GM, DICC, Dibrugarh; Mrinmoy Chetia, Dibrugarh; ...

This is an application under section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 filed by the State Bank of India, a body corporate, duly constituted under the State Bank of India Act, 1955 carrying on banking business through its diverse branches and in particular through a branch named State Bank of India, Moran Branch, P.O. Moranhat, A.T. Road, District - Dibrugarh, Assam and represented by the Manager, RASMECCC cum Stressed Assets Resolution Centre (SARC), Sri Gopal Gosala, Chiring Chapori, P.O. & District - Dibrugarh, Assam, Pin- 786001 with a prayer to pass an order for the Recovery of Rs. 40,92,613.73 (Rupees Forty Lacs Ninety Two Thousand Six Hundred Thirteen and Paise Seventy Three) only in favour of the applicant bank against the defendants No. 1,2 & 3 jointly and severally with pendentelite and future interest @ 15.50% (CC) and 16.25% (TL) per annum till realization, along with other relief and also against the Proforma Defendant No. 4 to the extent of the Lease Hold Right of the land. The facts in brief giving rise to the present application are as under. That the Defendant No. 2 as the proprietor of the defendant no.1 firm had approached the Applicant Bank and applied for financial assistance under KVIC Scheme for setting up a stone crushing unit by submitting a Loan Application dated 15.10.2007 and after considering the said application, the RASMECCC unit of the Applicant Bank had vide its Letter of Arrangement dated 23.04.2008 had sanctioned a Cash Credit Limit of Rs. 7,18,000.00 to the defendants no.1 and 2, with interest at 0.75% above SBAR (SBAR = 12.25% w.e.f. 27.02.2008 with an minimum of 13% per annum rising or falling therewith on daily products with monthly rests. The effective rate at the time of sanction was 13% per annum. A Term Loan of Rs. 15,87,000.00 was also sanctioned to the defendants no. 1 and 2 with interest at 1.50% above SBAR (SBAR = 12.25% w.e.f. 27.02.2008 with an minimum of 13.75% per annum rising or falling therewith on daily products with monthly rests. The effective rate at the time of sanction was 13.75% per annum. The Cash Credit Loan was repayable on demand and the Term Loan was to be repaid in 55 monthly installment of Rs. 29,000.00 each. The Defendants No.1 & 2 as the borrowers and the Defendant No. 3 as the guarantor had signed on the said Letter of Arrangement thereby agreeing to all the terms and conditions contained therein. That in connection with the sanction of the Cash Credit and Term Loan of Rs. 23.05 Lacs (CC = Rs. 7.18 Lacs + TL = Rs. 15.87 Lacs) sanctioned by the Applicant Bank and availed of by the Defendants No. 1 and 2, an Agreement of Loan cum Hypothecation dated 23.04.2008 was signed and executed by the Defendant No.2 as the proprietor of the defendant no.1 firm in favour of the Applicant Bank as security for repayment of the loan and thereby not only agreeing to all the terms and conditions of the said Agreement but also hypothecated the stocks, current assets of the defendant no.1 firm including the Stone Crusher Machine purchased out of bank finance with the applicant bank. Further, the defendant no.2 had also created a STDR of Rs. 1,32,907.00 kept as lien with the applicant bank as security for repayment of the loan and in that connection the defendant no. 2 had signed a Form of Agreement (Form-A) and Security Delivery Letter both dated 23.04.2008. That as security for repayment of the aforesaid loan facilities availed of by the Defendant No. 1 and 2, the Defendant No.3 had stood as the personal guarantor to the said loan by signing a Guarantee Agreement dated 23.04.2008. That besides the securities for repayment of the abovementioned loan facilities, the defendant no. 2 had created Equitable Mortgage of Lease Hold Rights (for a period of 15 years) of a land taken as lease by the defendant no. 2 from the proforma defendant no. 4 by deposit of Registered Lease Deed dated 31.05.2007 alongwith other relevant land documents with the Applicant Bank on 23.04.2008, as security for repayment of the abovementioned loan facilities availed of by the defendant no.1 firm. The defendant no. 2 had confirmed the creation of Equitable Mortgage of Lease Hold Rights of the land by deposit of the Registered Lease Deed dated 31.05.2007 by signing and executing a Letter of Confirmation dated 24.04.2008. It is further stated that the proforma defendant no. 4 as Lessor had issued a No Objection Certificate as per Letter No. DICCD(MIE)1/2007-08/4245 dated 26.06.2007 to create mortgage Lease Hold Rights of a land. That besides the securities for repayment of the