ORDER
Harihar P. Chaturvedi, J. (Presiding Officer)
1. The applicant Bank the Vysya Bank Ltd., is a Scheduled Bank registered under the Banking Regulations Act, having its branches all over India and one of such branch to Mount Road, Chennai and also at Coimbatore which is now represented by its Chief Manager. The applicant Bank has filed the present transferred application against the defendants and claims Recovery Certificate to be issued for a sum of Rs. 66,91,009.64 p. against them jointly and severally together with contractual rate of interest from the date of filing of TA till the date of realization. The applicant Bank has further prayed for sale of Schedule mentioned properties. The applicant Bank also prayed for the cost and other relief(s) which are necessary for rendering justice.
2. The brief facts raising to the present TA are that the D1, M/s. Meridian Electric Company is a partnership firm for which defendants D2 and D3 are its partners. The firm was engaged in the manufacture of winding wires, enamelled copper wires which are widely used in the electrical and electronic gadgets. The respondent company was stated on 1.7.1987 as Small Scale Industries and was also issued with a provisional registration certificate by the Director of Industrial and Commerce. The respondents further approached the applicant Bank for various credit facilities and the applicant Bank has sanctioned them a term loan of Rs. 25 lakhs on 24.5.1989 for purchase of plant and machinery. The said term loan was sanctioned under the IDBI refinancing facility with a leave period of one year from the date of disbursement in six half-yearly instalments. For availing of the above said loan facilities the D1 executed necessary loan agreements/documents such as demand promissory note, term loan agreement, hypothecation of movables, rate of interest, etc. In addition to the above, the D2 to D8 have also executed their personal guarantee for due repayment of the loan amount. The D8, being as power agent of D4 to D6, has executed a letter of confirmation of deposit of title deeds owned by them. Further the applicant Bank sanctioned Rs. 5 lakhs under OCC limits and Rs. 10 lakhs under Bill purchases limits and the defendants executed necessary loan agreements/documents for the same. The defendants executed acknowledgement of debts on 6.11.1990 and on 1.1.1992. After the commencement of production, the defendants did not repay the loan amount after the holiday period was over. The defendants vide their letter dated 12.12.1991 admitted that the factory premises had been locked and the factory was not functioning whereas the D1 in its letter dated 1.11.1991 had stated that the unit was running irregularly for the past three months. The D1 and the D2 were called upon the defendants to repay the overdue amounts as early as in 1991. Thereafter the whole of the operation of the loan account became standstill in the beginning of 1992. Therefore the applicant Bank issued lawyer’s notice dated 10.10.1993 to the defendants recaling the advances made to the D1 from all the defendants. However, the defendants in spite of repeated demands made and remedies issued failed in and neglected to comply with the terms and conditions of the loan nor repaid the loan amount due. Hence the applicant Bank has to file the present transfer application before Madra High Court as C.S. No. 501/ 94 and prayed for justice. After the enactment of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 the same was transferred to this Tribunal and renumbered as TA 288/1997.
