Bangalore District Court
Canara Bank (Erstwhile Syndicate Bank) vs M/S Manjunatha Fashions on 17 January, 2023
1 Com.O.S.No.1191/2022
In the Court of LXXXIV Addl. City Civil and Sessions
Judge (CCH-85 Commercial Court) Bengaluru
Dated this the 17th day of January 2023
Present : Smt.H.R.Radha, B.A.L., L.L.M.
LXXXIV Addl. City Civil and Sessions Judge,
(CCH-85 - Commercial Court)
Bengaluru
Com.O.S.No.1191/2022
Plaintiff Canara Bank (Erstwhile Syndicate Bank),
Amar Jyothi Nagar Branch, Bengaluru - 560
040, rep. by its Manager, Sri.Harish H., S/o
Late Halegowda, aged about 40 years
(By Sri.Rohit R.Achar, Advocate)
Vs
Defendant M/s Manjunatha Fashions, Rep. by its
Proprietor, Sri.Navanath K.G., S/o
Sri.Ganapathi S.A., aged about 62 years, R/at
No.558, 1st Floor, 2nd Main Road,
Mahadeshwara Temple Road, Kaveripura,
Kamakshipalya, Bengaluru - 560 079
Also at
No.98/1, 2nd Main Road, Near K.H.B. Colony,
Ranganathapura, Kamakshipalya, Bengaluru
- 560 079
(By Sri.V.Rajanna, Advocate )
2 Com.O.S.No.1191/2022
Date of Institution 19.08.2022
Nature of suit For recovery of business loan
Date on which the First Case
Management Hearing took 02.01.2023
place
Date of commencement of 07.01.2023
recording of evidence
Date on which judgment
17.01.2023
pronounced
Time taken for disposal Years Months Days
1) Total duration 00 04 29
2) From the date of First 00 00 15
Case Management Hearing
LXXXIV Addl. City Civil and Sessions Judge,
(CCH-85 Commercial Court), Bengaluru
JUDGMENT
This is a suit for recovery of Rs.13,47,000/- from the defendant with further interest at 10.60% p.a. on the term loan and 12% p.a. on the OD facility, compounded monthly. 3 Com.O.S.No.1191/2022
2. The plaintiff's case in brief is that Syndicate Bank the lender of the defendant amalgamated with it as per Notification No.CG-DL-E-04032020-21635 dated 04.03.2020. The defendant having availed term loan of Rs.4,00,000/- on 03.02.2017 by executing consideration receipt and composite hypothecation agreement to repay the same with interest at 10% p.a in 60 EMIs of Rs.8,517/- commencing from 28.02.2017 and OD facility of Rs.10,00,000/- on 03.04.2018 by executing composite hypothecation agreement to repay the same with interest at 9.70% p.a. compounded monthly, defaulted in adhering to the terms of sanction. Despite renewal of the same pursuant to execution of renewal letters dated 15.04.2019, 03.01.2020, 29.10.2020, he failed to repay the outstanding amount and therefore, legal notice dated 19.04.2021 was issued recalling the entire amount due. But the defendant neither replied nor paid the amount. As per the ledger account extract the defendant was due a sum of Rs.2,12,000/- towards term loan and Rs.12,64,263/- towards the OD facility, including interest. The current rate of interest on term loan is 10.60% and OD 4 Com.O.S.No.1191/2022 facility is 12% p.a. and the defendant is liable to pay interest at the said rate on the outstanding amount of Rs.13,47,000/-.
3. The defendant has filed the written statement admitting that he availed term loan of Rs.4,00,000/- on 03.02.2017 and OD facility of Rs.10,00,000/- on 03.04.2018 from Syndicate Bank for business purpose. While denying all other contentions, it is specifically contended that he regularly paid the installments till October 2020; Rs.2,27,000/- in all was paid towards the term loan. He was not properly made known about the rate of interest; that he signed the blank papers furnished by the bank and he did not execute the renewal letters or received the notice as claimed. He was supplying uniforms mainly to the industries and schools, but the same were closed during Covid-19; his entire investment is thus held up in the market and become a bad debt. He too had to close down the business due to lock down. On account of the loss suffered in the business he is unable to pay the installments. The loan is covered under CGTMSE scheme which guarantees repayment upto 75% of the borrowed amount. In spite of requesting to restructure the over dues and regularize the account so that he 5 Com.O.S.No.1191/2022 can continue the business, the plaintiff did not oblige. If the bank obtains 75% of the claim from CGTMSE Trust board he has no problem to pay the balance in installments; and the plaintiff has claimed exorbitant rate of interest.
4. Based on the pleadings this court has framed the following ISSUES
1. Whether the plaintiff proves that the defendant executed renewal letter dated 15.04.2019, letter of revival letter dated 03.01.2020 and renewal letter dated 29.10.2020?
