Shrikant G.Kulkarni, Presiding Officer -
(1.) THIS is an application for issue of recovery certificate under Section 19(1) of the RDDBFI Act, 1993. Apercu of facts leading to the present application is as under:
The applicant is a banking company carrying on business of banking through its various branches. Defendant No. 1 is the principal borrower and defendant Nos. 2 and 3 are die guarantors. At the request of defendant No. 1 the following facilities were extended to her:
_________________________________________________________________________________ Head Amount Date Interest Equated Monthly Instalment __________________________________________________________________________________ Term Loan -1 Rs. 6,33,750/ - 13.4.2000 @ 15.5% p.a. with Rs. 15,200/ - quarterly rests. per month Soft Loan Rs. 2,43,750/ - 13.4.2000 1 % service charge Rs. 4,100/ - per month Term Loan -2 Rs. 3,00,000/ - 13.4.2000 @ 13.25% p.a. Rs. 3,850/ - quarterly rests per month Term Loan -3 Rs. 1,00,000/ - 6.9.2000 @ 13.25% p.a. Rs. 1,250/ - quarterly rests per month Credit Card Rs. 21,067/ - - - - __________________________________________________________________________________
Defendant No. 1 gave undertaking to create equitable mortgage of the property mentioned in the application. The loan was actually disbursed on all the defendants executing necessary documents in favour of the applicant. The account of the defendant became irregular and finally dwindled. The defendants were, therefore, called upon by notice dated 4th July, 2002 to liquidate the dues. The defendants did not act upon the notice hence the applicant filed present application for recovery.
(2.) DEFENDANT No. 1 appeared and filed written statement at Exhibit 32 denying the contents in the application. According to her. Tribunal has no jurisdiction to entertain and decide the claim. The date of default has not been mentioned and therefore, the application was inconsistent with the provisions of SARFAESI Act, 2002. The house property in respect of which notice was sent is in the possession of Akshay Distributors as tenants and Akshay Distributors has served legal notice to the applicant. The notice published under Section 13 of the SARFAESI Act, 2002 is defective. The application is not within limitation. The defendant also contends that the application is premature. The dues do not exceed Rs. 10 lakh if loan transactions are viewed independently. No equitable mortgage in favour of the applicant was created. According to the defendant, she has got the account examined from S.G. Swami and Company, Chartered Accountant which shows that the interest charged upon the accounts are not correct. She denies the execution of security documents. Defendant claims that her account is not N.P.A. The interest calculated is exorbitant. There was no agreement to compound interest. The defendant had given proposal for One Time Settlement which was not considered by the applicant. She. therefore, prays for dismissal of the application. Defendant No. 2 filed written statement at Exhibit 27 inter alia contending that the Tribunal has no jurisdiction to entertain the claim. The application is premature and the same is not within limitation. The applicant has wrongly clubbed different loan transactions. The default date has not been given. The defendant denies to have executed security documents. Notice issued under SARFAESI Act, 2002 was incorrect. The account is not N.P.A. The defendant did not agree to pay compound interest. The applicant did not accept the request for One Time Settlement. He, therefore, prays for dismissal of the application.
(3.) DEFENDANT No. 3 appeared and filed written statement at Exhibit 42 inter alia contending that the application is incorrect. No equitable mortgage was created in favour of the applicant. The claim is not within the limitation. The application is silent on the date of N.P.A. He, therefore, prays for dismissal of the application.
4. The applicant filed affidavit of Mr. Pramod Ramchandra Moge at Exhibit 44 and produced original documents on record. Defendant No. 1 filed her affidavit at Exhibit 50. Defendant No. 2 filed affidavit at Exhibit 51.
6. I have heard Mr. Raje Bhosale, the learned Advocate appearing on behalf of the applicant, Mr. Athalye the learned Advocate appearing on behalf of the defendant Nos. 1 and 2 and Mr. Kabra, the learned Advocate appearing on behalf of the defendant No. 3 in extenso.
7. Before going to the point of controversy it is necessary to mention that Mr. Raje Bhosale, the learned Advocate appearing on behalf of the applicant conceded before me that the loan is not secured by equitable mortgage though contended to that effect. It is. therefore, clear that the loan is not secured by mortgage though the defendant No. 1 undertook to create it.
