Court: Senior Civil Judge cum Rent Controller (West), Tis Hazari Courts, Delhi
Case Number: CS SCJ No. 928/2024
CNR Number: DLWT-03-001566-2024
Parties:
- Plaintiff: State Bank of India, a corporation established under the State Bank of India Act, 1955. The case was initiated by its Manager through the branch located in Punjabi Bagh, Delhi, and RACPC at Naraina Industrial Area, New Delhi.
- Defendant: Mrs. Santosh, a resident of C-296, Madipur Colony, Paschim Vihar, New Delhi. She was also associated with the Municipal Corporation of Delhi (MCD), Ward No. 97, Karol Bagh Zone, Community Centre, Ramesh Nagar, Delhi.
Nature of the Suit:
A recovery suit filed by State Bank of India to claim an amount of ₹1,47,506/- from Mrs. Santosh, along with interest at 9.85% per annum (with monthly rests) until realization.
Key Dates:
- Date of Filing: 9th July 2024
- Date of Judgment: 15th January 2025
The case State Bank of India vs. Santosh exemplifies judicial processes in recovery suits involving non-performing assets (NPA). This detailed analysis delves into the facts, arguments, and legal principles applied by the court, ultimately leading to a judgment favoring the plaintiff. It highlights the importance of procedural diligence, substantive evidence, and the implications of an uncontested suit.
1. Introduction
Recovery suits form a significant aspect of banking litigation, especially in cases where borrowers default on loans. Banks rely on judicial intervention to recover dues when all other measures fail. In this case, the State Bank of India (SBI)initiated legal proceedings against the defendant, Smt. Santosh, who defaulted on a car loan. The judgment showcases the procedural and substantive legal framework that governs such cases.
2. Case Background
Initially filed under Order 37 of the Code of Civil Procedure (CPC), the suit was converted into an “ordinary suit for recovery” on the plaintiff’s request on July 9, 2024. The plaintiff sought recovery of an outstanding car loan amounting to ₹1,28,180.75, along with interest and costs.
Loan Sanction and Default
The defendant applied for a car loan under SBI’s Auto Loan Scheme, providing necessary identification and financial documents. On January 31, 2017, the bank sanctioned a loan of ₹3,90,000 for purchasing a Maruti A-2 Eeco 5-Seater Car. The loan was repayable in 84 monthly installments of ₹6,314.4, at an agreed interest rate of 9.2% per annum with periodic revisions.
Despite the contractual obligation, the defendant defaulted on repayments, and the loan account was classified as an NPA on April 11, 2023. Following this, the bank issued a legal notice on June 5, 2024, demanding repayment. The defendant neither replied to the notice nor cleared the outstanding dues, prompting SBI to initiate legal proceedings.
Procedural Developments
The defendant was duly served with summons but failed to appear or file a written statement. Consequently, the court proceeded ex parte against the defendant on November 19, 2024. This procedural development played a critical role in the outcome of the case.
3. Plaintiff’s Case and Evidence
The plaintiff relied on both oral testimony and documentary evidence to establish its claim. Sh. Amarnath, the Manager of SBI, deposed on behalf of the bank and presented key documents, including:
- Loan Application (Ex. PW-1/2): Evidence of the defendant’s request for financial assistance.
- Loan Agreement (Ex. PW-1/5): Proof of the contractual terms agreed upon by the defendant.
- Statement of Accounts (Ex. PW-1/11): Demonstrating the outstanding balance as of June 21, 2024.
- Legal Notice and Postal Receipts (Ex. PW-1/10): Proof of demand notice service to the defendant.
- Certificate of Interest Accrued (Ex. PW-1/13): Detailing the interest calculation.
All documentary evidence was certified under Section 65-B of the Indian Evidence Act, 1872, ensuring their admissibility as electronic records.
4. Legal Principles Applied
4.1. Presumption of Service
The court relied on Section 27 of the General Clauses Act, 1897, which states that if a document is properly addressed, prepaid, and sent via registered post, it is presumed to be delivered unless proven otherwise. The plaintiff produced postal receipts and tracking reports, substantiating the service of the legal notice.
The court also noted the principle upheld in K. Bhaskaran vs. Sankaran Vaidhyan Balan (1999), where the Supreme Court ruled that service of notice by post creates a presumption of delivery, shifting the burden to the defendant to disprove it.
