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Judgment
The hearing is conducted through virtual mode amid COVID-19 pandemic restrictions. Mr.K.N.Shah, Ld. Counsel appeared for Applicant Bank. Mr.Siddartha Samal, Ld. Counsel appeared for the defendant no.1 to 3.
Heard the Ld. Counsel for the bank and also gone through records with his assistance. The defendant no.4 & 5 are ex-parte.
This Original Application has been filed by the Applicant Bank under Section 19 of The Recovery of Debts Due to Banks and Financial Institutions Act, 1993, now amended as The Recovery of Debts and Bankruptcy Act, 1993, against defendants no. 1 to 3 for recovery of Rs.7,23,34,784.01 (Rupees Seven Crores Twenty Three Lakhs Thirty Four Thousand Seven Hundred Eighty Four and Paisa One Only) together with further interest @ 11. 75% per annum with monthly rests and penal interest at the rate of 3% p.a. from the 01.04.2015 till the realization along with costs and other relief as stated. The applicant bank further prayed to pass an order declaring that the applicant is entitled to recover a sum of Rs. 3,41,88,986.93 from the defendant no. 4 being amount payable in respect of outstanding bills accepted by the defendants no. 4 and a sum of Rs.3,81,45,797.07 being amount payable in respect of outstanding bills accepted by the defendants no. 5 with interest @ 11.75% p.a. with monthly rests and penal interest @3% from 01.04.2015 till its realization.
The case of the applicant bank, in brief, is that the defendant no.1 was incorporated on 07.03.2015 as 'Bhagwati Remedies Pvt. Ltd.' and from 13.05.2009 its name is changed to 'Kandla Energy and Chemicals Limited' Defendant No.2 is Managing Director of the defendant no.1 Company whereas the defendant no. 3 is the Director of defendants no.l Company. The defendants no.2 and 3 also stood as Guarantors in respect of financial assistance granted to defendant no. 1 Company by applicant. Thus, the applicant bank claimed liability of defendants no.1 to 3 as joint and several. Defendants no.4 and 5 are drawee and acceptor of bills drawn by the defendant no.1 and defendants no. 4 and 5 agreed to pay the said bills. In view of the discounting of such bills, the applicant had given credit of the said amount in the account of the defendant no. 1. However, the defendants no. 4 and 5 failed to make payment. Thus, they are liable to the applicant for payment of such bills.
The Applicant submits that the defendant No.l had approached the said branch for grant of financial assistance for the business. At the request of the defendant No. l, the applicant bank sanctioned LC Backed Bills discounting Limit of Rs.10.00 Crores vide sanction letter dated 07.06.2013, in order to meet out the financial requirements, the defendant No.l had been requesting the applicant for sanction/ enhancement of credit facilities from time to time and considering the request of the defendant No.l, the applicant sanctioned (LC backed of Rs.50.00 Crores and Sales bills discounting of Rs.10.00 Crores, aggregating to Rs.60.00 Crores vide sanction letters dated 03.10.2013 and 26.12.2013 respectively.
Upon sanction of the said credit facilities, the defendant no.l through its Directors executed bank's standard loan documents on 03.01.2014 in respect of bills purchase limit of Rs.10.00 Crores. The defendants No. 2 & 3 executed Letter of Continuing Guarantee on 03.01.2014 in favour of the applicant bank.