As to the jurisdiction of the Tribunal:
8. Mr. Athalye, the learned Advocate appearing on behalf of defendant Nos. 1 and 2 took strong exception to the jurisdiction of the Tribunal inter alia contending that the applicant has wrongly joined different loan transactions. He submitted that ii each transaction is independently looked into, outstanding does not travel beyond Rs. 10 lakh. According to him, the applicant has deliberately clubbed the loans so as u. bring the action before the Tribunal. He further submitted that the application is not maintainable on the ground that it has been filed under. The Recovery of Debts Due to the Banks and financial Institutions Ordinance, 1993 which did not exist when the application was filed as the Ordinance was converted into an Act. He submitted that wrong nomenclature is sufficient to throw the matter over -board. For the said proposition he placed reliance on Jeet Mohineder v. Harminder Singh .
9. Per contra, it was submitted by Mr. Raje Bhosale, the learned Advocate appearing on behalf of the applicant that the mention of 'Ordinance' is a lapsus calami and he has filed a pursi to that effect that the word "Ordinance" should be read as "Act". He further submitted that nothing in the RDDBFI Act. 1993 can prohibit joinder of claims.
10. In the wake of above arguments it is necessary to see whether the wrong nomenclature of the statute is sufficient to throw the matter overboard, In my opinion, the answer is in the negative for the simple reason that the Tribunal cannot be hypertechnical in the matter. It is settled rule of law that substance of allegation should be looked into than the form. The ratio quoted by the learned Advocate appearing on behalf of the defendants does not apply to the facts of the present case. If applicant is to be accused quoted the wrong ordinance then the defendants also need to be criticised for taking defence in respect of the action under SRFABSI Act, 2002. The present proceeding is not at all under SARFAESI Act. 2002, however, provisions of SARFAESI Act, 2002 are referred to in the written statement for the reasons best known to the defendants. On plain reading of the application it reveals that the application is for recovery of debt filed before the D.R.T., therefore, the said contention need not be considered.
11. It is now to turn to Mr. Athalye's contention regarding the maintainability of the application on the ground that the outstanding in each facility is less than Rs. 10 lakh. It is further necessary to mention that Rule 10 of the D.R.T. (Procedure) Rules. 1993, which barred plural remedies is no more on the statute book. Therefore, the said rule now be set as a bar. The question is whether different transactions tan be clubbed together. The said point is also no more res integra. Karnataka High Court in Syndicate Bank v. Chamundi Industries II has held that the Tribunal has power to decide the claim based on different causes of action. Earlier the very High Court in Jay Jee Service Station v. Syndicate Bank 2001 R.D.C. 536, held that words "cause of action" need to he construed lato sansu Just because the borrower has taken more than one facility or executed more than one set of documents may not be conclusive in the matter. Such transactions may form link with the other transaction entered into inter panes. There CMSIS intrinsic co -relation between such transactions. Therefore, joining of such claims is not barred. The Tribunal is not bound by the C.P.C. as mentioned in Section 22 of RDDBFI Act, 1993. The only fetter put on the powers of the Tribunal is adherence to the principles of fair play in action popularly known as Rules of Natural Justice. It is not shown to me how the defendant is prejudiced because of clubbing of different loan facilities.
12. It is settled rule of law that the point of jurisdiction has to be decided on the basis of allegation made in the plaint and not what transpire from the allegation in the application shows that the claim is more than Rs. 10 lakh it has to be filed before the Tribunal and nowhere else. If ultimately. it transpires that the claim is below Rs. 10 lakh the Tribunal can pass a recovery certificate of the lower amount also. Thus, viewed from all possible angles it cannot he said that the Tribunal has no power to entertain and decide the claim.
As to the limitation:
13. Mr. Athalye, the learned Advocate appearing on behalf of defendant Nos. 1 and 2 submitted that the claim is not within limitation as the same is not filed within 3 years from the date of the loan. He submitted that there is no pleading regarding acknowledgement and, therefore, the claim deserves to be dismissed in limine.
14. Per contra, it was submitted by Mr. Raje Bhosale, the learned Advocate appearing on behalf of the applicant that in the limitation clause of the application the applicant has pleaded about the acknowledgement of debt by repayment and the same has not been denied in the written statement.
15. There appears sufficient force in the submission pressed into service by Mr. Raje Bhosale, the learned Advocate appearing on behalf of the applicant. Paragraph 4 of the application specifically makes a reference to the repayment made in the account. The extract of accounts shows repayment made in 2002, 2003 and therefore under Section 19 of the Limitation Act the claim can be said to be in limitation. Mr. Athalye, the learned Advocate appearing on behalf of the defendant Nos. 1 and 2 further tried to contend that it is not shown that the payment in the account is made by defendant No. 1. In my opinion, the said contention needs to be turned down as no third person would deposit the amount in the account of defendant No. 1. A presumption under Section 114 of the Indian Evidence Act regarding due course of events needs to be drawn in this context.
