Kerala Gramin Bank vs E. J. Babu And Ors

This Original Application has been filed on 01.01.2018 by the applicant bank under S.19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - for short 'the Act' - for recovery of a total sum of Rs.27,91,180/- being the amount due under various loan accounts in favour of the applicant granting the following reliefs :

(a) the sum of Rs.4,07,138/- being the amount due under the KCC loan account with interest on the sum of Rs.3,89,569/- @12% per annum with half yearly rests from the defendants 1 & 2 and by sale of 'A' & 'B' schedule immovable properties;

(b) the sum of Rs.6,75,352/- being the amount due under the MLS (Mortgage loan) account with interest on the sum of Rs.6,20,612/- @18% per annum with quarterly rests from the defendants 1 & 2 and by sale of 'A' & 'B' schedule immovable properties;

(c) the sum of Rs.2,20,939/- being the amount due under the CLSot loan account with interest on the sum of Rs.2,05,544/- @16.5% per annum with quarterly rests from the defendants 1 & 2 and by sale of 'A' & 'B' schedule immovable properties;

(d) the sum of Rs.8,36,032/- being the amount due under the LDTL loan account with interest on the sum of Rs.7,88,078/- @15% per annum with quarterly rests from the defendants 1 to 3 and by sale of 'A' & 'B' schedule immovable properties; and

(e) the sum of Rs.6,51,719/- being the amount due under the MI loan account with interest on the sum of Rs.6,10,580/- @15% per annum with quarterly rests from the defendants 1 to 3 and by sale of 'A' & 'B' schedule immovable properties.

The defendants were duly served with summons by registered post. But the defendants never appeared nor were they represented and thus they were declared exparte on 05.10.2018.

The Manager and the Principal officer of the applicant bank, as AW1 filed proof affidavit and got marked Exts.A1 to A44 in support of its case.

Although the defendants remained exparte, I have examined the question of maintainability and jurisdiction and I found that the OA is well maintainable and this Tribunal has jurisdiction to entertain the OA.

According to the applicant bank, the defendants 1 & 2 were granted various credit facilities during the year 2008-2009 availed from the erstwhile North Malabar Gramin Bank (which was subsequently merged with the applicant bank) a KCC loan of Rs.1,50,000/- and a MLS loan of Rs.2 Lakhs for cultivating agricultural land crops and also for purchase of land on due execution of necessary security documents in its favour. As per agreement, the KCC loan with interest was to be repaid on 30th September and 31st March in each year. The MLS loan with interest was to be repaid in 84 equated monthly instalments of Rs.3,972/-each commencing from 24.10.2008 and ending on 24.09.2015. The repayment of the amounts due under the aforesaid loan was secured by the equitable mortgage created by the defendants over 'A' & 'B' schedule immovable properties.

Further at the request of the defendants 1 & 2, the applicant bank sanctioned a CLSot Loan of Rs.2,50,000/- on 31.10.2008 for the purpose of acquiring machinery for starting/expanding the photocopying machine on due execution of necessary security documents in its favour. As per agreement, the CLSot loan with interest was to be repaid in 60 equated monthly instalments of Rs.5,882/- each commencing from 30.11.2008 and ending on 30.10.2013. The repayment of the amounts due under the aforesaid loan was secured by the equitable mortgage created by the defendants over 'A' & 'B' schedule immovable properties.

It is also the case of the applicant bank that at the request of the 1st defendant as principal borrower and 2nd and 3rd defendants as guarantors availed a LDTL (Land Development Term Loan) of Rs.2,92,000/- for the purpose of construction of drying yard and store house was sanctioned on 11.05.2009 on due execution of necessary security documents in its favour. As per agreement the LDTL loan with interest was to be repaid in 9 yearly instalments each commencing from 10.05.2010 and ending on 10.05.2018. The repayment of the amounts due under the aforesaid loan was secured by the equitable mortgage created by the defendants over 'A' & 'B' schedule immovable properties.