The applicant further says that the defendant No l had failed and neglected to comply with the terms and conditions of the sanction and inspite of promise and assurance, the defendant no.1 has failed to liquidate the dues. The applicant further says that various bills issued by the defendant no 1 and drawn on various parties were discounted by the said branch hut various such bills have remained outstanding. The applicant further says that the said branch had lime and again informed the defendant no.1 to liquidate the same. The applicant further says that ultimately the account of the defendant No. l has been classified as NPA on 29.09.2014 as per guidelines/ directives issued by Reserve Bank of India from time to time. The applicant says that the applicant had issued notice dated 31.10.2014 upon the defendants and called upon the defendants to repay dues as per particulars mentioned therein. The applicant further says that the defendants have failed and neglected to repay the same. The applicant further says that the applicant has written letters dated 18.11.2014 and 16.12.2014 upon the defendant No.l but the defendant No. l has failed and neglected to repay the same. The applicant further says that the applicant has also written letters to the defendants No.4 & 5 i.e. FPC Petro Energy Private Limited and Galaxy Impo Expo Private Limited called upon them to make payment on 23.12.2014 but the defendants No.4 & Shave failed and neglected to comply with the same. It is thus crystal clear that the defendants ha e no bonafied intention to liquidate the dues with the result that the applicant has been constrained to file the present Original Application. The copies of said letters dated 31.10.2014, 18.11.2014, 16.12.2014 and 23.12.2014 are annexed hereto and marked at Exhibit "P" to "T" respectively.
The defendant No. 1 availed the said credit facility but it failed to repay the dues of the Bank as per agreed terms. It also failed to adhere to the financial discipline of the applicant bank, and the account of the defendants became irregular and sticky and classified the account as NPA on 29.09.2014. The applicant bank requested the defendants from time to time to regularize the said account but the defendants did not pay any heed to the said requests. Thereafter the applicant bank issued Notice dated 31.10.2014 but the defendants failed to repay the dues. In view of the said circumstances, the applicant is constrained to file the present Original Application.
On the date of filing of Original Application applicant bank claimed Rs.7,23,34,784.01 (Rupees Se en Crores Twenty Three Lakhs Thirty Four Thousand Seven Hundred Eighty Four and Paisa One Only) together with further interest @l l. 75% per annum with monthly rests and penal interest at the rate of 3% p.a. from the 01.04.2015 till the realization along with costs and other relief as stated. The applicant bank further prayed to pass an order declaring that the applicant is entitled to recover a sum of Rs.3,41,88,986.93 from the defendant no.4 being amount payable in respect of outstanding bills accepted by the defendants no. 4 and a sum of Rs.3,81,45,797.07 being amount payable in respect of outstanding bills accepted b) the defendants no. 5 with interest @11.75% p.a. with monthly rests and penal interest @3% from 01.04.2015 till its realization along with costs.
Soon after the registration of the case, the defendants were summoned through registered post with A/D. The defendants no.1 to 3 appeared through their counsel and filed written statement. Despite service none appeared on behalf of defendant No.4 & 5 by way of Regd. post and publication respectively, and thus they were proceeded exparte.
The defendants No.l to 3 in their written statement pleaded that instant application is not maintainable in law and the Tribunal has no jurisdiction to try and entertain. It is further pleaded that the O.A. of the bank is time barred in law and it is hit by law of limitation. The defendants also averred that the applicant bank obtained signature on the blank documents. It is also submitted that Mortgage is defective. It is further submitted that Statement of account is not on record as per Banker's Books Evidence Act.
In their joint written statement, defendants No.l to 3 denied the allegations made in the Original Application and submitted that Original Application is based on untrue and false facts and it is further pleaded that Original Application is suffers from suppressio veri and suggestio falsi as the applicant has suppressed many material facts and stated many false things to mislead this Tribunal and ultimately prayed for dismissal of Original Application.
It is further pleaded that bank has filed this Original Application without classifying the account as NPA. It is further pleaded that Original Application is liable to be dismissed for non-compliance of Rule 9 & Rule 4 of DRT (procedure) Rules 1993. It is further pleaded that the statement of account upon which applicant is relying is not duly certified under Banker's Books Evidence Act and as such Original Application is liable to be dismissed.
It is further pleaded that the application is not duly attested by Sr. Officer of the bank as contemplated under Rule 9(2) of DRT (procedure) Rules 1993, as such Original Application merits dismissal.
It is further submitted that due to recession in the business, competition, high cost of inputs, entire sector in the country was facing difficulties. But applicant bank has not understood difficulties of defendant No. I and the rigid attitude of applicant is not justified and is not in consonance with the policies of Government of India. It is further submitted that application is not filed on the prescribed format and not supported by proper affidavit and verification is not proper. It is further submitted that the person who has filed this Original Application is not well aware about the transactions and Original Application is not filed by proper person, as such Original Application is required to be dismissed.