3. In the counter filed by the D2 in the High Court of Madras and also in the reply statement filed before this Tribunal, the D2 has stated that the D1 firm was shifted to Kangeyam to avail backward area benefits offered by the Tamil Nadu State Government and completed its erection and trials of machinery in September, 1990. He further stated that the applicant Bank along with other officials had visited the factory site and after their satisfaction only they recommended disbursement of working capital sanctioned already. He further alleged that the Branch Manager of the 2nd plaintiff had colluded with the competitors of the D1 and pressurized the D1 to sell the factory to its competitors. Further the said branch manager thwarted the efforts of the D1 company to meet the market demands. The plaintiff Banks have abruptly suspended operation of working capital without assigning any reasons at time of take-off and have been indifferent to the requests made by the D1. Further they have also prevented the D1 firm from obtaining financial assistance from N.S.I.C. and came before this Court only with unclean hands. The D2 further alleged that the equitable mortgage created by the defendants in favour of the plaintiffs Bank by deposit of title deeds of immovable properties was a sufficient security and they were also prepared to give additional security for immediate release of working capital facility. But for want of some working capital, the D1 had to borrow funds from friends and relatives to execute orders. He further alleged that the plaintiff Banks adopted deceiving tactics by not giving the actual working capital involved. They also dishonoured the sales tax cheque of the D1 to spoil the reputation of the D1. This resulted in serving of B6 notice by sales tax authorities and stopped the meagre job orders which were helpful for maintaining plant and machinery. Further, the part payment received from its various customers towards bills outstanding were never been credited and were always kept in suspense account and the legal notices issued by the Bank for the entire outstanding was without reflecting the part payments received from the defendants. The D2 further stated that in the year 1991, the D1 had got orders of the value of Rs. 5 crores from reputed companies such as Hindustan Heavy Electricals, etc., but the same could not be executed for want of funds due to the failure on the part of the plaintiff Bank in releasing working capital. Thus the Bank caused damaged to the reputation and goodwill enjoyed by the D1 firm. Subsequently thereto, the landlord of the D1 firm also forced the D1 to vacate the premises. The D2 further denied this allegation that the operation of the accounts of D1 firm was far from satisfactory. He stated that from the year 1990 to October 1991, the D1 had discounted 55 bills and the 2nd plaintiff Bank which were signed by the D8. He further denied taking any financial assistance from any other Bank and the plaintiff Bank should be called upon to produce documents in support of the wild allegations made by them. The D2 further stated that the lease proposal was mooted in the year 1993 whereas the loss of raw materials took place in the year 1991. He further alleged that the schedule appended to the Judges summons is misconceived and the plaintiff Bank had deliberately included the item not actually purchased by the D1. Thus he prayed for dismissal of the suit in limine with exemplary costs and damages awarded to the defendants.
4. The D8 in his counter denied the allegations made by the plaintiffs. He denied that bogus bills were ever floated by the defendants and D1 firm was managed by him and not by D2 and D3 as alleged. He further stated that he was the authorized signatory of the D1 firm and not for any other firm. The D2 and D3 were not involved in any transaction with Central Bank of India. The plaintiff with a view to camouflage the fraudulent and unethical conduct of their Managers have twisted the facts and made unwarranted allegations against him and other defendants. He further denied the allegation stating that he never siphoned off money from any Industrial Unit nor involved in obtaining loans as authorized signatory. He further stated that the plaintiffs have made fictitious allegations against him and other defendants which were defamatory and libelous and the plaintiff Bank should be called upon to produce documentary evidence for the same. The defendants never made any attempt to sell the plant and machinery. The negligent attitude of the plaintiffs failure to provide adequate financial assistance had led to the closure of a highly profitable and essential rate industrial unit. The D8 thus has prayed for dismissal of the suit with costs.
5. The plaintiff Bank has further filed counter to the reply statement and counter-claim of the D1 firm. The Bank denied the allegations contained in the affidavit. The Bank slated that the D8 has descried himself as Chief Executive Officer of the D1 and was to be authorised to swear on behalf of D1. But the competent persons to represent the D1 concern, excepting through power of attorney can only be the D2 and D3 (who are partners). The plaintiffs further stated that the factory was set up at Kangeyam for manufacture of Copper Winding Wire. The advances by the plaintiff Banks were all made in the year 1989 for acquisition of plant and machinery and the Bank denied the allegation that the unit was running with a meagre profit and securities offered to the tune of Rs. 35 lakhs were not correct. The plaintiffs further alleged that the D1 never adhered to any of the sanctioned conditions inclusive of the submission of stock statement for assessing the drawable limit under the working capital facility. Further the defendants have utilized Cash-Credit Hypothecation limit and also Bills purchases limit and has drawn amounts from the said facilities granted to them. It is further denied that the plaintiff had given a second charge of the assets of the defendant and also a certificate to the defendant that the unit is being financed by the plaintiff. Further the receipt of subsidy from the State of Tamil Nadu was for backward areas and Bankdenied that shifting of the factory premises was also permitted. The plaintiff Bank alleged that the unit was running irregularly even after the working capital limits were sanctioned. The defendants were indulged in unfair trade practice and not cared to utilize the advances granted by the plaintiff Bank. If the unit is actually running normally as said by the defendants, it is impossible for them to carry on the manufacturing process in the same place wherein the factory was situated instead of shifted it to Padi and other benefits available by shifting so. The plaintiff alleged that the defendants tried to delay the process of recovery of the amount due and prayed for further orders.