16. There is another angle to the aspect of limitation. It appears from the letter of execution and the parties are ad idem on the point that the loans were to be paid by E.M.I. After adjusting payment towards the due instalments, each instalment, if remains unpaid, would give a cause of action. Such type of loan transaction is not provided for in Limitation Act and, therefore, will be governed by residuary article namely Article 113 of Limitation Act. Thus, if the payment made by defendant is taken into consideration the claim is perfectly within limitation, so far as unpaid instalments due from defendant No. 1 are concerned.
17. The case of defendant Nos. 2 and 3 stands on different footing as they are the guarantors. Period of limitation would start running against them from the date of breach of agreement of guarantee. Their case would fall under Article 55 of the Limitation Act. It is not disputed before me that notice regarding recall of advance was given on 4th July, 2002. So as against the guarantors the period of limitation would start not earlier from the said date and, therefore, the claim against them is perfectly within limitation.
As to the recovery of soft loan:
18. Mr. Athalye submitted that the soft loan was provided from out of National Equity Fund and, therefore, the applicant could not have claimed the same. It appears that the said contention does not figure in the written statement. However, the said contention needs to be turned down for the simple reason that the loan was provided through the instrumentality of the applicant and defendant No. 1 agreed to repay the same to the applicant. The terms and conditions of contract between the National Equity Fund and the applicant are of no relevance to defendant No. 1. The said contention, therefore, needs to be turned down.
As to the defence of denial by defendant No. 1:
19. Defendant No. 1 denies to have executed security documents in favour of the applicant. The applicant's witness has identified the signatures of the defendants on the concerned documents. Besides, defendant No. 1 had admittedly given a proposal for settlement which shows that the disbursement of loan was in dispute. It is pertinent to note that the notice recalling the advance was not disputed and, therefore, the defence of total denial is clearly taken with an ulterior motive. The same needs to be turned down.
As to the rate of interest:
20. Mr. Athalye and Mr. Kabra, the learned Advocates appearing on behalf of defendant Nos. 1, 2 and 3 submitted that the applicant has erred in charging interest with quarterly rests. He submitted that the Bank would not have charged interest with quarterly rests.
21. Per contra, it was submitted by Mr. Raje Bhosale, the learned Advocate appearing on behalf of the applicant that the Banks have every right to charge interest with quarterly rests, if the interest is not paid in time.
22. The mode of payment of interest is essentially a matter of contract between the parties. The promissory notes which are produced on record clearly show that defendant No. 1 had agreed to pay interest with quarterly rest. Besides, the Bank's right to claim interest with quarterly rests has been recognised by Supreme Court in Central Bank v. Ravindra I . A reference can also gainfully be made to the circular issued by R.B.I. No. DBOD No. Dir.B.C.32/C 96 -85 dated 16th March, 1985 which shows that the Bank can charge interest with monthly or longer rests. The provision for compounding of interest is mainly to inculcate financial discipline. If the interest is not paid on the due date it is capitalised. The borrower should therefore make every endeavour to pay the interest on due date.
23. It is also contended that the interest charged by the applicant is exorbitant. The said contention is clearly barred in view of Section 21A of the Banking Regulation Act and, therefore, need not be considered.
As to the Credit Card Dues:
24. The pleading regarding Credit Card is extremely vague. It does not spell out the agreement between the parties, the rate of interest, etc. and, therefore, the said credit card cannot be granted.
25. It appears that the Bank did not give details of the interest charged as required by the ratio in Central Bank v. Ravindra (supra). Besides, the Bank wrongly contended in the application that the loan is secured by equitable mortgage. This according to me is suggestio falsi, future interest needs to be reduced.
26. Defendant No. 1 appears to be a doctor by profession. She should not have indulged in denying the claim. She has thus violated financial discipline and therefore she is not entitled to any concession. Considering the suggestio falsi of the applicant and false defence by defendant No. 1 future interest at the rate of 14% per annum would meet the ends of justice. There is no equitable mortgage, however it appears that defendant No. 1 had undertaken to create the same and therefore it will be proper to keep charge of the said amount on that property. Hence the following order:
27. Issue recovery certificate in favour of the applicant for recovery of Rs. 15.73,419/ - (Rupees fifteen lakh seventy -three thousand four hundred nineteen only), together with the future interest at the rate of 14% per annum from the dale of the application i.e. 4th September. 2003 till realisation and cost of the application from the defendants.
Charge of the said amount is kept on flat Nos. F -3 and F -4. "Simian Apartment" situated at R.S. No. 269/A/1/2B. Karanje Turf. Satara.
This order shall form part of the recovery certificate.;