It is further pleaded that Original Application is nothing but abuse of process of law and not maintainable. Further, barred by limitation. It is further pleaded that bank has not sanctioned credit facility as per terms and conditions of sanction letter. So defendants are not liable to repay the credit Facility granted by applicant bank and defendants are not liable to repay the loan. The defendants denied their joint and several liability as claimed in the Original Application.
The defendants further pleaded that the applicant has wrongly sued the defendant No. l as principal borrower and other defendants. The defendants further submitted that the applicant has not sanctioned alleged facilities on various terms and conditions of sanction letter or counter signed such acceptance. Defendants denied execution of undertakings and declarations as claimed in the Original Application. It is further pleaded that defendant No.l at any point of time ever approached to the applicant bank vide letter dated 23.09.2013 for financial assistance and defendants denied any such sanction by the applicant bank.
Defendants denied execution of various loan security documents as claimed in the Original Application. It is further pleaded by the defendants that bank has got signatures of defendants on blank documents and applicant has not given any opportunity to defendants No.l to 3 for perusal of said documents. The defendants denied continuing guarantee of Rs.10,00,00,000/- executed on 03.01.2014 by defendants No.2 & 3 and further submitted that the same is not valid as insufficiently stamped and bank took signature of defendants on blank documents. Defendants denied the right of the bank to claim any interest and further denied their liability to pay any interest and it is further pleaded that the applicant has charged interest against guidelines/ directives of the Reserve Bank of India from time to time and further applicant bank is not entitled to charge penal charge.
It is further submitted that the bank has wrongly classified the account as NPA on 29.09.2014 and further submitted that the applicant bank has wrongly issued notice on 31.10.2014 and applicant bank has no right or claim against defendants No.4 & 5. Defendants submitted that the claim of the bank is absolutely wrong and against law and defendants are no liable to pay the same due to charging of interest and capitalization of penal interest. It is further submitted that statement of account with the list of documents contains so many wrongful entries.
It is further submitted that applicant bank has not mentioned cause of action to file this application. Applicant has no right to proceed under Securititzation Act. It is further submitted that the Original Application of the applicant bank merits dismissal.
The applicant bank filed rejoinder to the written statement filed by the defendant No. 2 & 3 and negated the averments made.
In support of Original Application, Applicant has filed affidavit in support of Suit Claim at Exh.A/ 12 which is sworn by Mr.Anil Sankhla, Manager of the Applicant Bank. Applicant has also filed evidence on affidavit and proved on record copies or documents from Exh.AW/2 to AW/26 and produced original documents for inspection. Right to file counter affidavit was closed by order on 06.10.2018.
During the course of arguments on 13.09.2019 & 22.09.2020, Ld. Counsels for the parties submitted as under respectively -
13.09.2019 -
"Ld. Counsel for the Applicant Bank submitted that bank has proved its case, creation of security interest, availment of loan, disbursement, default and liability of defendants no.1 to 5. All the defendants are jointly and severally liable to pay the entire dues. lie has produced documents evidence as Exh.AW2 to A W26 and as such Original Application may be allowed against defendants us claimed in the Original Application. the defendants have failed to prove their alleged defence. He further submitted that he reserves his right to argue in rebuttal.
Ld. Counsel for the defendants 1 to 3 submitted that the Original Application itself is not maintainable and this Tribunal has no jurisdiction to entertain this Original Application. The Original Application is barred by limitation and further submitted that bank took signature on blank documents and misused the said documents to file this Original Application and mortgage is defective. The Original application merits dismissal and same may be dismissed with heavy cost. He further submitted that the statement of account as required as per Banker's Books Evidence Act is not on record. He further submitted that bank has failed to explain certain debit entries.