4.2. Uncontested Testimony
As the defendant neither appeared in court nor cross-examined the plaintiff’s witness, the evidence presented remained unchallenged. Courts generally accept uncontroverted evidence as credible, as held in Abdul Gaffar vs. DDA (2001) and Kalu Ram vs. Sita Ram (1980).
4.3. Limitation and Jurisdiction
The court verified that the suit was filed within the limitation period prescribed for recovery suits. Additionally, the court had the necessary pecuniary jurisdiction to entertain the matter.
4.4. Admissibility of Documentary Evidence
The plaintiff complied with the procedural requirements for submitting documentary evidence, particularly under the Bankers’ Books Evidence Act, 1891 and Section 65-B of the Indian Evidence Act. This ensured the admissibility of account statements, legal notices, and other records.
5. Judicial Findings
The court made the following key findings:
- Proven Loan Transaction: The plaintiff successfully demonstrated that the defendant had availed a car loan of ₹3,90,000, evidenced by the loan application, agreement, and vehicle delivery report.
- Default and Outstanding Balance: The account statement and certificate of interest accrued proved that an amount of ₹1,28,180.75 was due, along with additional interest of ₹19,325.
- Service of Legal Notice: The court accepted the postal receipts and tracking reports as proof of service. The defendant’s failure to respond was interpreted as an admission of liability.
- Unrebutted Evidence: The absence of any defense or evidence from the defendant led the court to accept the plaintiff’s claims as unchallenged and credible.
- Right to Recovery: Based on the contractual terms and the evidence presented, the court concluded that the plaintiff was entitled to recover the outstanding amount with interest and costs.
6. Judgment and Decree
On January 16, 2025, the court decreed the suit in favor of SBI, ordering the defendant to pay:
- A sum of ₹1,47,506, inclusive of the principal amount and accrued interest.
- Interest at 9% per annum from the date of filing until realization.
- Costs of the suit.
The court emphasized that the defendant’s non-appearance and failure to contest the suit indicated a lack of defense.
7. Legal and Practical Implications
For Borrowers
This case serves as a cautionary tale for borrowers, highlighting the consequences of defaulting on loan repayments and ignoring legal notices. Borrowers must be proactive in addressing financial difficulties, negotiating with lenders, or seeking legal recourse if disputes arise.
For Lenders
The judgment underscores the importance of meticulous documentation and adherence to legal procedures. Banks must ensure that loan agreements, account statements, and notices are properly recorded and certified to strengthen their case in court.
Judicial Efficiency
The case also illustrates the efficiency of the judicial system in handling uncontested recovery suits. By relying on documentary evidence and legal presumptions, courts can expedite decisions, reducing the burden on the judiciary.
Key Legal Principles
The judgment reinforces several legal principles, including:
- Presumption of Delivery: Under Section 27 of the General Clauses Act, properly served notices are presumed delivered.
- Uncontested Evidence: Courts accept unchallenged testimony and evidence as credible, placing the burden on the opposing party to disprove it.
- Limitation and Jurisdiction: Recovery suits must comply with statutory limitations and jurisdictional requirements.
8. Conclusion
The judgment in State Bank of India vs. Santosh exemplifies the application of procedural and substantive legal principles in recovery suits. It highlights the importance of timely repayment obligations, effective legal notices, and comprehensive documentation.
For lenders, the case serves as a template for ensuring procedural compliance in loan recovery.
For borrowers, it underscores the risks of ignoring legal processes, emphasizing the need for timely communication and resolution of disputes.
As financial institutions continue to face challenges with non-performing assets, cases like this underscore the critical role of judicial intervention in maintaining financial discipline and protecting creditor rights.
FAQ:
What is the significance of pendente lite and future interest in the suit?
A: Pendente lite interest refers to the interest accrued during the pendency of the case.
Future interest is the interest charged on the outstanding amount from the date of the judgment until the payment is made in full.
What does RACPC stand for in this context?
A: RACPC stands for Retail Asset Central Processing Centre, which is a dedicated branch of the State Bank of India for managing retail loans and related recoveries.
ARCHITA SHARMA
GOVERNMENT LAW COLLEGE, MUMBAI
