Bangalore District Court
Canara Bank vs Sankula Manufacturing Unit on 31 October, 2022
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KABC170010172022
IN THE COURT OF LXXXVII ADDL.CITY CIVIL &
SESSIONS JUDGE, (EXCLUSIVE DEDICATED
COMMERCIAL COURT)
AT BENGALURU (CCH.88)
THIS THE 31st DAY OF OCTOBER 2022
PRESENT:
SRI. VIRUPAKSHAIAH H. M., B.Com., LL.M.,
LXXXVII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.O.S.No.529/2022
PLAINTIFF : Canara Bank
(Earstwhile Syndicate Bank)
Kumaraswamy Layout branch,
No.1/B, 1st Floor, 3rd Cross, 50Ft
Main Road, Near Dayananda Sagar
Institutions, Kumaraswamy Layout,
Bangalore 560078. Rep. by its
Manager Mr. CH Chandrashekhar
(By Advocate Sri KM)
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AND
DEFENDANT: Sankula Manufacturing Unit
Prop: Ashok A Nittur
S/o.Venkataramanaiah Hegde,
th
#1515, 19 Cross, Third Floor,
Kumaraswamy Layout,
M:9741165909, Bangalore 560 078.
(By Advocate Sri SVM)
Date of Institution of the 31.03.2022
suit
Nature of the suit (suit on
pronote, suit for declaration
& Possession, Suit for Suit for recovery of money
injunction etc.)
Date of commencement of 14.09.2022
recording of evidence
Date on which judgment
was pronounced 31.10.2022
Total Duration Year/s Month/s Day/s
00 07 00
(VIRUPAKSHAIAH H M),
LXXXVII Addl.City Civil & Sessions Judge,
(Exclusive Commercial Court)
Bengaluru.
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JUDGMENT
The plaintiff has filed the suit against the defendant for recovery of a sum of Rs.11,11,998/- under SOD cash credit No.0684140000042 balance Rs.9,27,776/- and Term loan a/c. No.06849160000172 outstanding as on 31.03.2022 in both accounts amounting to Rs.11,11,998/- towards the principal and interest at the rate of 12.65% p.a. from 01.04.2022 till settlement of its realization and for the cost of the suit.
2. It is the case of the plaintiff that the Sankula Manufacturing Unit is proprietory concern, Ashok A Nittur S/o. Venkataramanaiah is the Proprietor of the Firm has approached the plaintiff bank on 01.04.2016 requesting loan for the purpose of manufacturer of all types of choreography costumes for the firm. The defendants sought loan on a written application dated 01.04.2016. The plaintiff bank has considered the loan application and agreed to grant over draft / cash credit of Rs.8,00,000/- towards 4 improvement of business and SOD/ cash credit sanctioned Rs.8,00,000/- for working capital as per the prevailing terms/ rules and regulations of the bank at the rate in force as per directives of the Reserve Bank of India.
3. The plaintiff further states that present interest as per RBI norms 10.65% p.a. is being charged compounded monthly, which includes overdue interest @ 2% since the account is classified as Non-Performing Account. The defendant's request letter dated 09.11.2021 to extend time for regularization of limit/ payments. Similarly another loan application form under COVID support GECL for MSEs dated 22.07.2020 for Rs.1,60,000/- under MSEs scheme GECL. The process note dated 22.07.2020 for sanction of Guaranteed Emergency Credit Line and sanction memorandum for Rs.1,60,000/- with interest @ 7.50% p.a.. The offer letter for Guaranteed Emergency Credit Line dated 22.07.2020 and Appendix as per HO circular 416/20 dated executed by defendant for Rs.1,60,000/- repayable for 36 months with moratorium of 12 months and entire loan will 5 be repaid within 48 months commencing from 30.06.2021 for working capital term loan / loan facility granted letter dated 22.07.2020. The defendant has also executed Agreement cum Deed of Hypothecation dated 01.06.2020 for Rs.1,60,000/- and interest thereon @ 7.50% initially and 2% overdue interest above the normal if the said loan has become/treated as overdue and repayable for 36 months with moratorium of 12 months and entire loan will be repaid within 48 months commencing from 30.06.2021.
4. The plaintiff further states that the defendant was bound by the covenants agreed upon in the composite agreement and he clearly understood the implications of default, such as charging overdue interest, recalling the entire loan etc. The defendant also agreed for charging of 2% overdue interest in case of default in bringing to credit and / or interest charged thereupon.