abovementioned loan facilities, the defendant no. 3 had created Equitable Mortgage of his landed property by deposit of Registered Deed of Sale dated 19.06.1997 alongwith other relevant land documents with the Applicant Bank on 23.04.2008, as security for repayment of the abovementioned loan facilities availed of by the defendant no.1 firm. The defendant no. 2 had confirmed the creation of Equitable Mortgage of his landed property by deposit of the Registered Deed of Sale dated 19.06.1997 alongwith other documents by signing and executing a Letter of Confirmation dated 24.04.2008. That the Applicant bank had renewed the Cash Credit facility of the defendant no.1 and 2 and accordingly on such renewal vide Letter of Arrangement dated 04.08.2009, the applicant bank had renewed the said cash Credit limit of Rs. 7.18 Lacs with interest at 0.75% above SBAR (SBAR = 11.75% w.e.f 29.06.2009) with effective rate at the time of renewal being 12.50% per annum with monthly rests. The said renewed Cash Credit limit was payable on demand. The Defendants No. 1 & 2 as the borrowers and the Defendant No. 3 as the guarantor had signed on the said Letter of Arrangement thereby agreeing to all the terms and conditions contained therein. That the Defendants No.1, 2 and 3 have agreed to comply with the terms and conditions of the Letter of Arrangement and other relevant agreements and documents executed in connection with the aforesaid loan facilities sanctioned by the Applicant Bank and have accepted the same by executing the said documents as mentioned in the forgoing paragraphs and as such the defendants No. 1, 2 and 3 are jointly and severally liable to repay the entire outstanding loan amount in the Loan accounts and also the Proforma defendant No. 4 to the extent of the Lease Hold Right mortgaged with the applicant bank. It is the say of the applicant bank that the loan was availed of by the defendants and all transactions entered in one of its ordinary book of accounts maintained in the regular course of business of the bank but the defendants failed to regularize the loan account inspite of several requests and demands made by the applicant bank. The applicant bank had demanded and requested the defendants through Letters dated 31.12.2009, 10.02.2010, 27.02.2010, 14.06.2010 and 24.09.2010 (Call up Notice), SARFAESI Notice dated 07.10.2010, Letter dated 20.11.2010, Letter dated 09.02.2012, Legal Notice dated 02.02.2014 to regularize the Loan Account by paying the outstanding amount, but the defendants failed to make any payment thereof. However, the Defendant No. 2 as the proprietor of the defendant no.1 firm and the defendant No.3 as the guarantor had confirmed and acknowledged their indebtedness towards the bank by signing and executing Revival Letters both dated 15.02.2011 and also confirmed the execution of security documents in connection with the said loan facilities availed of by the Defendants No. 1 and 2. That it is stated that the applicant bank had appropriated and adjusted the STDR of Rs. 1,32,907.00 for a total amount of Rs. 1,67,855.00 only on 11.10.2010 in the Term Loan Account as there accrued huge outstanding in the loan accounts. It is the say of the applicant bank that the statements of accounts maintained by the applicant bank in the usual and ordinary course of business shows that the Cash Credit Account (A/C No. 30509160736) became N.P.A. on 31.08.2010 and the Term Loan Account (A/C No. 30371189998) became N.P.A. on 31.07.2010 and the total outstanding in both the loan accounts comes to Rs. 11,93,790.17 (CC) + Rs. 28,98,823.56 (TL) = Rs. 40,92,613.73. The applicant bank thus became constrained to file the present application for the recovery of the loan amount along with interest and cost of the application. The defendants No. 1,2 & 3 have appeared and filed written statement stating interalia that the present application is not maintainable in the eye of law, that no cause of action has been disclosed in the application, that the present application is barred by law of limitation. The say of the defendants is that the present loan was recommended by Khadi and Village Industries Board, District Office, Dibrugarh under their Scheme Gramudyog Rojgar Yojana to encourage rural employment and entrepreneurs for development of village industries. The loan so recommended by Khadi and Village Industries Board, under a specific scheme to be governed by the condition thereof and specifically meant to encourage and promote such industries and the defendant No. 2 being encouraged thereby desired to start such an industry after investing his own money borrowed from different sources