AHMED LEATHER EXPORTS PVT. LTD. AND ANR. Vs. BANK OF CEYLON
LAWS(DR)-2005-12-10
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on December 16,2005

Ahmed Leather Exports Pvt. Ltd. And Anr. Appellant
VERSUS
Bank Of Ceylon Respondents

JUDGEMENT

K.Gnanaprakasam, J. (Chairperson) - (1.) BOTH these appeals have been filed by the defendants 1 and 2 in the OA -345/2002 Regular Appeal RA -52/ 2005 has been filed as against the final order dated 31.3.2005 in OA -345/2002 and Miscellaneous Appeal MA -93/2005 filed as against the order dated 31.3.2005 in IA -348/2004 in OA -345/2002, passed by the DRT -II, Chennai. The respondent Bank filed the OA for recovery of a sum of Rs. 7,51,30,174/ - together with future interest @22% per annum with monthly rests from the date of application till realisation and for other reliefs and the same was decreed. Hence the appeal. The case of respondent Bank is as follows:
(2.) THE 1st defendant is a company with three Directors, (1) Mr. Ahmed Basha, (2) Mrs. Shamshad Begum, and his nephew, (3) Mr. Ameen Sayed. Mr. Ahmed Basha was no more on the date of filing of the OA. As per the information available to the Bank, Mrs. Shamshad Begum and Ameen Sayed, are the only legal representatives of the deceased Ahmed Basha and they have undertaken the liability for all his debts and obligations. The 1st defendant had ad hoc credit facilities with the Bank in 1997, furnished his immovable properties set out in Schedule 'B'. These were guaranteed by the other defendants. The defendants had also deposited title deeds related to the 'B' schedule properties with the Bank on 4.3.1997, with an intention to create equitable mortgage in respect of the immovable properties. On 9.10.1993, the defendants sought facilities to procure raw materials and stocks of leather, and for export and import purpose under two heads - (1). Packing Credit facility = Rs. 200 lakh (2). Letter of Credit = Rs. 150 lakh The 1st defendant agreed to secure the facilities, inter alia, by hypothecation of movables, personal guarantees of the defendants 2 to 5, and had also agreed to hypothecate the goods procured for export, and also stocks and raw materials, in favour of the Bank, which are set out in Schedule 'A' in the original application. Towards continuing collateral security for the loan granted to the 1st defendant, the 2nd and 3rd defendants had deposited the title deeds related to the immovable properties, which are set out in Schedule 'B', with an intention to create a security and also confirmed the same by their letter dated 13.10.1997. The defendants have also executed necessary documents ten in number, such as demand promissory note, packing credit agreement, indemnity letter, as listed in Para (d) of the OA. The defendants have further agreed that as far as the properties mortgaged on 4.3.1997 were concerned, they have agreed that the same could continue to be held by the applicant Bank for further advances also and the details of the documents deposited in order to create various equitable mortgages are concerned, set out in the index of documents filed along with the OA. The defendants having availed the facilities and utilised the same, they were not maintaining the accounts in a regular fashion in spite of several reminders sent to the 1st defendant to regularise the account. The defendants sought some time and executed the acknowledgement of liability. The defendant also wrote to the Bank on 23.11.1999 promising to effect shipments of Rs. 34 lakh by the end of 1999, and promising to pay Rs. 15 lakh by the end of the year. But they have not kept up their promise. As the defendants failed to pay the amount, the OA was filed, after the issuance of the legal notice to the defendants on 20.6.2001. As on the date of filing of the suit, the defendants were liable to pay Rs. 6,53,50,569/ - towards packing credit facility, and Rs. 97,79,605/ - towards current account (Overdraft) and in total Rs. 7,51,30,174/ - together with interest @ 22% p.a. with monthly rests. The OA was filed for the realisation of the amount due together with interest thereon and for costs and for sale of the immovable properties for realisation of the amount. The 2nd defendant filed the reply statement for self and on behalf of other defendants, which runs as follows.
(3.) THE defendants state that the 1st defendant company had three Directors and after demise of Ahamed Basha, this defendant stepped into the shoes of the demised Director. The defendants were carrying on business in export of leather garments. The defendant admits the ad hoc facilities which they had with the Bank and also the deposit of title deeds of the properties set out in Schedule 'B' on 4.3.1997, in favour of the Bank by creating an equitable mortgage. It is their case that only one property bearing Door No. 55/A, New Avadi Road, Kilpauk, Chennai - 600010, was offered as collateral security for ad hoc sanction limit. But they denied offering of 'B' Schedule property which consist of number of properties. It is admitted that on 9.10.1997, the company approached for facilities to the extent of Rs. 200 lakh for packing credit and Rs. 150 lakh for letter of credit on the strength of hypothecation of movables and personal guarantees of the defendants 2 and 5 also hypothecation of goods produced for exports and also stock of raw materials set out in Schedule 'A'. But they state that as on 9.10.1997, no sanction letter was issued approving the credit facilities, but whereas the Bank has issued letter only on 24.5.1998, granting facilities to the tune of Rs. 350 lakh. It is also stated that they made the deposit of title deeds on 9.10.1997 and confirmed by them on 13.10.1997. After obtaining credit facilities, the applicant Bank was pressurising the defendants to transfer the accounts from State Bank of India to their Bank and documentation was completed after 13.7.1998, and thereafter, the Bank was behaving with hostile attitude with the defendants. The Bank was regularly recovering certain percentage of their export bills and keeping them in interest free deposits and because of that the company had lost interest to the tune of Rs. 40 to 50 lakh, but the company was made liable to pay interest on the borrowings. The overdraft facilities also carried out a substantial interest, but whereas the deposit of the company credit carried no interest. When the defendants requested for enhancement of the credit facilities from the Council of Leather Exports, who certified that the company had a good track record, the Bank did not do it. The Bank wanted to cut short the facility on the ground that the company was not maintaining proper account and they have obtained a revival letter dated 8.11.1999, which was duly signed with the condition that subject to their appeal made to the waiver of penal interest. They have returned the revival letters with a covering letter wherein the company made clear that they are going to make exports for a value of Rs. 50 lakh by 30.11.1999, and thereafter, for Rs. 26 lakh by December, 1999. That towards the export of Rs. 8.5 lakh they have drawn only Rs. 3 lakh. Similarly, for the export of Rs. 26 lakh, they had drawn only Rs. 16 lakh. The company was ready to pay money on doing export, but no help was given by the Bank and also refused to release the goods, which is under their lock and key. The defendant had given the entire stock statement as on 11.1.2000, and the total value of stock lying in the godown under the custody of the Bank was valued as Rs. 5,53,73,557/ -. The defendants have also given a letter in the month of November, 2001, to the Bank informing that they have obtained an order of export to the value of Rs. 21,76,000/ - and sought the permission to release the leather goods, and the Bank has not come forward to release the goods. Nor the Bank had taken any steps to sell the goods in the open market in the year 1999 itself, when the value of the goods at that time was worth Rs. 5.5 crore. The Bank did not act prudently. The defendant is not satisfied with the statement of accounts furnished by the Bank and also contended that the claim of the Bank is barred by limitation. The facilities were granted on 9.10.1997 and revival letters were taken on 8.11.1999 and they are not valid acknowledgement of liabilities as those letters were sent with the condition that it is subject to the appeal made by the defendants for waiver of penal, compound interest etc. The defendants, therefore, prayed for dismissal of the OA.;


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