5. The plaintiff states that the defendant did not operate briskly nor brought to credit once a year or paid interest as agreed, thereby rendering the account as Non- 6 Performing Account. The plaintiff bank requested the defendant to regularize the account and in this regard wrote several letters, which however did not bring the desired results. The plaintiff calling upon the defendant issued a Vakil Notice through his counsels vide notice dated 10.01.2022. The notice issued to the defendant has been duly served and the notice was relied vide letter dated 16.01.2022.
6. The cause of action for the suit has arisen to file this suit on 19.08.2016 and 22.07.2020 when working capital loan and term loan sanctioned/released and overdraft / cash credit was sanctioned / released and on all the other dates of admitted credits viz., 22.07.2020 and 07.10.2020 and when entire loan was recalled by vakil notice dated 10.01.2022 at Bangalore and the same was within the jurisdiction of this Court. Accordingly, plaintiff has prayed for Judgment and decree.
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7. After service of summons, the Proprietor of defendant appeared through its counsel and filed his written statement by partly admitting and denying the plaint para 1 to 17 and contending that the claim is illegal, the interest charges is abusive and the entire suit is illegal and unsustainable. Resources and investments of the defendant is that they are running this Sankula Manufacturing Unit for last 22 years. The defendant is expert in Costumes Designing, Costumes Manufacturing and Sales. The defendant have invested for the same with Costumes, Artificial Jewellery, Accessories, ad Wings etc for all types of Dance, Drama, Cultural, Mythological, Historical, and Fancy Dresses for Kids Needs etc. and the defendant also manufacture Mascot Costumes, Handmade Masks etc. The defendant have regular suppliers of raw materials and Hand-made Handicraft Products from Kolkata, Rajasthan, Gujarat, Surat, Belgaum, local Bangalore, Andhra Pradesh and Tamil Nadu. These raw materials are Designed, Stitched, Manufactured and 8 assembled here and finally supplied to clients as per their requirements. The defendant indirectly hire the handicraft people to produce many handmade products from many parts of India as mentioned above. The defendant also have 2 to 3 sub-units to whom the defendant outsource to cater to the customer needs for in-time commitments for bulk orders during season time.
8. The National Disaster, the unfortunate and shocking Pandemic COVID-19, the Health Emergency Situation, due to which Lockdown was, announced during March 2020, the second wave lockdown in April 2021, and now the third wave or Omicron scare and semi-lockdown has shattered all the lives, all the hard earned business which has brought a major setback to all these activities, which are interdependent on each other. The entire years 2020 and 2021 has gone for the defendant without getting permissions for the all the above aforesaid activities. There are many 100s of families directly or indirectly dependent on the defendants for their livelihoods. 9
9. Since 15 years of banking history, the defendant have never seen any non-payments or cheque bounces in the accounts. From the income generated through this business only, the defendant have paid the taxes and filed ITRs regularly. Seeing these prompt and satisfactory payments and net profiles only, the bank has sanctioned loans. Genuinely, the plaintiff bank has very well co- operated and their services and respect that the defendant have been receiving is excellent and were very happy. A huge cultural hub happening everywhere. If not for the COVID-19, pandemic, the business would have been booming in these years. Even now the defendant is seeing the same demand and concepts except for permissions from the government.
10. The defendant sought in the reply to provide support and give sufficient time to come out of this awkward situation as there is only a problem with government to give permissions, for this sector of activities. On one side government is not permitting these activities and on the 10 other side the defendant is stressed to repay the EMIs due to zero income. Though the defendant have every facility for proper business to happen, but the hands are tied to do anything except to wait during this uncertain circumstance. Once permission are given, all the activities will revive again even better than before, as the children, parents, schools, companies etc are eagerly waiting to relax and come out of stress with these entertainment activities and events, as this is one of the important aspect of everyone's lives. Further defendant sought the co-operation and co- ordination of the Bank and postpone any legal action and provide discount in the interest and nothing was considered by the Bank. Therefore, the defendant prays to dismiss the suit with costs.
11. On the basis of the pleadings, this Court has framed the following issues:
ISSUES
1. Whether the plaintiff proves that the defendant approached the plaintiff bank on 01.04.2016 and 11 availed loan of Rs.8,00,000/- with interest at 10.65% p.a. monthly compounded and over due interest at 2% p.a. from the plaintiff bank and executed necessary loan documents in favour of the plaintiff bank?
2. Whether the plaintiff further proves that the defendant availed another loan of Rs.1,60,000/-
under GECL for MSEs scheme on 22.07.2020 with interest at 7.50% p.a. agreeing to repay the same with 36 monthly installments with moratorium 12 months and entire loan will be repaid with 48 months from 30.06.2021?
3. Whether the plaintiff further proves that the defendant is due of Rs.11,11,998/- in both accounts with interest at 12.65% p.a. from 01.04.2022 till realization?