including his relations but his entire ambitions was frustrated by the attitude of the applicant bank and various departments of the State Government whereby the defendant did not only lost his hard earned money but also being through on the street being totally ruin and per wised. That the defendant being promoted by the Government was given all the facilities in the beginning to start his dream project of stone crushing unit. He entered into a lease agreement with the Governor of Assam representing the Government of Assam whereby a plot of land on which the industry was to be started was leased out to the defendant. That the loan was sanctioned by the applicant bank after satisfaction of the lease agreement and also no objection from the concerned authority. That unfortunately, before the defendant put the small scale industry to some profits, the Government of Assam by letter dated 04-11- 2008 terminated/ cancelled the said lease on the behest of some nearby influenced persons with political backing on the ground that there was blind school nearby. It was very well known to the Government and his officer before entering into the lease deed, such a blind school existed at this place and they ought to have at that point of time decline such a lease to defendant No. 2 . But the Government official was influenced by a strong lobby to frustrate the dream project of the defendant. That the defendant challenged the order of cancellation of lease in the Court of Munsiff No. 1 at Dibrugarh as Title Suit No. 159/2008 and Misc. (J) Case No. 74/2008. The learned trial Court stayed and order of the cancellation of the lease. But luck would have been there, Pollution Control of Assam decline to renew the No Objection and issued a show- cause notice dated 07-01-2010 which document is marked as document No. B-6. The defendant by letter dated 25-01-2010 replied the show-cause which document is marked as document No. B-7, the Divisional Forest Officer vide its letter dated 03-05-2010 informed the defendant that the unit cannot be allowed to establish in the present area. Ultimately the Civil Court vide judgment and decree dated 25-09-2013 allowed the prayer of the defendant but that was of no use to the defendant since the Pollution Control Board of Assam declined to give clearance. The defendants further stated that there is no valid mortgage of the landed properties described under schedule B and C respectively of the application. Firstly, some original documents were shown to the applicant at the time of sanction and they retain the same on the pretext of his verification which were never return to the defendant and surprisingly it is now found that it is stated that such landed properties were kept mortgage by them. That the defendant No. 3 never created any mortgage of the landed properties under Schedule-C of the application. That the properties described under Schedule-B was never mortgaged with the applicant bank being not mortgage able in the eye of law since the leased was subject to terms and conditions and valid for a term of 15 ( fifteen) years subject to renewal. And that a part the lease was cancelled by the Government and as such, cancellation was challenged by the defendant in the Court of law. Under such circumstances no valid mortgage remains with the bank. The defendants further stated that the application is bad for non-joinder of necessary parties and mis-joinder of parties. The Functional Manager, District Industries and Commerce Centre, Dibrugarh on behalf of the Governor of Assam representing Government of Assam, who had not been made party in the application, but the defendant No. 4 who had nothing to do with the concern lease has impleaded as party defendant to the case. The defendants further stated that the financial assistance has been sanctioned by the applicant was subject to the condition contained under KVIC Scheme which were not followed. Further, it appears from the statement of accounts that the rate of interest under the limits of sanction was enhanced from time to time without any intimation to the defendant as to whom and from which period such enhancement was made effected. Hence prayed for dismissal of the application. The defendant No. 4 neither appeared nor filed written statement despite having been served through paper publication also in the newspaper on 31-05-2014 in Dainik Janambhumi and the Assam Tribune. The Applicant Bank in support of its case has filed evidence on affidavit affirmed by Sri Punya Jyoti Goswami, the Manager of the Applicant Bank and also relied upon the following documents:- Sl. No. Name of the documents Exhibit No.

