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I TEFoRETHEARBITRALTRIBUNAL
,R.V^.P.RAMAN,ADJOCATE
! (soLE ARBTTRATOR)
E Arbirration No. 2of 2022
AWARD DATED 07.W.2023
hVI7r. Shtir"- Finance Limite4
(Fonnerly I\(s.Shriram City Union Finance Ltd.,)
Having its Branch Office at
flNo.f} Ramasamy Street, T.Nagar,
Chennai 500017
hep. Uy its Authorised Signatory,
ffrs.S.Aarthi ...Claimant
Vs.
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0 *1.'i .J.r'r,L Ci1f. {^' 'i: "r i"i
I r. Ms.D.Santhakumari
2. Mr.K.Dhayalan
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3. Mrs.Bakkiyalakshmi
t 4. Ms.Priya
5. Ms.Sowmiya
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5. Mr.Kalaiselvan
All at No.111, Karukkupettai Main Road,
I Thimmaiyanpettai, Ekanampet
I Kanchepuram - 637607 .. . Respondents

nmn the Claimant

3 FOR THE PARTIES IN

Mr.R.Umashankar and M.Sridevi, Advocates for M/s. Sri and Shankar
fl
Associates for Claimant

Mr.A.Govindaraj, Advocate for the Respondents

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 3

AWARD

PROCEDURAL BACKGROUND:

1. The present Arbitration relates to the dispute between the parties with
respect to the loan agreement dated. 28.09.2017 bearing account no.
KNCU2TF170927002-L.

2. The Hon'ble Madras High Court vide order dated 02.08.2022 in

Arb.O.P.(Com.Div) No. 164 of 2022 constituted this Tribunal. Upon
receipt of the above order, this Tribunal issued communication to both
parties vide letter dated 30.08.2022fixing the timelines for completion of
pleadings. The claimant e-filed the claim statement on 15.09.2022. The
Claimant filed its claim statement in original along with supporting
documents on 22.09.2022.

3. As the letter sent to the Respondents returned, an email was sent on

10.09.2022 to the counsel for Respondents who appeared before the

Hon'ble Madras High Court in the above mentioned petition. The

Respondents filed their statement of defense along with supporting
documents on 29.09.2022.

4. Dralt issues were filed by the Respondents on 16.10.2022. The Claimant

did not file its draft issues. On 28.10.2022, the issues were framed. The
Claimant requested for trial by oral evidence vide email dated
13.12.2022. The Respondents also expressed their intention to have trial

by oral evidence. The said request was acceded to. On 23.12.2022, the
Claimant filed a memo seeking to amend to its name in the cause title
 4

pursuant to the order of the Hon'ble National Company Law Tribunal

dated 09.11,.2022. The same was allowed vide order dated 28.01..2023.

5. On 30.01,.2023, M.Mageswari, Employee of the Claimant bearing

No.M322 was examined as CW1 and marked Exhibits Cl to C19. The
Examination in Chiel Cross Examination and Re-examination of CW1
was completed on the same duy. On 23.02.2023 and 07.03.20?3,

Kalaiselvan, 6tL Respondent examined himself as RWL in the capacity of

guarantor and marked exhibits R1 to R10. The Examination in Chief,

Cross Examination and Re-examination of RW1 was completed on the
above said dates. The Lrt Respondent who is the Principal Borrower did

not enter the witness box. The 2"d Respondent who executed the Ex.C2
as guarantor and executed the mortgage deed Ex.R1 in order to secure
the said loan agreement also did not enter the witness box. It is only the
6m Respondent who is one of the guarantor entered the wibress box.
Thereafter, on 22.03.2023, the Respondents filed an interim application
i.e. I.A.No.1 of 2023 to bring additional documents on record. The
Claimant filed its counter to the said application on 27.03.2023.Both
parties vide separate emails dated 28.04.2023 (Respondents) and
29.04.2023 (Claimant) requested this Tribunal to consider its respective

affidavits as its oral submissions and pass orders. This Tribunal vide
order dated 02.05.2023 dismissed the said interim application.

6. On 27.06.2023, the Respondents filed their Written Submission and vide

email dated 30.06.2023 requested this Tribunal to treat the same as their
oral arguments. On 30.06.20n, the Claimant e-filed its Written

a
 5

Submission and requested this Tribunal to treat the same as its oral
arguments. Hence, the rnatter was reserved for orders.