In rebuttal, Ld. Counsel for the Applicant Bank submitted that whenever contention about certain debit entries, bunk had already dealt with the same in its rejoinder. He further submitted that the defendants failed mention any specific debit and credit entry. He further submitted that Original Application is well maintainable and within limitation and defendants in a disguised way admitted their signatures on loan documents and their execution"
22.09.2020 -
"The hearing is conducted through virtual mode amid COVID-19 restrictions.
Mr.Kulin shah, Ld. Counsel for the Applicant Bank
Mr.Siddartha Samal, Ld. Counsel for the defendant no.1 to 3
Defendant no.4 & 5 are ex-parte
Ld. Counsels for the parties submitted that they have already argued on 13.09.2019 and in furtherance of so submitted arguments, Ld. Counsel for the defendant no.1 to 3 further submitted as under -
Ld. Counsel for the defendant referred to page no. 74 of the Original Application i.e. guarantee agreement and submitted that the sanctioned amount is not mentioned in the said guarantee agreement
He further submitted that impounding passport and such reliefs cannot be granted, us this Tribunal has no authority and jurisdiction to impound passport.
He further submitted that the certificate annexed with the statement of accounts under Bankers Book Evidence Act is not in conformity with the requirement of Bankers Book Evidence Act, as such no reliance can he placed upon such statement of accounts and at this score, the Original Application requires to be dismissed.
Ld. Counsel for the Applicant Bank rebutted as under-
Ld. Counsel for the bank submitted that he is relinquishing his prayer for impounding of passport at this stage. He further submitted that even otherwise it was a relief claimed as interim reliefs.
He further submitted that defendants are liable for the due repayment of the entire dues claimed in the Original Application and the bank has proved the statement of accounts at page no. 110 qua defendant no.1, 2 & 3 and at page no.110A for defendant no.4 and page no.110B for defendant no.5 and bunk has filed statement of accounts on affidavit on record, duly attested and certified under Bankers Book Evidence Act.
Hence, the Original Application may be allowed."
In view of the above, the following points have come out for adjudication:
(i) Whether the Original Application as filed is maintainable?
(ii) Whether Original Application is within time'?
(iii) Whether Original Application can be dismissed on the allegations regarding obtaining signatures of defendants on blank documents?
(iv) Whether defendant no.4 & 5 are also liable, if yes, to what extend?
(v) Whether the Applicant Bank is entitled to the reliefs claimed in this Original Application, in view of the issues raised by the defendants and material on record?
The Learned counsel for the Applicant Bank submitted that the Bank has duly proved all the documents on file as required under The Recovery of Debts and Bankruptcy Act, 1993 and thereafter submitted that the defendants No.l to 3 are willful defaulters, as they availed the aforesaid credit facilities to their benefits but failed to maintain the financial discipline of the bank. The defendant no.2 and 3 being Directors/Guarantors are also liable. The Original Application may be allowed for the reliefs claimed.
The procedural irregularities if any, cannot be a ground to dismiss Original Application for recovery of public money. That are directing in nature not mentioning.
The recession in business, competition, high cost of input, cannot be considered as valid reasons to justify default and wriggle out from liability at this stage, The defendants should have infused funds from their own sources to be in market instead of making allegations against bank.
If defendants No.1 to 3 had any grouse regarding disbursement of credit facilities or any issue about sanction or its terms and conditions they would not have availed the credit facilities at relevant time period after commissioning of default they have no right to agitate such issues. No evidence on record that defendants ever raised such issues prior to this Original Application.
The defendant No.l as principal borrower and defendants No. 2 & 3 as guarantors executed various security documents. The bank has proved the record Exh.AW/l to Exh.AW/26. Guarantee documents exhibited without objection. So I find no legal impediment to believe as said documents to adjudicate this Original Application.
NPA is not sine-qua-non for filing of Original Application even otherwise account statement reflect that account was NPA. The defendants admitted loan transactions in a disguised way by denying their liability to pay peal interest with allegations of capitalization of penal interest. The defence as taken is contradictory to other defence. The have failed to point out any specific debit or credit entry.