1 Loan Application dated 15.10.2007 and the Letter of Arrangement dated 23.04.2008 A-1 & A-2

2 Agreement of Loan cum Hypothecation dated 23.04.2008 and Form of Agreement (Form-A) and Security Delivery Letter both dated 23.04.2008 A-3, A-4 & A-5

4 Lease Deed (Deed No. 671/2007 dated 31.05.2007) with IGR, Special Power of Attorney (being Deed No. 616/2007 dated 28.06.2007) with IGR, No Objection Certificate dated 26.06.2007, Affidavit dated 21.07.2007 and Letter of Confirmation dated 24.04.2008 A-7, A-8, A-9, A-

5 Deed of Sale (being Deed No. 1413/1997 dated 19.06.1997), Jamabandi, Trace Map, Non Encumbrance Certificate dated 18.01.2007, Affidavits dated 25.01.2007 and 23.04.2008 and Letter of Confirmation dated 24.04.2008 A-12, A-13, A- 14,A-15, A-15(a), A-15(b) and A-16

6 Letter of Arrangement dated 04.08.2009 A-17

7 Revival Letters both dated 15.02.2011 A-18 & A-19

8 Letters dated 31.12.2009, 10.02.2010, 27.02.2010, 14.06.2010 and 24.09.2010 (Call up Notice), Letter dated 22.02.2010 (by defendant no.2), SARFAESI Notice dated 07.10.2010, Letter dated 20.11.2010, Representation dated 19.11.2010, Letter dated 20.11.2010 (by Bank), Letter dated 25.01.2012 (by defendant no.3), Letter dated 09.02.2012 (by bank), Letter dated 13.03.2012 by defendant no.3), Legal Notice dated 02.02.2014 with postal receipts A-20, A-21, A-22, A-23, A-24, A-25, A-26, A-27, A-28, A-29, A-30, A-31, A-32, A-33, A- 33(a), A-33(b) and A-33(c)

9 Certified copies of Statements of Accounts for the aforesaid loan accounts with Interest Calculation Sheets A-34, A-34(a), A-

35 and A-35(a) The defendants have filed counter evidence on affidavit reiterating the written statement filed by them and also relied upon the following documents:- Sl. No. Name of the documents Exhibit No.