2. Whether the defendant proves that the plaintiff obtained his signatures on blank forms without informing about the rate of interest?
3. Whether the plaintiff is entitled to recover Rs.2,11,573.91 with interest of Rs.426.09 from 01.07.2022 till the date of suit towards term loan account No.06959910000604?
4. Whether the plaintiff is entitled to recover Rs.11,29,254.62 with 6 Com.O.S.No.1191/2022 interest of Rs.5,745.38 from 01.07.2022 till the date of suit towards over draft facility in account bearing No.06951400000028?
5. What Order or Decree?
5. The plaintiff's Manager is examined as Pw1; he has filed affidavit in lieu of examination in chief as Pw1 and got marked Ex.P1 to P11, P11(a) and (b), P12, P12(a), P13 and P13(a). Ex.P14, the authorization in favour of Pw1 is marked with consent.
6. The defendant is examined as Dw1; he too has filed affidavit in lieu of examination in chief and got marked Ex.D1.
7. Heard arguments.
8. My findings on the above issues are:
Issue No.1: In the affirmative Issue No.2: In the negative Issue No.3: In the affirmative Issue No.4: In the affirmative Issue No.5: As per the final order for the following 7 Com.O.S.No.1191/2022 REASONS
9. Issues 1 and 2: Since these issues relate to the loan transaction and execution of loan documents as well as revival letters by the defendant, the same are taken up together for discussion for convenience and to avoid repetition.
10. The defendant admits availing term loan of Rs.4,00,000/- on 03.02.2017 from Syndicate Bank for business loan and sanction of OD facility of Rs.10,00,000/- on 03.04.2018 on his request, but contends that the rate of interest was not known to him as the loan papers were blank when he signed the same. He also denies execution of the revival letters dated 15.04.2019, 03.01.2020 and 29.10.2020.
11. Pw1 has filed affidavit reiterating that the defendant executed stamped consideration for having received the term loan of Rs.4,00,000/- and two composite hypothecation agreement dated 03.02.2017 and 03.04.2018 as primary security for the term loan and the OD facility on the assets purchased out of the loan proceeds.
8 Com.O.S.No.1191/2022
12. Ex.P1 and P5 are the sanction letters dated 03.02.2017 and 03.04.2018 in respect of the term loan and the OD facility. Ex.P2 is the consideration receipt and Ex.P3, composite hypothecation agreement in respect of the term loan. Ex.P6 is the composite hypothecation agreement in respect of the OD facility. Dw1 admits during cross examination that he utilized the loan amount to purchase materials like fabric, thread, needle and also the machinery
13. Dw1 also admits his signatures on Ex.P1 to P10, but claims that he did not go through the terms and conditions, which is contrary to the specific defence that he signed the blank documents. It is not the defendant's case that he has compelled to sign Ex.P1 to P10 without reading its contents. Such being the case the argument that the defendant did not know the rate of interest at the time of signing the loan papers cannot be accepted.
14. The suggestion of the defendant to Pw1 that the two loans were sanctioned without insisting for security by way of hypothecation is categorically denied claiming that the same 9 Com.O.S.No.1191/2022 was granted on hypothecation of primary security like the machinery purchased out of the loan. Even Dw1 has admitted in unequivocal terms, execution of two hypothecation agreements in favour of the bank hypothecating the materials and machinery purchased utilizing the loan amount.
15. Ex.P7 to P9 are the letters of revival dated 15.04.2019, 03.01.2020 and 29.10.2020 and these are executed within the period of limitation provided under Article 19 of the Limitation Act and therefore, amount to acknowledgment of debt for the purpose of Sec.18 of the Limitation Act. Except suggesting to Pw1 that Ex.P1 to P13 are concocted by the bank, there is absolutely no cross examination either denying or disputing the execution of Ex.P7 to P9.
16. In view of the same and having regard to Dw1's evidence during cross examination that he had sought for renewal of the loan and not restructuring, it can be safely concluded that the defendant executed the revival letters at Ex.P7 to P9 as claimed by the plaintiff. Accordingly, issue No.1 is answered in the affirmative and issue No.2, in the negative. 10 Com.O.S.No.1191/2022
17. Issues 3 and 4: From Dw1's evidence during cross examination it is clear that he utilized the loan amount to purchase materials like fabric, thread, needle and also the machinery for business purpose. Despite hypothecating the materials and machinery purchased out of the loan amount, he did not inform the plaintiff about their sale. Even though the defendant denies receipt of notice at Ex.P11, Ex.P11(a) and (b) show that it was sent through RPAD to his admitted address. Therefore, due delivery of the same on the defendant can be safely inferred.
