IDBI Bank vs M/s. Chintamani Enterprises & Ors

Ashok Menon, Chairperson

The IDBI Bank is aggrieved by the dismissal of the Original Application (O.A.) No. 569/2016 by the Debts Recovery Tribunal, Pune (DRT), vide judgment and order dated 16.10.2018. The O.A. was filed for recovery of ₹2,42,70,933.67 together with interest from the defendants jointly and severally from out of the mortgaged property, other assets and personally under the provisions of Recovery of Debts Due to Banks & Financial Institutions Act, 1993 (“RDDB Act”, for short).

The facts in brief are thus:

The defendants in the O.A. are the respondents herein. The 1st defendant is a firm of which defendant Nos. 1(a) to 1(d) are the partners. The firm and its partners had availed of two term loan facilities and a cash credit facility from Rajguru Sahakari Bank Ltd. On 11.08.2010 they approached the appellant bank to take over the credit facilities granted to them by the Rajguru Sahakari Bank Ld. and the appellant agreed. Yet another term loan was granted by the appellant to the borrowers. The aggregate debt granted to the borrowers was ₹1.93 crores. Respondents Nos. 2 to 5, stood as guarantors to the transactions. A demand draft was issued to Rajguru Sahakari Bank Ltd. for settling the dues and releasing the mortgage, and that mortgage was released on 06.10.2010 vide a registered lease deed. Demand promissory notes and hypothecation agreements were executed by the borrowers in respect of each transaction. Guarantee agreements were also executed by respondents Nos. 2 to 5 in respect of each of the transactions. Mortgage by way of deposit of title deeds was created to secure all the four facilities concerning 1/3 share of respondent 1 (a) concerning property comprised in Gat No. 650/2B/2/B and Pad land total admeasuring 6 Hectares and 46 Ares in Thembhurni village, Madha Taluk, Sholapur District. A mortgage was also created by depositing the title deeds concerning the property situated at Sortapwadi, Haveli Taluk in Pune District admeasuring 28,589 ft². On 31.03.2012, the appellant sanctioned the renewal of the facilities as requested by the respondents. Revival letters were executed by the respondents. The respondents had also executed an acknowledgement letter of confirmation on 01.08.2013.

The respondent defaulted in repayment and the appellant demanded repayment. On failure to repay, the O.A. was filed. All the defendants were served. Defendants Nos. 1(a), (b) and 2 to 4 appeared and filed written statements admitting the claim. Defendants No. 1(c) and (d) filed written statements, admitting that they were partners of the firm. However, defendant No. 1(c) claims to be an illiterate person ignorant about the business of manufacturing ash bricks by the firm. The firm was being managed by defendant No. 1(a), and defendants Nos. 1(c) and (d) were mere sleeping partners. It is pointed out that the beneficiaries of the loan obtained from Rajguru Sahakari Bank Ltd. were originally defendant Nos. 1(a) and (b) alone. Signatures of defendants Nos. 1(c) and (d) were fraudulently obtained in the proposal submitted to the appellant bank by defendant No. 1(a) in collusion with the bank officials. The funds obtained for the firm were all diverted by defendant No. 1(a) fraudulently and defendants Nos. 1(c) and (d) came to know about the transactions only after receiving the summons in the O.A. The officers of the bank had also informed defendant No. 1(c) and the husband of defendant No. 1(d) that the loan was being restructured on receiving ₹50 lakhs from defendant Nos. 1(a) to (d) and a further sum of ₹25 lakhs from defendants Nos. 1(a) and (b). It is contended that the bank officials in collusion with defendant No. 1(a) had cheated defendant No. 1(c) by taking advantage of his being an illiterate person.