1 No objection certificate from Pollution Control Board vide their Memo dated 15-10-2007 and 23-12-2008 DW-1 & DW-2

3 Judgment & Order dated 25-09-2013 DW-4 Heard the learned counsel for the applicant bank who prayed for issuance of Recovery Certificate against the defendants as per pleadings made in the Application, supported by evidence on affidavit of their witness who affirmed on oath the execution of the security and other documents by the defendants and also execution of their own documents relied upon, which have been marked exhibits. Heard the learned counsel for the defendants No. 1,2 & 3 who prayed for dismissal of the application. I have carefully perused the documents on record including original application, evidence on affidavit and exhibited documents filed by the applicant bank as well as written statement & counter evidence on affidavit filed by the defendants. The defendants have neither denied sanction of loan, availment of loan, execution of documents and their signature on the same. The defendants have taken the plea that the original application is not maintainable in the eye of law. It is evident from the statement of account filed by the applicant bank that the defendants have defaulted in repayment of the loan. If there is default in repayment of the loan the applicant bank has every right to proceed against the defendants for realization of the outstanding dues. Hence I have no hesitation to hold that this original application is maintainable. The defendants have urged that no cause of action has been disclosed in the application. After perusing the documents on record and taking into consideration of the facts and circumstances of the case, I find that the applicant bank has every cause of action to file this original application as the defendants failed to comply with the terms of the documents executed by them in respect of availment of loan and also the repayment was not made even on demand. Moreover, the defendants have not filed any documents to buttress their contention whereas, the applicant bank has produced all relevant documents to prove its claim. Another contention raised by the defendants is that the present application is barred by law of limitation. This plea of the defendants has been rebutted by the exhibits filed by the applicant bank through its witness. The Revival Letters ( Exhibit A-18 & A-19) have been executed on 15-02-2011 and the original application has been filed on 13-02- 2014 i.e. within 3(three) years. Moreover, the mortgage has also been created by the defendant No.2 where the limitation available is for 12 years and as such taking into account of the creation of the mortgage the application appears to have been filed well within the period of limitation. Further contention of the defendants is that there is no valid mortgage of the landed properties described under schedule B and C respectively of the application. Firstly, some original documents were shown to the applicant at the time of sanction and they retain the same on the pretext of his verification which were never return to the defendant and surprisingly it is now found that it is stated that such landed properties were kept mortgage by them. That the defendant No. 3 never created any mortgage of the landed properties under Schedule-C of the application. That the properties described under Schedule-B was never mortgaged with the applicant bank being not mortgage able in the eye of law since the leased was subject to terms and conditions and valid for a term of 15 ( fifteen) years subject to renewal. And that a part the lease was cancelled by the Government and as such, cancellation was challenged by the defendant in the Court of law. Under such circumstances no valid mortgage remains with the bank. The say of the applicant bank is that apart from the leasehold property as security, the applicant bank had also taken collateral security in the form of Equitable mortgage of the Schedule C property standing in the name of the defendant No. 3 and in that connection proper and legal mortgage has been created in favour of the applicant bank and the defendant No. 3 had also confirmed the same by signing the Letter of Confirmation for creation of Equitable mortgage of his property. The further say of the applicant bank is that the defendant No. 3 had not only created equitable mortgage of his landed property by deposit of Title Deeds on 23-04-2008 but also confirmed the same by signing and executing a Confirmatory Letter dated 24-04-2008 and also signed the Letter of Arrangement dated 23-04-2008 and Renewal Cum Letter of Arrangement dated 04-08- 2009, therefore, in view of the execution of the aforesaid documents, the defendant No. 3 cannot claim that the original documents of his landed properties were only given for the purpose of verification and as such the deponent reiterates and reaffirm the statements made in paragraph 5(viii) of the original application. It is observed that the defendants No. 2 & 3 have executed and signed the Memorandum of Deposit of Title Deed along with other documents. It is also observed that the defendants have not denied the execution and signature on these documents. The applicant bank has proved the contention and the documents by way of filing original documents and by way of filing evidence on affidavit of Sri Punya Jyoti Goswami, the Manager of the Applicant Bank. In view of the above, I do not agree with the contention of the defendants and the same is negated. The further contention of the defendants is that the application is bad for non- joinder of necessary parties and mis-joinder of parties. The Functional Manager, District Industries and Commerce Centre, Dibrugarh on behalf of the Governor of Assam representing Government of Assam, who had not been made party in the application, but the defendant No. 4 who had nothing to do with the concern lease has impleaded as party defendant to the case. It is observed that the defendant No. 4 is the necessary party as he is the Lessor and has been arrayed as proforma defendant. Functional Manager, District Industries and Commerce Centre, Dibrugarh is not a necessary party. In view of the above I do not agree with the contention of the defendants and the same is negated. The further contention of the defendants is that it appears from the statement of accounts that the rate of interest under the limits of sanction was enhanced from time to time without any intimation to the defendant as to whom and from which period such enhancement was made effected. It is observed from the sanction letters ( Exhibit A-2 & A-17) in item No. 3 at page 2 of the Letter of Arrangement, it is written as under :-