4. What order decree?
12. In order to prove, the plaintiff got examined its Senior Branch Manager as PW1 and got marked 32 documents at Exs.P1 to P32. The defendant firm got examined its Proprietor as DW1. No any evidence lead on behalf of defendant.
13. Heard, learned counsel for the plaintiff and the defendant.
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14. My findings on the above issues are as under:
Issue No.1 :- In the Affirmative Issue No.2 :- In the Affirmative Issue No.3 :- In the Affirmative Issue No.4 :- As per the final Order for the following reasons.
REASONS
15. Issue Nos.1 to 3 : These issues are taken up together for discussion to avoid repetition of facts and convenience.
16. It is specific case of the plaintiff Bank that the defendant approached the plaintiff Bank and availed loan of Rs 8,00,000/- with agreed interest at 10.65% per annum monthly compounded and over due interest at 2 % per annum on 1.4.2016 and defendant availed another loan of Rs 1,60,000/- under GECL for MSES scheme with interest at 7.50 % per annum on 22.07.2020 agreeing to repay the same with 36 installments with moratorium 12 months and entire loan will be repaid within 48 months from 13 30.06.2021 and executed necessary loan documents. It is further case of the plaintiff that the defendant failed to repay the same to the plaintiff Bank as agreed by him and there is due of Rs 11,11,998/- in both accounts with interest.
17. To substantiate the case of the plaintiff, PW1 examined in lieu of affidavit in chief-examination and reiterated the facts as averred in the plaint once again on oath and marked Ex.P1 to P32. Ex.P.1 is the Loan application with certificate of Registration, PAN Card, Election ID and Aadhar card, Ex.P.2 is the particulars of assets and liabilities, Ex.P.3 and 4 are Copies of Udyog Aadhar Registration Certificate of defendants, Ex.P.5 is the registration certificate of establishment, Ex.P.6 is the Process note/assessment of eligible credit upto 10 lakhs, Ex.P.7 is the Sanction letter, Ex.P.8 is the Credit guarantee scheme for MSE consent of borrower, Ex.P.9 is the Composite hypothecation agreement, Ex.P.10 is Value of 14 stocks statement by defendant, Ex.P.11 is Stock details, Ex.P.12 is Provisional extension loan limit of defendant, Ex.P.13 is Request letter given by defendant to the Bank to seek time to furnish further documents, Ex.P.14 is Application for coverage of CGMSE, Ex.P.15 is Undertaking letter from defendant, Ex.P.16 is the Renewal letter for all facilities, Ex.P.17 is the letter of revival, Ex.P.18 is Request letter by the defendant to extend time for making due payments, Ex.P.19 is Statement of account, Ex.P.20 is Application form loans to MSES, Ex.P.21 is Process note format sanction guaranteed emergency credit line, Ex.P.22 is Sanction memorandum, Ex.P.23 & 24 are Per approved loan facility guaranteed and emergency credit line, Ex.P.25 is Pronote, Ex.P.26 is Take delivery letter to DPN, Ex.P.27 is the Agreement cum deed of hypothecation, Ex.P.28 is the Letter of undertaking re-loan for advances, Ex.P.29 is the Office copy of the legal notice, Ex.P.30 is Postal receipt, Ex.P.31 is Reply notice by defendant and Ex.P.32 is Statement of account of the defendant. They reveals that 15 the defendant availed the loan from the plaintiff Bank as contended by the plaintiff agreeing to repay the same with interest by executing necessary loan documents, defendant is due of Rs 9,27,776.00 as on 30.03.2022 pertaining to loan account No. 06841400000042 and Rs 1,84,222/- as on 31.03.2022 pertaining to loan account No. 06849160000172. It is also noticed that the defendant proprietor requested the plaintiff Bank Manager on 9.11.2021 seeking extension of time for making due payments on the reason that his business is related to school and college events, they are reopening slowly, hence seeks time of 15-20 days to make payment on account of Covid. It appears that the defendant is not denying the loan transaction and the execution of loan documents in favour of plaintiff Bank and non-payment of loan installments to the plaintiff Bank due to Covid-19. This document itself is sufficient to hold that the defendant availed the loan from the plaintiff Bank as contended by the plaintiff and due to Covid-19 he failed to repay the same 16 within the stipulated time as agreed by him. As corroborated to Ex.P.18, D.W.1 himself admits in his cross-examination that he sought reduction of rate of interest within the limitation of the Bank and seeks six months time to repay the loan outstanding amount of Rs 11,11,996/- with 12.65 % interest and penal interest as against the suggestion putforth by the plaintiff. He has taken a contention in his written statement that he partly admits and deny the case of the plaintiff but as against his contention, he only sought time of six months to repay the outstanding loan amount with interest to the plaintiff Bank. It shows that the denial by the defendant in its written statement is only formal and no any supporting evidence. His bald denial in the written statement cannot prevail over the documentary evidence produced by the plaintiff Bank. Though he stated several aspects in his affidavit by way of chief-examination, but to support the same, he has not produced any documents.
