Final Order:

This original application has been filed by the applicant bank, on 16.06.2014 through Mr. Suyash Naaraayan, Authorized Officer of the applicant bank, under Section 19 of the RDB Act, 1993 against the defendants for recovery of a sum of Rs.12,38,383/- along with interest @19% p.a. from the date of filing of this O.A. till the date of realization in full.

2. The brief facts of the case are that at the request of defendant no.1, the applicant bank sanctioned Loan Facility/Financial Assistance of Rs.21,00,000/-, vide loan/agreement no. CE 361146. The said loan Facility/Financial Assistance was secure by the defendant no.1 by way of hypothecation of purchase construction equipment/, machinery(s) having make Lt_KOMATSU model LT_HEPC200 serial no.NL 17250, as per the loan cum guarantee agreement dated 29.05.2012 in favour of applicant bank. The defendant no.2 stood as the guarantor for the said loan. The defendants executed all necessary loaning documents on 29.05.2012.

3. It is further submitted that the defendants enjoyed and utilized the loan facility, but failed to maintain the financial discipline and failed to repay the due amounts. The applicant bank requested the defendants to regularize the loan account by visits and letters, but there was no response from the defendants. Therefore, the applicant bank served a recall notice dated 06.05.2014 to the defendants but failed to recover the same. Thus, the present O.A is preferred by the applicant bank to recover its dues.

4. On notice by this Tribunal, the defendants put appearance through counsel. The defendant No.1 has filed written statement and evidence.

5. In the written statement the defendant No.1 has denied the facts mentioned in the OA. It is submitted that the present O.A. is not maintainable as the sum demanded by the applicant bank is not due for payment. This is corroborated by the fact that in the loan accounts, besides demanding the sums outstanding, the applicant bank in its O.A. has also claimed the Prepayment Charges. It is submitted that the prepayment charges are levied by the banks when a borrower offers to pay the amount in lump sum before it is due for payment. The applicant bank has recalled the advance and has illegally, unjustifiably and mischievously levied foreclosure charges to the account. Hence, the O.A. being premature is liable to be dismissed. It is further submitted that the applicant bank is not sure of the amount due from the defendant, the applicant bank vide its recall notice dated 06.05.2014 has demanded a sum of Rs.13,01,426/- whereas accounts copy/foreclosure sheet of applicant bank, certified as per the Bankers Book of Evidence Act shows the amount as Rs.12,38,383/- as on 22.05.2014. The difference between the two figures is not supported by the entries in the statement of account. It is submitted that as per the statement of account submitted by the applicant bank, an amount of Rs.46,956.13 has been charged as “prepayment Interest (5% on Principal Outstanding+Service Tax).” As per the present Banking Laws, prepayment charges are levied by banks in case the borrower wishes to foreclose the account. No law empowers a bank to levy foreclosure charges in case the loan is recalled by the bank. It is further submitted that the statement of account as submitted by the applicant bank is not drawn in terms of the norms set by the Hon’ble Supreme Court in the case of Central Bank of India Vs. Ravindra. Applicant bank he instructed to recast the Statement of Account giving details of the amount advanced, payments received, interest charged, details of other debits to the account amount outstanding as per the standard formats of the banks. It is further submitted that compounding of penal interest/supervision charges/Incidental Charges etc., are not allowed. Thus, the amount demanded by the applicant bank is extraneous, escalated and unjustified as certain non-allowable charges like prepayment interest, Revenue for broken period etc., have been added. As per RBI Circular on Prudential norms on Income Recognition, Asset Classification and Provisioning bearing No. DBOD.No.BP.BC.1/21.4.048/20132-14 dated 01.07.2013. It is further submitted that the applicant bank in total disregard to the RBI guidelines, is debiting interest to the account even after declaring the account as NPA. Such debiting of interest, thus tantamounts to the factum that the bank is treating the account as a Performing Asset and not NPA. Filing of Recovery Proceedings is under these circumstances bad in law.

6. The applicant bank and the defendant no.1 have filed their respective evidence.

7. Heard the Ld. Counsel of the applicant bank and Ld. counsel for defendant no.2 and perused the record.

8. The main contention of the defendant is that the applicant bank has charged pre payment charges @ 5% on principle outstanding plus service tax. It is submitted that the pre payment charges can be levelled only when the borrower offers to pay lumpsum amount before its due. In the present case the borrower has never offered the payment of the entire dues before the date of due and therefore, the prepayment charges cannot be levied. In this regard I have perused the exhibit DW1/1 Annexure A/6. The same document has been proved by the Ld. counsel for the applicant bank as AW/6 Annexure A/6. From perusal of the record it is clear that the applicant bank has charged principle outstanding as on 22.05.2014 Rs.835819.13 and has also charged repayment interest (5% of the principle outstanding plus service tax) as Rs.46,956.13. Therefore, it is clear that the applicant bank has demanded prepayment interest. The prepayment interest cannot be demanded when the account has become NPA. It can be leveled only when the borrower makes the payment before its due. Therefore, it is clear that the applicant bank has wrongly charged an amount of Rs.46,956.13. Therefore, the contention of defendant is liable to be accepted and it is directed that the applicant bank cannot get the amount of prepayment charges.

9. The next contention of the defendant is that the applicant bank has charged penal charges,. Supervision charges and incidental charges. It is submitted that the applicant bank cannot charge these charges. But the contention of the defendant has no force. If the defendant has failed to pay the dues, the applicant is permitted to charge penal charges and other incidental charges.

10. In the light of the above discussions, the present OA deserves to be partly allowed.

ORDER

1) I hereby partly allow this O.A. of the Applicant Bank and direct the defendant nos.1 and 2 to pay jointly and severally to the applicant bank within 30 days from today, a sum of Rs.12,38,383.00 – Rs.46,956.13 = Rs.11,91,426.87 along with cost, expenses and interst @ 8% from the date of filing of this O.A. till the date of realization.

2. In case of failure to deposit the above amount within the stipulated period, the same shall be recovered from the sale of hypothecated assets. In case of short fall, the same shall be recovered from the sale of the personal movable and immovable assets of the defendant nos.1 and 2.

3) Recovery Certificate be issued forthwith and be sent to Recovery Officer, Debts Recovery Tribunal-II, Delhi.

4. The registry of this Tribunal is hereby directed to issue free copy of the order and send the same to both the parties.

5) Parties  are direct to appear before the Ld. Recovery Officer, DRT-II, Delhi on 02.04.2026. Pending IAs, if any, stand disposed of.

File be consigned to records.

This judgment has been signed, dated and pronounced in open court.