3. RATE OF INTEREST : Working Capital : Interest at 0.75% above State Bank Advance Rate (SBAR) ( SBAR = 12.25% w.e.f. 27-02-2008) with a minimum of 13.00 % p.a. rising or falling therewith, on daily products with monthly rests. Present effective rate 13.00 % p.a.. Whenever expedient, interest rate is directly linked to the Credit Risk Assessment of the borrower. From the above, it is evident that the rate of interest is to be changed rising or falling therewith on daily products with monthly rests. Hence, it is evident that the rate of interest will be changed from time to time as per the RBI guidelines. In the case of Syndicate Bank Vs. R.Veeranna and others AIR 2003 SC 2122 ; Suit for recovery of loan by Bank-Claim of enhanced rate of interest As per terms of agreement. Observations of Trial Court that there was no record to show that the defendant had agreed to pay higher rate of interest. Running contrary to the terms of agreement. Subsequently, acknowledgement made by the defendant also including that they acknowledged their liability of amount due and amount was calculated on the basis of enhanced rate of interest. No question of taking separate consent of defendant as rate of interest was increased as per terms of agreement. No violation of natural justice e for want of notice to defendant. Claim for enhanced rate of interest cannot be rejected. In view of the above, there is no force in the contention of the defendants and the same is negated. The documents executed by the principal borrower as well as guarantor from time to time are duly proved by the applicant bank and the witness of the applicant. It is also found that the claim is within the period of limitation. The applicant has sufficient cause of action for filing the instant application due to disbursement/availment of loan to/by the defendants and on default in repayment of the loan by the defendants, inspite of demands made, as per exhibited documents filed by the applicant bank. Considering the unrebutted version of by Sri Punya Jyoti Goswami, the applicants witness and all the documents marked as exhibits, including duly certified copy of the statement of account along with interest calculation sheet maintained by the applicant Bank in its regular course of business, I hold that the applicant is entitled to get the Recovery Certificate as prayed for. In the result I pass the following order : O R D E R Issue Recovery Certificate in favour of the applicant bank for a sum of Rs. 40,92,613.73 (Rupees Forty Lacs Ninety Two Thousand Six Hundred Thirteen and Paise Seventy Three) only against the defendants No. 1,2 & 3 jointly and severally together with pendentelite and future interest @13% per annum with quarterly rests till realization and also cost of the application. No liability is fastened upon Proforma Defendant No. 4. The charge of the certificated amount be kept alive on the hypothecated property described in Schedule A annexed to the application till the amount is realized in full, under the certificate. The charge of the certificated amount be kept alive on the mortgaged property being a Lease Hold Right (15 years) over an area (Open Space) measuring 21,600 Sq.ft located at Moran Industrial Estate, under Dag No. 134, Mouza Khowang, Village Chakalia, District Dibrugarh and the said portion of land is owned by the Proforma Defendant no. 4 (Lessor), described in Schedule B annexed to the application till the amount is realized in full, under the certificate. The charge of the certificated amount be kept alive on the mortgaged property being a Land measuring 2 Kathas 13 Lechas covered by Dag No. 236 under Periodic Patta No. 79 and land measuring 2 Bighas 11 Lechas covered by Dag No. 250 under Periodic Patta No. 79 situated at Bazorohuk Bengaligaon, Mouza and P.S. Moran, District Dibrugarh standing in the name of the Defendant No.3 i.e. Sri Bhadra Nath Chetia under Deed of Sale (being No. 1413/1997) dated 19.06.1997 and is bounded by East:Land of Dhaniram Gogoi; West: Land of Kanak Gogoi ; North:Public Road ; South :Land of Dhaniram Gogoi Total Land Standing in the name of Sri Bhadranath Chetia (Defendant No-3) 2 Bighas 3 Kathas 4 Lechas, described in Schedule C annexed to the application till the amount is realized in full, under the certificate. This order is dictated and corrected by the undersigned and pronounced in the open Tribunal under the signature of the undersigned on this day the 14th day of September 2016. The file be consigned and sent to the record room after the Recovery Certificate is issued to the learned Recovery Officer to recover the certificated dues as per provisions of the law. Let copy of this order be served to the parties. (VIJAY KUMAR GARG) Presiding Officer DRT, Guwahati.