FA

7. The Claimant is a Non-Banking Finance Company engaged in the

business of extending finance facility to individuals, firms and Limited

companies under various schemes. In the course of its business, the 1st

Respondent approached the Claimant with a request to avail finance

facility to the tune of Rs.15,00,000/- (Rupees Fifteen Lakhs only) for her
business development. The same was favorably considered and loan
agreement dated 28.09.201.7 bearing no.KNCU2TF1.70927002L was
entered into between the Claimant and the 1"t Respondent along with
Respondents 2 to 6 being the personal guarantors. The toan was
repayable along with finance charges being Rs.12,40,500/-(Rupees
Twelve Lakhs Forty Thousand Five Hundred only) in 60 equal
installments with each installment beingRs.45,675 /- (Rupees Forty Five
Thousand Six Hundred and Seventy Five only) commencing from
10.71..2077 and ending on 70.10.2022.The Respondents allege that the
Claimant has tampered with details of Schedule 1 to agreement dated
28.09.2017 wherein the date of the loan agreement was changed from
21..09.2017 to 28.09.2017 and annualized rate of interest as 26.65%

instead ot1.6.5%. Further there were no witnesses to the said agreement.

Due to Covid-19, the Claimant granted moratorium in payment of the
amount for a period of 6 months from March 2020 to August 2020.The
interest during the moratorium period stood capitalized and the
payment schedule stood revised and got extended till December 2023.
 6

As per the revised schedule, the Respondents had to pay Rs.45,675/-

(Rupees Forty Five Thousand Six Hundred and Seventy Five only) as

monthly installments upto November 20?3 and for the last installment
alone Rs.8,646/- (Rupees Eight Thousand Six Hundred and Forty Six
only) had to be paid.

8. The above mentioned loan was secured by the 2na Respondent by

mortgaging his property through a mortgage deed dated 25.09.2017
registered with the Sub-Registrar, Walajabad bearing Doc.No.2855 of
2077.The rate of interest mentioned in the mortgage deed is 75.65%

(flaQ.The Respondents paid upto 40 installments and defaulted

thereafter. The last payment was made on 10.02.2027. Further, an Ex-

$atia of Rs.7,981/-(Rupees Seven Thousand Nine Hundred and Eighty

One only) was credited and adjusted against the dues payable by the
Respondents. The Respondents defaulted in making payment towards
the monthly installments and thereby committed an "Event of Default"
as stipulated under the loan agreement. As per the loan agreement, for

every default in payment of the installment, the Respondents are liable

to pay overdue interest at 36% per annum on such delayed Payments.
The Claimant issued notice dated 01.09.2021. to the Respondents calling

upon them to pay the amount due under the Loan agreement and also
categorically stated that upon failure on part of the Respondents to clear
the amount due, the Contract shall stand determined and the claimant
is entitled to recover entire amount due including future installments.

9. The Respondents issued notice dated 13.02.2021. disputing the interest

payable under the agreement dated 28.09.2017. The Respondents had

a
 alleged that the rate of interest levied under the agreement is only 16.5%
P.A. and without any contract Claimant has levied 26.65% P.A. The
Claimant also issued a reply dated 19.03.2021 refuting the same. The
Respondents made several complaints against the Claimant to the
Reserve Bank of India and with the Inspector of Pblice, Kancheepuram.
Further, the Respondents lodged a complaint with the Hon'ble
President of India agairst the Claimant.

10. Apart from the above loary the l."t Respondent has also availed another
loan for Rs.10,00,000/-(Rupees Ten Lakhs only) and an agreement dated
1,4.06.20-18 bearing agreement no.KNCU2TF1805200001 was entered
between the l."t Respondent and Claimant along with Respondents 2 to
6 being the personal guarantors for the said loan. The second loan was

also repayable along with finance charges being Rs.8,27,000/-(Rupees

Eight Lakhs Twenty Seven Thousand only) in 60 equal installments
with each installment commencing from 10.07.2018. The Respondents

defaulted the second loan as well and hence a sum of Rs.5,85,978/-

(Rupees Five Lakhs Eighty Five Thousand Nine Hundred and Seventy

Eight only) is due and payable as on 72.09.2022. The second loan is also
secured by a mortgage deed. The Respondents, allege that the said
mortgage deed was fraudulently registered by the officers of the
Claimant with the help of Sub-registrar, Walajabad.