On considering the evidence placed and the arguments advanced, the DRT observed that the prayer clause 6 (a) in the O.A. does not seek any relief against defendant Nos. 1(a) to 1(d) and relying upon the decision of the Hon’ble Supreme Court in Standard Chartered Bank vs. Noble Kumar & Anr. (2013) 9 SCC 620 that the Tribunal has no inherent powers to grant orders and relief which has not been prayed for, dismissed the claims against the defendant Nos. 1(a) to 1(d). The DRT also observed that the applicant’s claim is based solely on the sanction letter and that it has failed to plead and establish a case of defendants signing and executing the documents including the renewable document. The DRT further finds that there is no documentary evidence pointing to the authority of defendant No. 1(c) to create a mortgage. And it was also observed in the impugned judgment, that the merger of three term loans is neither pleaded nor proved. The O.A. was also dismissed on grounds of capitalisation of penal interest. The Ld. Presiding Officer observes that the renewal of the cash credit facility was on 31.03.2012 and that the O.A. filed is beyond the period of limitation only on 05.06.2015. The appellant is aggrieved and hence in appeal.

In this appeal, the respondents were all served, but none except respondent No. 1(c) appeared to contest the appeal. Heard. Records perused.

It is to be noted that none of the defendants except defendants Nos. 1(c) and (d) had contested the O.A. the other defendants had admitted the claim. Yet the Ld. Presiding Officer dismissed the O.A. on grounds, which do not appear to be tenable.

The first ground on which the O.A. was dismissed is that there is no relief sought against defendant Nos. 1 (a) to (d). A reading of the relief in paragraph 6 (a) in the O.A. indicates that the applicant had prayed for a Recovery Certificate against defendant Nos. 1 to 5 jointly and severally. The Ld. Presiding Officer interprets this prayer by stating that no specific prayer is sought against defendant Nos. 1 (a) to (d). This finding appears to be perverse. When relief is sought against defendants Nos. 1 to 5, which obviously includes defendants Nos. 1 (a) to (d) as well. The 1st defendant is a firm. A firm is a compendium of persons described as its partners. The partners of the 1st defendant firm have been arrayed in the O.A. as defendant Nos. 1 (a) to (d). Hence, when relief is sought against defendants Nos. 1 to 5, it necessarily includes defendants Nos. 1 (a) to (d) also. The interpretation of the Ld. Presiding Officer is curious and pedantic. Hence, the dismissal of the appeal on that ground is ex facie unsustainable. Reliance on the decision Noble Kumar (supra) and the interpretation of the Ld. Presiding officer is out of place. the ratio-decidendi is contrary to the observation of the DRT.

Then comes the question of whether the appellant has proved the existence of a debt. Defendants Nos. 1 (a), (b) and 2 to 4 have in their written statements admitted the execution of the documents in favour of the appellant and also admitted the loan transaction. The 5th defendant did not file any written statement contesting the claim. The only contesting parties are defendants Nos. 1 (c) and (d). They admit to being partners of the firm. They have also not disputed the execution of the documents, the creation of the mortgage and the availing of the loan. Their specific contention is that they were cheated and fraudulently made to sign certain documents by the officials of the bank in collusion with defendant No. 1 (a) who was running the partnership business. It is also stated that defendant No. 1 (c) is illiterate and was therefore gullible to the fraud committed by the officers of the bank in collusion with defendant No. 1 (a).

A case of fraud and collusion has to be proved by the person who pleads it. There is no dispute that the contesting respondents have admitted the entire transaction. The only defence taken by them is that respondent No. 1 (c) had been misled by the bank official in collusion with respondent No. 1 (a) to execute certain documents in favour of the bank to create the liability. There is not a scintilla of evidence to prove the existence of fraud and collusion as alleged.

The Hon’ble Supreme Court has in the decision Rangammal vs. Kuppuswami and Ano. (2011)12 SCC 220, held that the burden of proving a fact lies on the person who asserts that fact. The Hon’ble Apex Court has in M. Sankaranarayanan vs. Deputy Commissioner, Bangalore & Ors(2017) 13 SCC 661 held that fraud cannot be presumed. It has to be pleaded and proved by the person who alleges it.

Given the discussions made above, I find that the DRT has gone wrong in non-suiting the appellant. The impugned judgment is, therefore, quashed and set aside.

The appeal and the O.A. are allowed. Defendants No. 1 to 5 jointly and severally directed to pay to the appellant bank a sum of ₹ 2,42,70,933.67 together with interest @ of 13.25% p.a with monthly rests with effect from the date of filing of the O.A. till realisation, personally and from out of the mortgaged properties referred to in the O.A. and the other assets. A recovery certificate be issued in favour of the appellant bank in the above terms.