 calling upon the defendants to pay Rs. 10.01.06.400.62 along with further interest from 1.7.2010 @ prevailing BPLR+% p.a. with monthly rests. Further, the defendant No.2 vide letter dated 27.7.2010 informed the applicant bank that he has resigned as the director of defendant No.1 from 25.5.2009. The defendant No.1 issued cheque dated 21. 7.2010 draw on ICICI Bank Ltd., discharge of its liability for a sum of Rs. 10,01,06,400.62 which was signed by defendant No.2 as a Director of defendant No.1 which on presentation for encashment has bounced No.1 which on presentation for encashment has bounced and the applicant bank has initiate the proceedings under section 138 of the Negotiable Instrument Act. Further, the applicant bank sent notice dated 6.1.2011 through registered post to the defendant No. 1 and also sent its copy to Punjab National Bank, Bank of Baroda, Standard Chartered Bank, Bank of India, Canara Bank, Bombay Stock Exchange Ltd,. and National stock Exchange which was replied by the defendant through its Advocate and assured that the defendant No.1 is capable to fulfil its financial commitments subject to just deltas. The defendant No 1 has admitted a ailment to the Short Term Loan to the time of Rs. 7.50 crore in the balance sheet which is part of Annual Report of 2008-2009 The bank in all has claimed Rs. 11,23,81,505,06.00 with pendent elite and future interest at the rate of 17.50% p.a with monthly rests from 1.3.2011.

Notice was issued to the defendants. Defendant No.1 put in appearance through counsel but later on, absented.

8 In order to prove the averments made in the O.A. the applicant bank has filed the affidavit of Shri Vineet Aggarwal, Regional Manager and Shri Narender Gera, another Regional manager of the applicant Bank.

Shri Vintten Aggarwal, Regional Manager of the applicant bank who in his affidavit has deposed that after deducting the penal interest the applicant bank is entitled to recover Rs. 11,14,85,036.86.

Shri Narender Gera, another Regional Manager of the applicant Bank while deposing on the lines of the O.A. has proved documents i.e. General power of Attorney Ex. PW-1/1 resolution dated 23.11.2007 of the defendant No. 1 Ex. PW-1/2sanction letter Ex. PW-1/3 , Multi option facility agreement Ex. PW-1/4 Demand promissory note Ex. PW-1/5, Take delivery letter pw-1/6, Letter of continuing security Ex. PW-1/7, share pledge agreement PW. Pw- 1/8, copies of letters relating to short Term Loan Ex PW-1/9 (colly), copy of letter dated 23.7.2008 ex.pw-1/10 copy of letter dated 12.1.2009 Ex.pw-1/11, copy of letter dated 27.5.2009 of applicant bank Ex. Pw -1/12, copy of bank letter dated 23.3.2010 Ex. Pw-1/13, copy of legal notice, postal receipts etc. Ex. Pw-1/14 (colly), letter dated 27.7.2010 from the defendant No.2 Ex. Pw-1/15, copy of statutory notice dated 6.1.2011 Ex. Pw-1/16, Copy of reply dated 10.2.2011 Ex. Pw-1/17, copy of rejoinder dated 8.32011 Ex. Pw-1/18, copy of balance sheet Ex. Pw-1/19, statement of account Ex. Pw-1/20 and Ex.pw-1/21.

I have heard the Ld. Counsel for the parties and perused the record.

The following points in pertinent points needs to be considered.

To what rate of interest the applicant is entitled?

Whether the applicant is entitled to get relief, as prayed for in the O.A for the reasons stated therein?

POINT 1

So far as the issue of pendent elite and future interest is concerned, it is stated on behalf of the applicant that the transaction between applicant bank and the defendant being commercial in nature, the applicant bank is entitled to claim the same at contractual rate of interest as per the direction of RB guidelines from time to time. Further, as per Section 21 (A) of Banking Regulation Act, 1949, the applicant bank to get contractual rate of interest as the transaction is commercial in nature. pr the reasons stated above, it is found that the applicant is entitled to get pendent elite and future interest at the rate of 17.50%p.a. with monthly rests, as prayed for from the date of filing the O.A. i.e. 23.11.2010 till realization in full.

On the basis of the fore-going discussion I am of the opinion that interest of justice will be served of pendent elite and future interest is awarded at the rate of 17.50% p.a. with monthly rests, as prayed for , from the date of filing of the present O.Ai.e.31.3.2011 till realization kin full. The point its answered in affirmative in favour of the applicant bank against the defendants.

