DRT affirmed the joint and several liability of the borrower and guarantor for loan default while modifying the interest rate.
The Debts Recovery Tribunal (DRT), Cuttack Bench, presided over by Mr. Jitendra Prasad Singh, adjudicated an OA and held that a borrower and guarantor are jointly and severally liable to repay the sanctioned loan amount, along with applicable interest. The Tribunal emphasized that when documentary evidence establishes default, it is empowered under Section 19(20) of the RDDBFI Act, 1993, to award simple interest, overriding contractual interest rates post-litigation.
The Debts Recovery Tribunal considered an Original Application filed under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The applicant bank sought a Recovery Certificate for ₹33,02,182 along with interest, costs, and other reliefs against Defendants No. 1 and 2. The claim arose from a cash credit facility of ₹15,00,000 sanctioned to Defendant No. 1 for running a business in motor spare parts and accessories, with Defendant No. 2 serving as a guarantor. The defendants executed relevant loan documents on October 6, 2014, following which the loan was disbursed. However, after February 11, 2016, the defendants failed to make transactions or payments, leading to the account being classified as a Non-Performing Asset (NPA) on May 12, 2016. Despite repeated demands, the defendants did not regularize the account, prompting the applicant bank to initiate legal proceedings.
The applicant bank initially approached the Civil Judge, Senior Division, Bhanjanagar, but the suit was returned due to lack of pecuniary jurisdiction. Subsequently, the bank filed the Original Application before the Tribunal. Notices to the defendants were published, but none appeared, resulting in the matter proceeding ex-parte. The Tribunal examined evidence on affidavit and documents, including the loan application, sanction letter, agreements, and statements of account. It found that the defendants had availed and utilized the loan but failed to repay the dues despite repeated demands. The claim was deemed within the limitation period, and the Tribunal affirmed its jurisdiction.
The Tribunal concluded that the defendants were jointly and severally liable for ₹33,02,182 with interest at 10% per annum, calculated from May 1, 2019, until realization. While the applicant sought pendent lite and future interest at 10.75% per annum with monthly rests, the Tribunal exercised its discretion under Section 19(20) of the Act and awarded simple interest at 10% per annum. The defendants were restrained from transferring or encumbering their assets until the dues were satisfied.
The Tribunal directed the Registry to issue a Recovery Certificate to the Recovery Officer for executing the recovery process. The Recovery Officer was tasked with ensuring compliance and taking necessary steps under the law. The defendants were instructed to appear before the Recovery Officer on October 23, 2024, failing which recovery proceedings would ensue.
Mr. M.K. Swain, Advocate represented the Applicant whereas no one was present for the Respondents.
For the Respondent/ Defendant: None (Ex-parte on 27.09.2022)
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines, Press Releases and more.
Click on the Citation/Link to access these resources
Comments