Applicant bank is carrying business within the jurisdiction of this Tribunal and defendants are also residing and working at Ahmadabad within the jurisdiction of this Tribunal. The Bank has filed this Original Application to recover Rs.7,23,34,784.01 which comes within the term 'debt' as defined in section 2(g) of Act, 1993. Therefore this Tribunal has territorial as well as pecuniary jurisdiction to entertain and try the present Original Application.
The Original Application is within time from the date of execution of loan documents, default and operation in account. Therefore, present Original Application is filed well within the period of limitation.
It is also pleaded on behalf of defendants that the bank took signature on blank documents and misused the said documents to file this Original Application. There is no dispute regarding the signatures of the said defendants on the loan documents. Although, the said defendants have come with a stand that the Applicant Bank got the signatures of the said defendants on blank documents, but the defence, so taken, is not tenable and seems to be an afterthought, because the said defendants had failed to place on record any complaint ever made by them to the Police Authorities or higher authorities of the Applicant Bank regarding allegations of signatures on blank documents. So after filing of the present Original Application, the defence, so taken is not permissible. Further, by taking such defence, one thing is clear that the said defendants admitted their signatures on loan documents as proved on record by the Applicant Bank. So on this account also, there is no defence of said defendants and the said defendants have no case in their favour.
So far as the defence taken by the defendants regarding defective mortgage, while going through the records, it is observed that the defendants have never mortgaged any of the properties in favour of the applicant bank as security and thus their allegation is vague and out of context and is not maintainable.
So far as the allegations of defendants regarding statement of account, the defendants had failed to substantiate their alleged defence. While going through the records, it is revealed that the applicant bank has submitted statement of accounts as per Banker's Books Evidence Act, containing page No.111 to 112. The defendants also failed to specify debit entry and thus the defence taken by the defendants seems to be bald one and is not entertainable.
Further, Ld. Counsel for the defendants argued that on the Guarantee Agreement, bank has not mentioned the amount of consideration of guarantee, whereas in page no.74 of the Original Application, amount of consideration of Bank Guarantee i.e. Rs.l0.00 Crores is duly mentioned. So the objections as taken is not tenable.
The bank has filed this application on the basis of apprehension that defendant no.2 & 3 would leave the country and it would be difficult to initiate legal process in accordance with law against them to recover dues of the bank, but the applicant bank has failed to plead or file any prima-facie evidence or any reasonable or justifiable ground to believe such apprehension. Merely on perceived apprehension this Tribunal is hesitant to impose any restriction on personal liberty of a person which indeed is a fundamental right Under Articles 14, 19 & 21 of Constitution of India to travel abroad. Hence, no prayer for such like directions can be entertained. However, the Applicant Bank, during the arguments dtd 22.09.2020, relinquished his prayer for impounding of passport on the grounds that the said prayer was claimed as interim reliefs.
I have gone through the certificate annexed with the Statement of Accounts, same are duly attested under Bankers' Books Evidence Act and all the necessary ingredients as required to be proved in Statement of Accounts have been duly incorporated in the certificate so annexed. Further, the defendants have failed to question any specific debit/credit entries, whatever entries have been disputed, same have been duly justified in the rejoinder by the bank.
Defendants No.4 and 5 are the drawees and acceptors of multiple bills drawn by the defendant No. l. Applicant has discounted the said bills and the proceeds were paid to the defendant No.1. In order to substantiate its case, applicant has placed on record various bills of exchange, commercial invoices, transport receipts. The bank has proved on record Exh.AW/2 to Exh.AW/26 i.e. letters written by bank to defendants No.4 & 5 having details of invoice No., bill of exchange date, due date, bill amount and outstanding. The defendants No.4 & S failed to respond said demand and further have failed to appear before this Tribunal to contest the case. It appears that they have nothing to say against the claim of applicant bank. So under given circumstances adverse inference is required to be drawn against defendants No. 4 and 5 particularly when defendants No.l to 3 also arc not denying the transactions with defendants No.4 & 5.