6. I perused the pleadings made by both the parties in their plaints as well as the documents produced and relied on. I further gone through the PA of the applicant Bank Manager Sh. B. Balasubramanian Exs. A1 to A50. No counter proof-affidavit has been filed by the defendants. Therefore following points of issue are framed for the disposal of this case.
(a)
ISSUES
FINDINGS
Whether the present suit is filed by the
Bank is within limitations and maintainable
YES
(b)
Whether the Bank made a negligent attitude
and remained failure to provide adequate financial facilities to the
defendants.
NOT PROVED
(c)
Whether the present TA is liable to be
dismissed due to non-cooperative attitude of the Bank in failure to provide
further financial assistance to D1 and causing damage to the reputation and
goodwill enjoyed by the D 1 firm
NOT PROVED TA CLAIM IS MAINTAINABLE
(d)
Whether the applicant Bank has successfully
proved its debts due in suit claim?
YES
(e)
Whether the applicant Bank is entitled for
recovery certificate as per provisions of the Recovery of Debts Due to Banks
and Financial Institutions Act, 1993?
YES
(f)
If so, upto what extent?
As per final order
(g)
Other relief for rendering justice.
As per final order
As the above said points of issue are same loan transaction and are mixed questions of law and facts and they are being discussed jointly and decided commonly.
7. In order to prove its claim and establish the debt, the applicant Bank files proof affidavit of Associate Vice-President Shri S. Balasubramanian of the applicant Bank along with the documents Exs. A1 to A50. The Bank witness categorically and elaborately stated the facts of loan transaction entered into between the Bank and D1 firm and availing of loan facilities and confirming the execution of loan agreement/documents by D2 and D3. The applicant Bank witness has categorically denied in his proof-affidavit of defendant’s allegation made in their reply statement. The witness has further stated that D1 is a partnership firm in which D2 and D3 are its partners. The D1 is engaged in manufacturing of winding wires, enamelled copper wires which are elaborately used for electrical and electronic gadgets. The witness further stated that the respondent approached the applicant Bank for various credit facilities with all the above representations that there is wide range of market as enamelled copper wires are crucial component for the performance of the said electronic items and durability, consumption of power efficiency, etc. of such electrical items solely depend on the winding wires, used in such machines and there is good scope for doing business in this field that they need certain credit facilities. The Bank witness further stated that the D1 firm further stated in 1971 as being a Small Scale Industries and also got its registration provisionally and was having certificate of Director of Industries and Commerce. The witness further confirmed that for availing of the loan facilities respondents/defendant Nos. 4, 5, 6, 7 and 8 also represented and undertook that they will stand as a guarantee in their individual person capacity for the loan amount advanced to the D1 firm. By considering these facts and by relying on the assurances, the Bank considered the request of the D1 firm for financial assistance to the tune of Rs. 25 lakhs under Term Loan facilities and the Bank sanctioned said term loan facilities of Rs. 25 lakhs with 25% margin for purchase of Plant and Machinery. The witness further stated that the Term Loan was to be repaid with a leave period of one year from the date of disbursement in six instalments which was due in every six months. The witness further stated that the loan was sanctioned by the Bank to the defendants with this main objective of purchasing plant and machinery which were to be installed in the factory premises as described in schedule “A”. As per the loan agreement, the defendants executed demand promissory note for Rs. 25 lakhs as a security for the term loan sanctioned (Ex. A1) and the D1 further agreed to pay interest at the contractual rate and shall be compounded quarterly. As per the Bank witness, the defendants further agreed that in the event of committing default by the defendants in operation of loan account, the plaintiff Bank would be at liberty to charge interest at 2% over and above the rate agreed as default interest. The witness further stated that the defendants executed other documents in favour of the Bank to secure the loan money which are agreement of hypothecation of movables dated 24.5.1989, etc. The defendants further executed other documents by waiving their claim, right for any notice relating to the change in the rate of interest. They also executed personal guarantee by D2 to D8 which are marked as Exs. A5 to A9. The Bank witness further stated that the defendants acted as a power agent of D4 and D6 but execution letter of confirmation of deposit of title deeds in respect of agricultural land which are owned by the defendants in various survey numbers and are situated at Tirupalaivanam Village, Minjur Panchayat Limit. They deposited these title deeds with an intention to create equitable mortgage in favour of the Bank. The witness further confirmed that thereafter another loan of Rs. 5 lakhs was sanctioned by the Bank with a margin of 5% as OCC limit and another Rs. 10 lakhs with a margin of 10% under the Bill Purchases Limit for which the defendants executed necessary documents which are descried in para 6 to 8 of proof-affidavit. The witness further stated in para 7 of the proof-affidavit that all the loan facilities availed by the defendants was sanctioned by Sanctioned Ticket Certificate (A25). The Bank further wrote certain correspondence with the defendant firm in respect of loan transaction and repayment of loan.