18. Ex.P12 is the certified statement of term loan account extract and Ex.P13 pertains to OD facility; Ex.P12(a) and 13(a) are the certificates U/s 2 and 2A(a) and (b) of the Banker's Book of Evidence Act. Nothing is suggested to Dw1 to dispute the entries in Ex.P12 and P13. Nor is it the case of the defendant that his payments towards installments and interest are not reflected therein.
19. As per Ex.P12, the defendant was due a sum of Rs.2,11,573.91 as on 01.07.2022 and the plaintiff has claimed 11 Com.O.S.No.1191/2022 the same with Rs.426.09 towards interest upto the date of suit. Likewise, from Ex.P13 it is seen that the defendant was due a sum of Rs.11,29,254.62 as on 30.06.2021 towards OD facility and Rs.5,745.38 is claimed towards interest upto the date of suit.
20. The defendant does not dispute the suit claim but contends that the loan sanctioned in his favour was covered under Credit Guarantee Fund Scheme for Micro and Small Enterprises and therefore, the plaintiff should recover 75% of the dues under this scheme and only then he can be proceeded against for the balance. The defendant relies upon Ex.D1 in support of such contention
21. Ex.D1 speaks to the effect that Credit Guarantee Fund Trust for Micro and Small Enterprises framed CGTMSE scheme for providing guarantees in respect of credit facilities extended by the lending institutions to the borrowers in micro and small enterprises with effect from 01.06.2000 and the scheme was modified from time to time. However, the trust reserves the 12 Com.O.S.No.1191/2022 discretion to accept or reject any proposal referred by the lending institutions.
22. Therefore, it is not necessary that the trust should accept the proposal of the plaintiff with regard to the defendant's loan. A plain reading of the scheme would indicate that even if the plaintiff recovers the amount guaranteed under the scheme, it is bound to recover the dues from the defendant and refund the claim released by the trust. Under such circumstances, I do not find any merit in the argument that the plaintiff can proceed against the defendant only after claiming the benefit of CGTMSE scheme.
23. For the forgoing reasons and in view of the findings on Issues 1 and 2, I am of the opinion that including interest upto the date of suit the plaintiff is entitled to recover Rs.2,12,000/- (Rs.2,11,573.91 + Rs.426.09) towards the term loan and Rs.11,35,000/- (Rs.11,29,254.62 + Rs.5,745.38) towards OD facility from the defendant. Therefore, Issues 3 and 4 are answered in the affirmative holding that the plaintiff is entitled for Rs.13,47,000/- in all with interest from the date of suit till 13 Com.O.S.No.1191/2022 the date of realization at 10% p.a., notice charges of Rs.1,500/- and cost of the proceedings.
24. Issue No.5: In the result, I pass the following :
ORDER Suit of the plaintiff is decreed with cost.
The plaintiff is entitled to recover Rs.13,47,000/- from the defendant with current and future interest at 10% p.a. and notice charges of Rs.1,500/-.
Draw decree accordingly.
Issue copy of the judgment to the parties through email as provided U/o XX Rule 1 of CPC if email ID is furnished.
(Dictated to the Stenographer, transcribed and typed by her, corrected and then pronounced by me in the open court on this the 17th day of January 2023) (H.R.Radha) LXXXIV Addl. City Civil and Sessions Judge, (CCH-85 Commercial Court), Bengaluru 14 Com.O.S.No.1191/2022 ANNEXURE List of witnesses examined for the plaintiff:
Pw1 Harish H. List of documents marked for the plaintiff:
Ex.P1 Sanction letter dated 03.02.2017 Ex.P2 Consideration receipt Ex.P3 Composite hypothecation agreement Ex.P4 Loan application dated 10.03.2018 Ex.P5 Sanction letter dated 03.04.2018 Composite hypothecation agreement dated Ex.P6 03.04.2018 Ex.P7 Renewal letter dated 15.04.2019 Ex.P8 Letter of revival dated 03.01.2020 Ex.P9 Letter of revival dated 29.10.2020 Ex.P10 Letter for extension of over draft facility Ex.P11 Office copy of the legal notice dated 19.04.2021 Ex.P11(a) Postal receipts & (b) Ex.P12 Certified statement of account extract of term loan Ex.P12(a) Certificate U/s 2 and 2A(a) of Banker's Book of Evidence Act Ex.P13 Certified statement of account extract of the OD facility Ex.P13(a) Certificate U/s 2 and 2A(a) of Banker's Book of Evidence Act 15 Com.O.S.No.1191/2022 List of witnesses examined for the defendant:
Dw1 Navanath K.G. List of documents marked for the defendant:
Ex.D1 CGTMSE guidelines (H.R.Radha) LXXXIV Addl. City Civil and Sessions Judge, (CCH-85 Commercial Court), Bengaluru