KERALA FINANCIAL CORPORATION Vs. UNION BANK OF INDIA

JUDGEMENT

(1.) THE appeals are filed by the appellant 6th defendant in (RA-3/2002) and appellant 5th defendant (in RA-4/2002) as against the Order dated 26.2.2001 passed by the Presiding Officer, Debts Recovery Tribunal (DRT), Ernakulam, in TA-1213797. THE respondent applicant United Bank of India filed the suit for recovery of Rs. 1,39,98,386/- with interest and also for sale of the property in the Sub-Court, Kochi on 17.9.1996. THE 1st defendant is the Company and defendants 2 to 4 are the Directors. THE defendants 5 and 6 are having par/passu charge over the land, machinery and fixed assets of the Company along with the plaintiff. D-1 Company represented by D-2 requested the plaintiff Bank for grant of financial assistance and loan of Rs. 28 lakhs was sanctioned. D-2 and D-3 were authorized to execute necessary documents securing the loan and D-l to D-3 executed the necessary documents. D-2 representing D-l deposited with D-5 the title deeds in respect of the A-Schedule properties. THEn D-1 approached the plaintiff for additional term loan and additional loan of Rs. 22 lakhs and another term loan of Rs. 3,30,000/- was sanctioned. D-1 (o D-4 secured the loans by way of executing documents. On 18.11.1990, D-l through D-2 and D-3 confirmed the balance under the term loan account No. 1 as Rs. 28,99,457.60 besides interest. At the request of D-l the plaintiff granted again another term loan of Rs. 10 lakhs andDl to D4 executed the necessary documents and they also confirmed the balance as on 30.6.1991 as Rs. 34,47,718.70, Rs. 26,13,488.40, Rs. 11,77,697.10 and Rs. 4.07,741.70. THE plaintiff at the instance of Dl, granted another term loan No. 2 of Rs. 8,20,000/- and Dl to D4 also executed promissory note and hypothecation agreement. D2 and D3 executed letter of guarantee on 11.10.1991 for Rs. 1,94,90,000/- and interest. DI also extended the charge over the plaint A-Schedule properties over the plaintiff in respect of the various dues.

(2.) Defendants 1 to 4 confirmed the balance under the term loans on 11.10.1991. Dl to D3 also by debit balance confirmed on 10.5.1993, acknowledged the balance under the five accounts as on 31.12.1992 inclusive of interest upto 25.12.1992. On 18.8.1993, D1 through D2 and D3 executed a deemed promissory note undertaking to pay debit balance of Rs. 30,89,203/- with interest with quarterly rests. Dl to D4 also acknowledged the debit balance of Rs. 24,40,397/- with interest with quarterly rests. So also Dl to D4 acknowledged the debit balance of Rs. 11,33,703/- outstanding under term loan No. 3. Dl through D2 and D3 executed the demand promissory note. D1 to D4 also further acknowledged the debit balance of. Rs. 3,75,837/- and Rs. 9,32,799/- under the funded interest on term loan No. 1 and term loan account respectively. D1 through D2 and D3 had alsoexecuted demand promissory note to repay the said amounts. D2 and D3 also executed a letter of guarantee for a sum of Rs. 1,51,50,000/- on 22.9.1993. D4 had also executed a similar guarantee. D2 had deposited title deeds relating to his properties in the plaint B-Schedule with the plaintiff Bank with the intention to create equitable mortgage to secure the advances granted to Dl. The loans sanctioned were secured by the personal guarantee of D2 to D4 as well as by way of their charge with D5 and D6 over the plaint A-Schedule properties and by creating equitable mortgage over the B-Schedule property of D2. The defendants were irregular in making payments and committed default. As per the accounts maintained by the Bank a total sum of Rs. 1,39,98,387/- is due from Dl to D4 to the Bank.

(3.) THE 5th defendant filed written statement contending that D6 had granted a term loan of Rs. 60 lakhs to D1 and D1 executed agreements in favour of D6 to repay the term loan and Dl had also executed a deed of hypothecation charging its movables as collateral security. Personal guarantee of the Directors was also obtained. THE immovable properties of DI in the plaint A-Schedule was offered as security by way of equitable mortgage to D5 and D5 and D6 have joint security for the above said term loan. Pari passu inter se arrangement was entered into and letters were exchanged between the plaintiff Bank and D5 and D6 confirming the pari passu arrangement of joint mortgage given to the parlies. Dl committed default in repayment of loan due to the defendant and a sum of Rs. 3,30,00,000/- wasdue from D1 and the dues were charged on the plaint A-Schedule properties. D6 has set forth the prayer to distribute the sale proceeds among the plaintiff", D5 and D6 in proportion to the loans advanced and the dues thereby. THE Official Liquidator is the 7th defendant. THE Official Liquidator 7th defendant filed a statement contending that he is unable to ascertain the exact amount due to secure the creditors including the applicant Bank and the 1st defendant was ordered to be wound up by the Company Court and the applicant Bank was allowed to continue the proceedings before the Tribunal by virtue of the order in CA-642798.