According to the applicant, the defendants 1 to 3 requested for MI (Minor Irrigation) loan of Rs.2,28,000/- on 11.05.2009 for the purpose of digging pond on due execution of necessary security documents in its favour. As per agreement the MI loan with interest was to be repaid in 8 yearly instalments each commencing from 11.05.2010 and ending on 11.05.2017. The repayment of the amounts due under the aforesaid loan was secured by the equitable mortgage created by the defendants over 'A' & 'B' schedule immovable properties.

It is submitted by the applicant bank in paragraph 5.22 of the OA, that the penal interest charged in the various loan accounts are Rs.19,964/-, Rs.65,167/-, Rs.18,006/-, Rs.55,120/-and Rs.47,286/- respectively and the penal interest charged in the account has been capitalised. This has been reiterated by AW1 in paragraph 24 of his proof affidavit.

The proof affidavit of AW1 along with Exts.A39 to A43 account relating to the various loan accounts shows that the amounts claimed as due under the OA is inclusive of the aforesaid amounts. It is well settled that penal interest cannot be capitalised and no interest can be charged on penal interest. If any authority is required we find the same in the decision of the Hon'ble Supreme Court in Central Bank of India v. Ravindra [reported in AIR 2001 SC 3095 : (2002) 1 SCC 367 : 2002 (1) KLT 743(SC)]. Therefore, the applicant bank is not entitled to seek for recovery of the sum of Rs.2,395/-, Rs.10,427/-, Rs.2,611/-, Rs.7,166/- and Rs.6,147/- and to claim interest on the aforesaid penal interest of Rs.19,964/-, Rs.65,167/-, Rs.18,006/-, Rs.55,120/- and Rs.47,286/-.

In the above circumstances, the case of the applicant bank regarding recovery of the sum of Rs.4,07,138/- (mistaken shown in the OA as 'Rs.4,09,533/-') claimed as due under Ext.A39 certified copy of the statement of account relating to the KCC loan less the aforesaid sum of Rs.2,395/-, i.e. Rs.4,04,743/- as on 31.12.2017, the date of the OA with interest pendentelite and post final order interest on the sum of Rs.3,84,779/- from the defendants 1 & 2 and by sale of 'A' & 'B' schedule immovable properties; recovery of the sum of Rs.6,75,352/- (mistaken shown in the OA as 'Rs.6,85,779/-') claimed as due under Ext.A40 certified copy of the statement of account relating to the MLS loan less the aforesaid sum of Rs.10,427/-, i.e. Rs.6,64,925/- as on 31.12.2017, the date of the OA with interest pendentelite and post final order interest on the sum of Rs.5,99,758/- from the defendants 1 & 2 and by sale of 'A' & 'B' schedule immovable properties; recovery of the sum of Rs.2,20,939/- (mistaken shown in the OA as 'Rs.2,23,550/-') claimed as due under Ext.A41 certified copy of the statement of account relating to the CLSot loan less the aforesaid sum of Rs.2,611/-, i.e. Rs.2,18,328/- as on 31.12.2017, the date of the OA with interest pendentelite and post final order interest on the sum of Rs.2,00,322/- from the defendants 1 & 2 and by sale of 'A' & 'B' schedule immovable properties; recovery of the sum of Rs.8,36,032/- (mistaken shown in the OA as 'Rs.8,43,198/-') claimed as due under Ext.A42 certified copy of the statement of account relating to the LDTL loan less the aforesaid sum of Rs.7,166/-, i.e. Rs.8,28,866/- as on 31.12.2017, the date of the OA with interest pendentelite and post final order interest on the sum of Rs.7,73,746/- from the defendants 1 to 3 and by sale of 'A' & 'B' schedule immovable properties; and recovery of the sum of Rs.6,51,719/- (mistaken shown in the OA as 'Rs.6,57,866/-') claimed as due under Ext.A43 certified copy of the statement of account relating to the MI loan less the aforesaid sum of Rs.6,147/-, i.e. Rs.6,45,572/- as on 31.12.2017, the date of the OA with interest pendentelite and post final order interest on the sum of Rs.5,98,286/- from the defendants 1 to 3 and by sale of 'A' & 'B' schedule immovable properties are proved by the uncontroverted averments in the proof affidavit of AW1 along with Exts.A1 to A44.