8. The witness further denied in para 8 of his proof-affidavit about the allegation of the defendants made in their reply statement and further rejected all the contentions of the defendants by stating that the defendants have merely a bald allegation that the Bank did not cooperate but not furnished any proof thereof. The witness further clarified and denied that the Bank cannot be found fault if no sale tax was paid and for some action taken by the tax authorities. In their reply statement the defendants admitted that they could not paid the sale tax for want of financial assistance from the Bank, but the defendants did not produce any proof in respect of apathetic attitude of the Bank or the Bank failed to discharge any contractual obligations. The Bank witness further stated that in fact that the Bank fully cooperated with the defendants even in shifting of the premises and all the allegations made by the defendants are baseless and false and without any material and there is no case at all for filing counter-claim against the applicant Bank by the defendants. The witness categorically confirmed and stated that the defendants were failed in maintaining their account satisfactorily and that is why the Bank was recalled the advance made. The Bank has furnished true statement of accounts in respect of loans which are mentioned as Ex. A30 to A35 which shows an outstanding balance. The witness further confirmed the defendants secured the loan by depositing title deeds in favour of the Bank by creating equitable mortgage and the title deeds are standing in the name of Munirathnam Naidu. The witness further explained that Ms. Venkatamma has obtained the property under a partition deed and original of which was not available with her and the other members of her family has given indemnity in favour of the plaintiff Bank that only documents of title deeds in proof of Venkatamma for 4 acres was only a certified copies of the partition deed and they have no right to claim title or interest over the property. They are also fully aware of the guarantee by their mother of the amount advanced to the D1 and that by deposit of the certified copy of the partition deed as equitable mortgage. Apart from this, the Bank witness further stated that the D7, Mr. Srinivasalu has also mortgaged schedule “B” property as the only legal heirs of his mother Mrs. M. Pappamma. The witness further stated that reply filed by the applicant Bank to the counter-claim of the defendants may be treated as a part and parcel of proof-affidavit and the defendants are to be put to strict proof of their allegations made in their reply statement.
9. A careful scrutiny of the proof-affidavit filed by the Bank shows that the proof-affidavit of the Bank goes unrebutted because no counter-proof affidavit has been filed by the defendants. Moreover, in the present matter, the defendants filed their reply statement with counter-claim but they failed to pay any requisite Court fee for counter-claim which is required as per the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act and it was amended in the year of 2000. It is also well-settled legal position in the Act when the defendants filed counter-claim and the said counter-claim was not maintainable in this Tribunal because at that time in this Tribunal only the plaintiff Bank can file a suit and defendants has no right to file any counter-claim of officer issues to seek counter release. After the amendment of Recovery of Debts Due to Banks and Financial Institutions Act, 2000, the necessary provisions were made by allowing the parties to file counter-claim. Through the defendant was equally required to pay the requisite feeds for counter-claim which is Rs. 1.50 lakhs the defendants has sought a relief for want of Rs. 1,16,44,940/- against the Bank. Hence the counter-claim is not maintainable for want of necessary and requisite application fees. Moreover, the defendants also failed to categorically state that now the counter-claim is within limitation as the defendants alleged to have suffered some loss due to non-cooperative attitude of the Bank between the period 1991-1994 which caused business problem and hardship in payment of tax. But it is admitted position that these transactions are pertaining to the period between year 1991 and 1994. Moreover, the defendants tried to claim loss/profit by the prospective order which amount to the tune of Rs. 7 crores and abpve but they have stated their claim to the extent of Rs. 1.16 crores and odd. The said orders were supposed to receive only between this period 1991-94, then they were equally required to file this counter-claim immediately within limitations of three years from the date of cause of action arose while the present reply statement and counter was filed in this Court for the first time on 15.7.1999 whereas the suit was filed during the year 1997. The defendant has not given any explanation for this as to how counter-claim/damage suit is maintainable against the Bank’s fact and within limitation. Hence this counter-claim is hit by the provisions of limitations act and is rejected as time-barred.