POINT 2

A careful perusal of the loan records/documents shows that the applicant has successfully proved its loan transaction as against the application mentioned defendants and also established averments made in the O.A It is also further seen that the defendants executed necessary security documents in favour of the applicant, Further, a careful scrutiny of record goes to show that the present application is filed well within limitation on 31.3.2011 and this Tribunal possesses necessary and proper jurisdiction to dispose of the same . No Oral/ documentary record on defendants' side is available on record to dispute the claim of the applicant bank or can confront and rebut the documents produced and relied on by the applicant. Therefore, it can be safely concluded that the proof affidavit and the averments made in the application, remain properly un-rebutted and un-challenged in accordance with law. The exhibits as well as proof affidavit establishes the O.A. claim of the applicant. In my view, the applicant has succeeded in proving its claim against the applicant has succeeded in proving its claim against the defendants. From the documents, I am convinced that defendants are the principal borrowers and guarantors who are joint and severally liable to pay the dues of the applicant. In the light of the above discussion , I am convinced that the applicant has succeeded in proving it against the defendants. The point is answered in affirmative in favour of the applicant and against the defendants herein.

On the basis of fore-going discussions, and also as per the affidavit of Shri Vineet Aggarwal and the statement of account Ex. AW-1/20 and Ex. AW-1/21 the case of the applicant bank stands proved and the applicant bank is entitled to recover a sum of Rs. 11,14,85,036.86 (Rupees Eleven Crore Fourteen lacs Eighty-Five Thousand Thirty-Six and paise Eighty-six ) only together with pendente lite and future interest at the rate of 17.50% p.a. with monthly rests from the defendants jointly and severally from the date of filling of this O>A. Till its actual realization if full. The point is answered in affirmative in favour of the applicant bank and against the defendant .

ORDER

I) The application of the applicant Banks for recovery of the above mentioned Rs. 11,14,85,036,.86 ( Rupees Eleven crore Fourteen lacs Eighty-five Thousand Thirty-six and paise Eighty-six) only. Against defendants 1 and 2 along with pendent lite and future interest at the rate of 17.50% p.a. with monthly rests, is allowed, Defendants 1 and 2 are directed to pay the amount within two months. The cost of litigation be also borne by these defendants.

ii) The defendants are directed to pay the amount within two months from the date of this order falling which the same shall be recovered from sale/sale proceeds of pledged share/personal assets/properties of defendants or as per the provisions of the Recovery of debts Due to Banks and Financial Institutions Act, 1993, Recovery Certificate be issued forthwith.

iii) In case the defendants fail to pay the amount within the stipulated time, the Recovery Certificate so issued against the defendants be sent to Ld. Recovery Officer having jurisdiction. He shall proceed in accordance with law. The parties to appear before the Ld. Recovery Officer on 15.11.2013. The Recovery Officer is directed to report to this Tribunal within 8 months as to whether the recovery certificate has been fully satisfied and of not, then up to what extent.

iv) Copy of this judgment and recovery certificate be sent to all the parties free of cost by registered post. File be consigned to record room."

Learned counsel for the appellant had submitted that irrespective of the fact that the appellant had not contested the claim of the Bank the learned Tribunal below (DRT) was expected to examine the Bank's documents minutely to find out if the appellant had stood guarantor or not for the repayment of the loan by the borrower Company and only thereafter should have returned a finding referring to the document, if any, that the appellant was a guarantor. That having not been done and in fact even here also the Bank's counsel could not point out any guarantee deed having been executed by the appellant. It was also contended that the only document executed by the appellant was agreement of pledge of his two lacs shares of the borrower Company and the same have always been in custody of the Bank and it was always at liberty to sell the pledged shares and nothing beyond that and the learned Presiding Officer of the DRT was not at all justified in passing personal recovery certificate against the appellant.

The argument of the learned counsel for the appellant thus was that except to enforce its right to sell the pledged shares the Bank did not have any other remedy against the appellant.

The learned counsel for the Bank submitted that the share pledge agreement Ex. PW-1/8 was signed by all the three parties to the transaction of loan i.e. the appellant, the borrower Company and the Bank and, therefore, the appellant could not claim that against him no recovery certificate could be issued and the only remedy available to the Bank was to sell the pledged shares return of which was never sought by the appellant.

Hon'ble Supreme Court had held in its judgment rendered on 29th November, 2006 in "M/S Transcore vs Union of India & Anr.", Appeal (civil) 3228 of 2006, that 'borrower' includes a 'pledgor'. That it was observed that Section 2(f) of the SARFAESI Act defines the word "borrower" to mean the principal borrower who is granted financial assistance by any bank or Financial Institution and includes a guarantor, a mortgagor as well as a pledgor. So, in the present case also, even though the present case arises out of proceedings under the RDDBFI Act,1993, the appellant-pledgor has to be considered as a borrower and rightly the learned DRT has made him also liable to pay the debt for which he had pledged his shares. If the submission of the learned counsel for the appellant were to be accepted then the result would be incongruous that no lender who has given some loan on the 'pledge' of any goods/property, like shares in the present case, will be in a position to recover its money from the pledgor and the only remedy will be to sell the pledged goods. In the present case the pledged shares of value since the same are not listed with any stock exchange. As per Section 176 of the Indian Contract Act a pledge can sue the pledgor for the debt secured by the pledge while retaining the pledged goods(shares). It is not obligatory on the part of the pledge to sell the pledged goods.

This appeal being devoid of any merit is dismissed. Records of DRT be sent back with a copy of this order.