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Judgment
R. S. Kulhari, Chairperson
The present appeal has been preferred under section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as "The RDDBFI Act) against the order dated 27.09.2018 passed by the Tribuanl below, whereby the claim of O.A. filed by the Bank was partly allowed.
Briefly stated facts of the matter are, that the appellant-Bank granted housing loan to the respondent no. 1 and the respondents no. 2 & 3 were the co-borrowers. The loan was secured by the personal guarantee of the borrowers and equitable mortgage of the house belonging to the respondents no. 1 & 2. A sum of Rs. 10,24,160/- was sanctioned on 24.04.2006 and was disbursed thereafter. The borrowers were required to repay the loan in 180 EMIs, but they have repaid only some EMIs and failed to deposit thereafter. Therefore, the account was declared as NPA on 10.12.2008 and the loan was recalled vide notice dated 11.08.2010.
It transpires that no action was taken against the borrowers by the Bank for about eight years and kept on to charge the interest and penal interest in the account. Ultimately, the O.A. was filed on 21.04.2018 before the DRT claiming a sum of Rs. 32,66,228.66, which included principle outstanding, late payment penalty, amount of pending installments, as also the cheque bouncing charges.
The respondents-defendants did not appear before the Tribunal below, hence they were proceeded ex-parte.
The Tribunal below vide impugned order rejected the claim with regard to the penal interest and due installments and decreed the principle amount of Rs. 9,28,127/- along with pendentelite and future interest @ 10% per annum simple against the defendants no. 1 & 2 only to the extent of value of mortgaged property and dismissed against the defendant no. 3 being barred by time. Being aggrieved by a part of rejection of the claim, the appellant-Bank has challenged the same by filing the present appeal to a limited extent.
The respondents have not appeared despite service, therefore, they were proceeded ex-parte in this appeal also.
Learned counsel for the appellant submitted that the Bank had proved on record with the help of various documents, which were also relied upon by the Tribuanl below, yet the penal interest, amount of due installments and the cheque bouncing charges were declined without giving any justification. The Bank was entitled for total claim on the basis of the documents executed by the respondents. Therefore, the amount as claimed by the Bank may be allowed.
However, on being queried that what were the reasons for not filing the O.A. at the earliest, the learned counsel replied that the Bank was waiting that the respondents may deposit the amount on persuasion. With regard to charge of penal interest @ 24%, the leaned counsel was not in position to show any documents executed by the borrowers in this behalf. However, the learned counsel has referred to one judgment passed by this Tribuanl in Appeal Sr. No. 155/2016-ICICI Bank Ltd. Vs. Sarita Saraf & Another, decided on 06.01.2020 to contend that this Tribuanl has earlier awarded the penal interest, therefore, such interest be allowed on the same analogy.
Having heard the learned counsels for the appellant and considering the material available on record, it is undisputed that the account was declared as NPA on 10.12.2008 and the recall notice was issued on 11.08.2010 to the respondents. No further action was taken and the O.A. was filed on 21.04.2018. Thus, it was apparently beyond the limitation prescribed for money suit in personal capacity and hence the Tribuanl below has rightly dismissed the O.A. against the defendant no. 3 and exonerated the defendants no. 1 & 2 from the personal liability and the recovery was restricted to the mortgage of the property, because it was within limitation for enforcement of the mortgaged.
The Tribuanl below relying upon a judgment of the Hon'ble Supreme Court in CBI Vs. Ravindra, AIR 2001 SC 3095 had declined to award the penal interest, as also the interest for intervening period on the ground that the Bank has not submitted the details and if such amount is allowed, it would be undue enrichment for the secured creditor.
The principal outstanding of Rs. 9,28,127/- as part of the future EMIs is not in dispute and that amount was rightly determined in favour of the Bank. The dispute is with regard to late payment penalty and the amount of unpaid (due) installments and the cheque bouncing charges. The Bank has submitted that an amount of Rs. 11,49,646/- was to be recoverable as late payment penalty, which was as per Bank, @ 24% per annum, but there is no document on record to show that the borrowers have ever executed such document or they were apprised by the Bank at any point of time. Learned counsel for the Bank was also not in position to show the Tribuanl any of such documents, whereby the borrowers may be held liable for any penal interest. Therefore, the penal interest cannot be allowed on mere asking in absence of any document to this effect. Hence, the Bank is not entitled to recover Rs. 11,49,646/-as late payment penalty and this claim was rightly rejected by the Tribuanl below.