Having regard to the amounts availed for various operations, and the repayments made, and the interest and the penal interest charged, and the prevailing rate of interest for advances, this Tribunal, in exercise of its discretionary power conferred upon it under S.19(20) of the Act in granting interest is of the view that the applicant bank is entitled to get interest pendente-lite and post final order interest @8% per annum for KCC loan; @12% per annum for MLS (Mortgage loan); @ 13% per annum for CLSot loan; @ 11% per annum for LDTL loan and @ 13% per annum for MI loan. .

The applicant bank, therefore, is entitled to and given a final order on the following lines:-

(a) The applicant bank is allowed to recover:-

(i) The sum of Rs.4,04,743/- (Rupees Four Lakhs Four Thousand Seven Hundred Forty Three only) with interest pendentelite and post final order interest on the sum of Rs.3,84,779/- (Rupees Three Lakhs Eighty Four Thousand Seven Hundred Seventy Nine only) @ 8% per annum from 01.01.2018 from the defendants 1 & 2 and by sale of 'A' & 'B' schedule immovable properties;

(ii) The sum of Rs.6,64,925/- (Rupees Six Lakhs Sixty Four Thousand Nine Hundred Twenty Five only) with interest pendentelite and post final order interest on the sum of Rs.5,99,758/- (Rupees Five Lakhs Ninety Nine Thousand Seven Hundred Fifty Eight only) @ 12% per annum from 01.01.2018 from the defendants 1 & 2 and by sale of 'A' & 'B' schedule immovable properties;

(iii) The sum of Rs.2,18,328/- (Rupees Two Lakhs Eighteen Thousand Three Hundred Twenty Eight only) with interest pendentelite and post final order interest on the sum of Rs.2,00,322/- (Rupees Two Lakhs Three Hundred Twenty Two only) @ 13% per annum from 01.01.2018 from the defendants 1 & 2 and by sale of 'A' & 'B' schedule immovable properties;

(iv) The sum of Rs.8,28,866/- (Rupees Eight Lakhs Twenty Eight Thousand Eight Hundred Sixty Six only) with interest pendentelite and post final order interest on the sum of Rs.7,73,746/- (Rupees Seven Lakhs Seventy Three Thousand Seven Hundred Forty Six only) @ 11% per annum from 01.01.2018 from the defendants 1 to 3 and by sale of 'A' & 'B' schedule immovable properties; and

(v) The sum of Rs.6,45,572/- (Rupees Six Lakhs Forty Five Thousand Five Hundred Seventy Two only) with interest pendentelite and post final order interest on the sum of Rs.5,98,286/- (Rupees Five Lakhs Ninety Eight Thousand Two Hundred Eighty Six only) @ 13% per annum from 01.01.2018 from the defendants 1 to 3 and by sale of 'A' & 'B' schedule immovable properties.

(b) 'A' & 'B' schedule to the OA shall be appended to this final order.

(c) The applicant bank shall file memo of costs within ten days from the date of this final order.

(d) A certificate of recovery shall be drawn up on the basis of this final order and be issued along with a copy of this final order to the Recovery Officer for recovery of the amount of debt specified under paragraph 13(a) above and for distribution of the proceeds from the sale of 'A' & 'B' schedule immovable properties in the order of priority as provided under sub-section (20AB) of S.19 of the Act.

Communicate a copy each of this final order and the recovery certificate to be issued as specified under paragraph 13(d) above to both parties as provided under sub-section (21)(i) of S.19 of the Act r/w R.16 of the Debts Recovery Tribunal (Procedure) Rules, 1993 as amended from time to time.