O.A. No. 475 of 2001. Case: State Bank of India Vs Raga Synoplast Pvt. Ltd. and Ors.. Nagpur Debt Recovery Tribunals

Case NumberO.A. No. 475 of 2001
CounselFor Appellant: G.D. Sule, Adv. and For Respondents: D.N. Kukde, Adv. for Defendant Nos. 1 to 3, S.K. Chaware, Adv. for Defendant No. 4 and G.M. Shitut, Adv. for Defendant No. 5
JudgesK.J. Paratwar, Presiding Officer
IssueBanking Law
CitationI (2006) BC 49
Judgement DateAugust 31, 2005
CourtNagpur Debt Recovery Tribunals


K.J. Paratwar, Presiding Officer

  1. This is an application for recovery of Rs. 82,28,192.89ps. by liquidating 1st and 4th defendant's mortgaged properties and movables.

  2. The borrower (defendant No. 1) is a company of which defendants 2 to 4 are/were directors sued as guarantor. Defendant No. 5 is legal representative of deceased guarantor. Defendant No. 6 is made party because it opened the account in the name of 1st defendant in violation of RBI circulars.

  3. The 1st defendant manufactures rotational moulding products, PVC toys and allied items. In May, 1995 the applicant sanctioned Demand Cash Credit Facility (DCC) of Rs. 10.90 lakhs and Medium Term Loan (MTL) of Rs. 21 lakhs to the 1st defendant at the latter's request.

  4. The DCC and MTL were granted against personal guarantees of defendant Nos. 2 to 4 and deceased Mr. Vasant Limbekar, husband of defendant No. 5. The further security was of equitable mortgage, by deposit of title deeds, by defendant No. 4 of his properties. Defendant No. 1 through its director also deposited title deeds of its factory and thus created equitable mortgage to secure the outstandings.

  5. In lieu of grant of facilities, the 1st defendant executed usual security documents while defendant Nos. 2 to 4 and deceased Mr. Vasant gave letters of guarantee.

  6. The 1st defendant availed of the facilities and operated the account though not satisfactorily. On its inability to clear the outstandings letter of acknowledgement given on 19th August, 1998. The amount, however, was not paid even thereafter and despite repeated demands as also the service of demand notice. Therefore, this O.A. is filed for the aforesaid amount being outstanding under the two facilities as below:

    (i) Cash Credit facility Rs. 23,77,624.66 Interest in DCC A/c upto 8/2001 Rs. 14,20,616.23 (ii) Medium Term loan Rs. 25,02,432.00 Interest in MTL A/c upto 8/2001 Rs. 19,22,020.00

  7. Defendants 1 to 3 in their common written statement (Ex. 25) have admitted grant of the DCC and MTL as averred by the applicant and execution of the security documents in lieu thereof. The letters of guarantee and the creation of equitable mortgage is also not disputed. The contentions on which the O.A. is opposed stated in the special pleadings are that considering nature of 1st defendant's products and requirement of the purchasers (which constantly undergo change) the 1st defendant required dyes and had, therefore, requested the applicant for grant of additional finance. In view of proposed change of director, the Bank had by letter dated 6.8.1998 agreed to release defendant No. 4 as guarantor and induction of Mrs. Shubhada Menon as new Director guarantor-mortgagor. By letter dated 23.3.1999 the Bank put conditions contrary to the arrangement letter dated 6.8.1998 of creating mortgage of entire agricultural land of incoming new director. Defendant No. 1 protested and offered to give as collateral security 4 acres of land of 2nd defendant and proposed Director Mrs. Shubhada Menon but the Bank did not respond. The Bank did not do any of the things and the unit, therefore, became non-functional on 23.4.1999. The Bank suo motu transferred...

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