IDBI Bank Ltd vs Laxmichand Bhaiyalal Barapatre

Ashok Menon, Chairperson

Aggrieved with the dismissal of O.A. No. 136/2010 on the files of the Debts Recovery Tribunal, Nagpur (‘DRT’ for short) dated 20.09.2011, the Applicant Industrial Development Bank of India (‘IDBI Ltd’ for short) is in Appeal.

The facts in the case, in brief, are thus:

The defendant had applied for a home loan for the purchase of property described in the document of Agreement and accordingly a sum of ₹3,12,000/- was sanctioned and various documents were executed in favour of the Bank. The loan was to be repaid in equated monthly instalments of ₹6,783/- over a period of sixty months. The defendant defaulted on the payment. He was, therefore, liable to pay the outstanding amount together with incidental charges and penal interest. A demand notice was issued to the defendant on 29.09.2010 claiming a sum of ₹10,70,650/- together with future interest. Penal interest @24% per annum is also due. The agreement to sell has been deposited by the defendant as security. The mortgaged property has to be proceeded against for realisation of the amount and anything remains to be paid after the sale of the mortgaged assets, it may be realised from the defendant personally.

The defendant appeared and filed a written statement stating that the claim is unsustainable in view of the non-joinder of the Central Bank of India. The defendant contends that his title deed pertaining to the property is deposited with the Central Bank of India and therefore, the Applicant cannot take any action against the defendant. The claim made by the Applicant Bank is denied and disputed. The Central Bank of India has proceeded against the defendant and filed R.P. No. 27/2005. The Applicant is aware of the proceedings and therefore, the defendant sought dismissal of the application.

The Ld. Presiding Officer has in the impugned order accepted the arguments of the counsel appearing for the defendant that the very same property has been mortgaged in favour of the Central Bank of India and has been proceeded against in R.P. No. 27/2005. Secondly, it was observed that apart from the 11% interest per annum charged by the Applicant Bank they have also charged penal interest on defaulted amount @24% per annum. No breakup is given regarding how much is principal amount and what is claimed as interest and penal interest. Capitalisation of penal interest is impermissible. A sum of ₹4,36,106/- is charged by way of penal interest @24% as borne out from the affidavit filed by the Applicant Bank. The Ld. P.O. observed that the penal interest is exorbitant and that the agreement of loan in which the defendant has subscribed his signatures is in English. The Ld. P.O. assumed that the defendant has not been explained the ingredients of the agreement in the vernacular and therefore, is not bound by the agreement. The charging of penal interest would, therefore, not be appropriate. When the component of the penal interest is excluded, the total claim of the Applicant would come below ₹10 lacs and would not, therefore, come within the jurisdiction of the D.R.T. Hence, the application was dismissed.

The defendant died and his only son is brought on record as the legal representative in the Appeal. Though he was served with the notice, he did not appear to contest it. The Respondent was, therefore, set ex-parte and the Ld. Counsel for the Appellant heard. Records perused.

The Ld. Presiding Officer has non-suited the Applicant on the ground that the application does not come within the pecuniary jurisdiction of D.R.T. The Ld. Presiding Officer seems to have apparently made a mistake. There is no pleading in the Written Statement questioning the pecuniary jurisdiction of the D.R.T. The defendant has also not challenged the claim regarding penal interest or about not understanding the contents of the loan agreement for it being in English. The defendant could not have raised the contention regarding not understanding the language of the agreement because his own written statement is in English. The Ld. Presiding Officer could not have assumed the ignorance of the defendant regarding the loan agreement by giving flight to his imagination, in the absence of specific pleadings in that regard. The defendant has denied the very existence of the loan. All that he has contended in the written statement is that the property has already been mortgaged to the Central Bank of India and therefore, it could not have been mortgaged to the Applicant Bank. The Applicant Bank has made a complaint to the police regarding the non-disclosure of the earlier mortgage in favour of the Central Bank of India and the police have also registered a first information report against the defendant as Crime No. 123 of 2006. Even if the property has been mortgaged twice, the Bank that has a mortgage prior in time would have the right to proceed against the property in the first instance. The loan agreement and the mortgage in favour of the Applicant do not stand automatically vitiated by the existence of a prior mortgage. There are other documents evidencing the existence of the debt. Hence, the application should have been decreed. The Ld. Presiding Officer went wrong not doing so. The component regarding penal interest is incorporated in the loan agreement and the defendant is bound by that. Under the circumstance, the impugned order disallowing the application is set aside.

In the result, the Appeal is allowed and the impugned order dated 20.09.2011 of D.R.T., Nagpur in O.A. 136/2010 is hereby set aside. The O.A. is allowed directing the defendant to pay a sum of ₹10,70,615/- to the Applicant Bank together with interest @ 6% per annum with effect from the date of filing the application till realisation and the costs. The property mortgaged shall be proceeded against in case there is an excess amount available after realising the debt due to the Central Bank of India having the first charge by virtue of the Order in R.P. No. 27/2005 in O.A. No. 100/2004 on the files of the D.R.T., Nagpur and from the defendant personally. Since the original defendant is no more the amount shall be realisable from the out of the mortgaged property, and from the legal representative of the deceased defendant (the respondent herein) to the extent of the assets belonging to the deceased defendant in his hands. A recovery Certificate shall be issued by the D.R.T. to this effect.