18. Though defendant cross-examined the P.W.1, 17 nothing is elicited to discard his oral and documentary evidence. However, P.W.1 admits in his cross-examination that prior to March 2020 the defendant was regularly paying the loan installments to the plaintiff Bank and after March 2020 all school and colleges and other business activities were stopped due to Covid-19. He further admits that the relationship of the defendant with the plaintiff Bank was cordial before Covid-19. It shows that defendant was regularly paying the loan installments to the plaintiff Bank before Covid-19 and thereafter he failed to repay the same due to Covid-19 as admitted by the plaintiff. Under these circumstances, there is no impediment to the defendant to grant six equal monthly installments accrued with interest for repayment of outstanding loan to the plaintiff Bank without single default. Otherwise the defendant will be put to hardship because at present all the business activities are normal and the plaintiff Bank should give opportunity to the defendant for repayment of outstanding loan amount without harmful to the 18 defendant. Therefore, in the facts and circumstances of the case and in the light of the discussion as above, this Court feels that the suit of the plaintiff is deserves to be decreed by granting six months equal installments to the defendant. Hence, I answer issue No.1 to 3 in the Affirmative.
19. ISSUE No.4 :- For the aforesaid reasons on issues No.1 to 3, I proceed to pass the following Order.
ORDER The suit of the Plaintiff is partly decreed with costs.
The Defendant is liable to pay the outstanding loan amount of Rs 11,11,998/- under both loan accounts to the plaintiff along with interest at the rate of 12.65 % per annum from the date of suit till the date of realization.
The plaintiff Bank shall grant six equal monthly installments to the defendant to repay the said outstanding loan amount with accrued 19 interest.
The 1st installment shall commence from 01.12.2022 till 31.05.2023.
The Advocate for the plaintiff is directed to file Memorandum of Cost before the Office within 5 days from today.
Draw decree accordingly.
(Dictated to the Stenographer, typed by him, corrected and then pronounced by me in open Court on this the 31st day of October, 2022).
(VIRUPAKSHAIAH H M), LXXXVII Addl.City Civil & Sessions Judge, (Exclusive dedicated Commercial Court) Bengaluru.
ANNEXURE LIST OF WITNESSES EXAMINED ON BEHALF OF THE PLAINTIFF PW-1 Sanoop P P LIST OF DOCUMENTS EXHIBITED ON BEHALF OF THE PLAINTIFF Ex.P.1 Loan application with certificate of Registration, PAN Card, Election ID 20 and Aadhar card Ex.P.2 Particulars of assets and liabilities Ex.P.3 and 4 Copies of Udyog Aadhar Registration Certificate of defendant Ex.P.5 Registration certificate of establishment Ex.P.6 Process note/assessment of eligible credit upto 10 lakhs Ex.P.7 Sanction letter Ex.P.8 Credit guarantee scheme for MSE consent of borrower Ex.P.9 Composite hypothecation agreement Ex.P.10 Value of stocks statement by defendant Ex.P.11 Stock details Ex.P.12 Provisional extension loan limit of defendant Ex.P.13 Request letter given by defendant to the Bank to seek time to furnish further documents Ex.P.14 Application for coverage of CGMSE Ex.P.15 Undertaking letter from defendant Ex.P.16 Renewal letter for all facilities Ex.P.17 Letter of revival 21 Ex.P.18 Request letter by the defendant to extend time for making due payments Ex.P.19 Statement of account Ex.P.20 Application form loans to MSES Ex.P.21 Process note format sanction guaranteed emergency credit line Ex.P.22 Sanction memorandum Ex.P.23 & 24 Pre approved loan facility guaranteed emergency credit line Ex.P.25 Pronote Ex.P.26 Take delivery letter to DPN Ex.P.27 Agreement cum deed of hypothecation Ex.P.28 Letter of undertaking re-loan for advances Ex.P.29 Office copy of the legal notice Ex.P.30 Postal receipt Ex.P.31 Reply notice by defendant Ex.P.32 Statement of account LIST OF WITNESSES EXAMINED ON BEHALF OF THE DEFENDANT D.W.1 Ashok Nittur 22 LIST OF DOCUMENTS EXHIBITED ON BEHALF OF THE DEFENDANT Nil (VIRUPAKSHPAIAH H M), LXXXVII Addl.City Civil & Sessions Judge, Bengaluru.
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