On perusal of the bills of exchange reveals that the acceptors of the bills were required to make payment to the applicant within 90 days. Despite of serving notice after 90 days, the acceptors, i.e. defendants No.4 & 5 failed to make payment of the bills of exchange. Hence, defendant No.4 is required to pay Rs.3,41,88,986.93 alongwith interest to the applicant. Likewise. defendant No.5 is also required to pay Rs.3,81,45,797.08 alongwith interest to the applicant. Bank has filed this Original Application against defendants and has proved on record copies of documents from Exh.AW/2 to AW/26.
I have gone through the loan documents of the Original Application and also considered the submission made by learned counsel for the parties. The evidence produced by the Bank remains un-rebutted. There is no reason to disbelieve the same.
I have considered the claim of the bank, the claim of the Applicant Bank is within time in view of execution of loan documents and operation in the account as discussed supra.
I find no legal impediment to grant the relief claimed in favour of applicant banks. The applicant banks are entitled to Recovery Certificate for entire amount claimed in the Original Application for their respective claim and further applicant banks have every right to recover the said amount by sale of personal movable and immovable properties of the defendant no.l to 3
As per the statement of accounts on the date of filing of Original Application, the defendants No. 1 to 3 were liable to pay Rs.7,23,34,784.01 (Rupees Seven Crores Twenty Three Lakhs Thirty Four Thousand Seven Hundred Eighty Four and Paisa One Only) together with further interest @ 11.75% per annum with monthly rests and penal interest at the rate of 3% p.a. from 01.04.2015 till the date of realization along with costs and I feel judicious to grant interest @11.75% p.a. with monthly rests for pendentelite and future period. Claim for penal interest is declined. The defendants No.4 & 5 being acceptor of bills are liable to pay Rs.3,41,88,986.93 and Rs.3,81,45,797.08, respectively alongwith pendentelite and future interest and their liability will be limited to that amount only.
As a result, the Original Application is allowed on contest with cost against the defendant no. 1 to 3 and ex-parte against defendant no.4 & 5. The Bank has proved the loan, hypothecation, default, liability of the defendants. The liability of the defendants shall be joint and several and the personal movable and immovable properties of the defendants can also be sold for recovery of amount due. The liability of defendant no.4 would be limited to Rs.3,41,88,986.93Ps and the liability of defendant no.5 would be limited to Rs.3,81,45,797.07Ps along with pendentelite and future interest being amounts payable in respect of outstanding bills accepted by the respective defendants and pendent lite interest on the respective amounts.
It is, therefore ordered:-
(i) That the Original Application No. 322 of 2015 initiated by the Applicant Bank for issuance of Recovery Certificate to the tune of Rs.7,23,34,784.01 (Rupees Seven Crores Twenty Three Lakhs Thirty Four Thousand Seven Hundred Eighty Four and Parsa One Only) together with interest and costs hereby succeeds and is allowed jointly and severally against the defendant no.1 to 3, but liability of defendant no.4 would be limited to its extent of Rs.3,41,88,986.93 Ps and the liability of defendant no.5 would be limited to Rs.3,81,45,797.07 Ps and pendentelite and future interest on this amount.
(ii) The defendants are directed to pay the dues within a period of two months from the date of judgment, failing which the Applicant Bank will be entitled to sell the personal movables and immovable properties of the defendants. The Applicant Banks are further entitled to pendentelite and future interest on the amount due @11.75% per annum with monthly rests from date of filing of Original Application till the full recovery is made from the defendants.
(iii) Let a Recovery Certificate be issued with memo of cost immediately u/s 19(22) of The Recovery of Debts and Bankruptcy Act, 1993 together with the details of the properties, if any, by fixing 09.12.2020 before Learned R.O., DRT-1, Ahmedabad.
(iv) The defendants are hereby restrained by means of injunction from depleting, transferring, encumbering, alienating or in any way dealing with their properties I assets without first paying the claim of the Applicant Bank.
Given under my hand and the seal of this Tribunal on this date: 06.10.2020
Dictated on 06.10.2020
Corrected and signed by me on 06.10.2020