10. Apart from this, when the defendants preferred a counter-claim they are equally required to file proof-affidavit in support of the counter-claim and to produce themselves in this Court for the purpose of cross-examination to ascertain the correct facts. They were equally required to produce the relevant document in support of their counter-claim and other documents to confront and rebut the claim made by the Bank and the documents produced and relied on. But the defendants utterly failed to produce any relevant document to substantiate their counter-claim or to dispute or disprove the IA claimant to rebut the documents produced and relied on the Bank. The defendants only attempted to make an evasive allegation in their counter-claim/reply statement on the Bank but they have not mentioned even the name of the concerned Bank officer which can be held responsible for alleged non-cooperative attitude. Further they tried to raise fingers against one of the manager of the Bank for wrongful attitude with arbitrary motive and he suffered to loss and goodwill but they utterly failed to call the same manager as witness in this Court for cross-examination nor they have narrated categorically that what action of the Bank or its wrongful activities leads to the loss to the defendants. This Court is not supposed to cast an aspersion on any public authority/Bank Manager without giving him a reasonable opportunity of being heard. Hence this allegation made by the defendants in their reply statement and counter-claim are liable to be rejected for want of proof or being devoid of merit.
11. As the defendants failed to produce themselves as witness to prove their counterclaim nor failed counter-claim within limitation nor paid any requisite Court fees, hence, this Court can safely conclude that the counter-claim is not maintainable at all in this Court and liable to be rejected being devoid of merit and time-barred. Hence the same is rejected. As the defendants also failed to cross-examined the applicant Bank nor filed counter proof-affidavit nor produced any document to confront the document produced and relied on by the Bank, hence the proof affidavit filed by the applicant Bank becomes unchallenged and successfully proved. It is held the applicant Bank has established its dues against the defendants and entitled for the recovery certificate of the debt due to the Bank. Hence, it is held the TA claim is proved and the applicant Bank is entitled for recovery certificate for Rs. 66,91,009.64p (inclusive contractual rate of interest till date of filing C.S. 501/94 before the High Court of Madras).
12. However, for awarding pendente lite and future interest, I consider the facts and circumstances of the present case by relying on the principle of natural justice as contemplated under Section 22 of the DRT Act, and also relying on the judgment of the Hon’ble Supreme Court in N.M. Veerappa v. Canara Bank, II (1998) SLT 361=I (1998) CLT 88 (SC)=AIR 1998(1) 1101, by careful scrutiny of the record shows that the defendants may have to suffer some loss in their business and hence they deserve some sympathy for awarding pendente lite and future interest. Hence, I am of the view that the end of justice would meet if the applicant Bank is awarded 12% simple future interest from the date of filing of C.S. No. 501/ 94 before the High Court of Madras till realisation along with cost of the proceedings.
13. In the result it is declared that:
(1) The defendants are jointly and severally responsible to pay a sum of Rs. 66,91,009.64 p (inclusive the contractual rate of interest till the date of filing C.S. 501/94 before the High Court of Madras) and 12% (twelve) percent per annum) simple future interest from the date of filing C.S. No. 501/94 before the High Court of Madras till realisation with costs.
(2) In case of default of payment by the defendants, the applicant is at liberty to sell the application schedule property and to adjust the sale proceeds towards the amount due.
(3) If the sale proceeds are found not sufficient after defraying the expenses of such sale for the payment of all such amounts, the defendants are personally liable to pay the amount of such deficiency with interest mentioned above until realisation.
(4) In case of utter failure on the part of defendants in paying the recovery amount, the Bank is at liberty to apply to this Tribunal for Civil imprisonment of the defendants as per the law/procedure.
14. Recovery Certificate be prepared and be issued accordingly.
15. The Counsel fee be determined and certified as per Schedule of Counsel fee under the Rules prevailing in the State or agreed fees whichever is less.
16. A copy of the final order be sent to both the parties by the registry in due course.