A claim of Rs. 6,566/- has been made towards cheque bouncing charges. The document placed at page 124 of the paper book demonstrates that the borrowers have agreed to pay Rs. 200/- plus service tax on account of dishonor of every cheque. The statement of account indicates that so many cheques were bounced, therefore, the appellant-Bank is entitled for recovery of this amount from the respondents no. 1 & 2 as per agreement.
The next pertinent issue is with regard to the amount of overdue installments, which was Rs. 11,78,119/- as per claim of the Bank. The bifurcation of this amount as shown at page no. 140 reflects that out of this amount, Rs. 48,083/- was the principal component and Rs. 11,30,036/-was the interest on unpaid EMIs. This interest was calculated and applied @ 12% to 14.50% from time to time. However, in my considered view, the Bank is not entitled to charge the interest at this exorbitant rate for a pretty long time of about eight years. The recall notice was sent in the year 2010, therefore, the Bank was expected to file O.A. or to invoke the SARFAESI proceedings as early as possible. A period of one year or two years in taking legal measures may be understandable on the ground that the borrowers may be approached for persuasion, but a period of eight years, by no stretch of imagination, may be treated as a period for persuasion and waiting. It only indicates that the Bank kept on waiting only with a motive to earn higher rate of interest and late penalty charges etc. on the loan and was assured for recovery, because the property was mortgaged with them, which may be enforced at any time within 12 years.
Thus, it is a clear case of intention of undue enrichment. Therefore, the Bank is not entitled to get the interest @ 14.50% or any penal interest. But on the other hand, since the amount was due from the borrowers, therefore, the total denial of the interest cannot be said to be justified. Thus, adopting the balance situation and to meet the ends of justice, I deem it proper to award the interest at the rate of 10% per annum simple, which is almost equivalent to the basic contractual rate of 8.75% per annum compoundable.
The statement of account demonstrates that the regular installments were deposited till the month of April, 2010, therefore, this interest is applicable from the month of May, 2010. The principal amount of Rs. 48,083/- was towards the unpaid EMIs and Rs. 9,28,127/- is the principal amount towards the future EMIs. Thus, the total principal amount was Rs. 9,76,210/- and the Bank is entitled to charge the interest @ 10% per annum simple from the respondents no. 1 & 2 on this amount from 10.05.2010 till filing of the O.A.
The Tribuanl below has mentioned the rate of interest to be 10% per annum simple in the body of the jdugment, but in the operative portion, it has mentioned 12%. Thus, it appears that 12% was written due to typographical error and inadvertence. Thus, the Bank is entitled for pendentelite and future interest @ 10% per annum simple on the said amount.
This Tribuanl is well aware about the judgment dated 6.1.2020 (Supra) referred to by the counsel for the appellant, wherein the penal interest was allowed, but in that case, the borrowers have executed the documents accepting the penal rate of interest and the O.A. was filed within a year after recalling the loan and declaring the account as NPA, whereas the facts of the present appeal are entirely different as stated above. Therefore, the argument referring the said judgment is misconceived.
In view of the above, the appeal is partly allowed. Para 4 of the impugned order is modified in the manner that-
(a) the Defendants No. 1 & 2 are liable to pay Rs. 9,76,210/- together with pendentelite and future interest @ 10% per annum simple from 10.05.2010 till realization. The Bank is also entitled for recovery of Rs. 6,566/- towards cheque bouncing charges.
(b) The liability of the defendants no. 1 & 2 is restricted to the value of the mortgaged property only. The O.A. of the Bank against the Defendant no. 3 is dismissed as barred by limitation.
(c) Clause No. II and III of para 4 of the impugned judgment shall remain intact.
(d) The Tribuanl below shall modify the recovery certificate accordingly.
(e) No order as to costs.
A copy of this judgment be forwarded to the parties as well as to the DRT concerned and be also uploaded on the e-DRT portal.