1.1.The Respondents allege that a lump sum of Rs.10,00,000/-(Rupees Ten

Lakhs only) was paid on 19.01..2021. by 1s Respondent through online

transfer to the Claimanfs branch at Tindivanam as directed by the
Kancheepuram branch. Out of the said Rs.10,0e000/- (Rupees Ten
 8

Lakhs only), Rs.2,74,400/- (Rupees Two Lakhs Seventy Four Thousand

Four Hundred only) was deducted towards the 1't loan and
Rs.7,25,571/-(Rupees Seven Lakhs Twenty Five Thousand Five
Hundred and Seventy One only) towards the second loan and no
receipt for the Rs.10,00,000/- (Rupees Ten Lakhs only) was given by the
Claimant. The Respondents further state that there were two sanction
advices for the two loans dated 25.09.2017 and 14.06.2018 addressed
through email by the Claimant to the 1't Respondent mentioning the
effective rate of interest as 26.65% and 25.92o/o p.u.and it was accepted
by the L'tRespondent.The Respondent alleges that the lst znd lnd

Respondents did not sign the said sanction advices and their signatures

were forged.

12.When the L't Respondent offered to close both the loan agreements, the
Claimants demanded a further sum of Rs.8,00,000/-(Rupees Eight
Lakhs only) towards future installments. The Respondents allege that
the Claimant is guilty of fraud and violated the RBI guidelines by
charging exorbitant interest. The rate of interest levied by the Claimant
is in violation of Tamil Nadu Money Lenders &ct,1957.

ISSUES INVOLVED:

13.This Tribunal framed the following issues on28.70.2022:

I. Whether the Schedule L in the loan agreement bearing no.
KNCU2T F 17 0927 0021 is f abtic ate d?
 9

II Whether the schedule 1 in loan agreement bearing account no.

KNCU2TF1805200001 dated 14.06.2018 is fabricated?

m Whether the interest rate was arbitrarily and unilaterally modified from
16.5% p.a. to 26.650/o p.a. by the Claimant?

IV Whether the interest rate charged by the Claimant is

usurious/exorbitant and is in violation of Tamil Nadu Money Lenders

Act,1957?

V Whether the Respondents are jointly and severally liable to pay a sum
of Rs.18,54,640l- to the Claimant?

VI. Whether the Respondents are liable to pay further interest at the rate of
36% p.a. from the date of the claim statement till date of realization?

VII I,llhether Respondents have repaid the entire loan amount for both the
ioan accounts?

VIII. Whether there was any delay/default in payment towards the loan
accounts by the Respondents?

IX. Whether the Claimant is justified in unilaterally extending the term of

the loan agreement as per the RBI Notification?

X. Whether Claimant is entitled to retum the Original Title documents

obtained by it in order to secure the loan accounts?

I
 10

XI. Whether the -loan obtained by the Respondents for the value of
Rs.10,00,000/- bearing account no. KNCU2TF1806200001 dated
1.4.06.2018 is a separate transaction or in addition/top-up to the existing
loan obtained by the Respondents for the value of Rs.1,5,00,000/-

bearing account no. KNCU 2TF17 0927 0021?

XII. Whether the Arbitral Tribunal can decide the validity of the registration
of the simple mortgage deed dated 1,4.06.2018? If yes, \Alhether the
simple mortgage deed dated 1"4.06.2018 containing 26.56% p.a interest
on Rs.10,00,000/ - is validly registered by the Claimants?

XIII. Whether the parties are entitled for any other reliefs?

XIV. Whether the Loan Agreement Ex.C2 containing the Arbitration Clause
is sufficiently stamped?
(lssue XIV has been framed as an additional issue since the same was raised by the

Respondents during Cross Examination of CW1. and both parties haae made
submissions regarding the same.)

CONTENTIONS ADVANCED BY THE PARTIES IN THE WRITTEN

SUBMISSIONS

14.The Case of the Claimant:

a. The present arbitral reference is only with respect to the loan
agreement entered between the L't Respondent and Claimant
d ated 28.09 .2017 bear in g a greement no. KNCU 2TF 17 0927 0021' .

I
l1
 11

b. As per the above agreement, a sum of Rs.15,0O000/- (Rupees

Fifteen Lakhs only) was sanctioned as loan by the Claimant to the

1"t Respondent and the Respondents 2to 6 are the guarantors of
the said loan. Further, the Loan was secured by way of a

mortgage deed dated 25.09.2077 registered as document no.2855

o12017 on the file of Sub-,Registrar, Walajabad.

c. The said loan was repayable in 60 irutallments with each

installment being Rs. 45,675/ - (Rupees Forty Five Thousand Six

Hundred and Seventy Five only) commencing fuom 10.11..2017

and ending on10.70.2022. The installments is inclusive of the loan

amount and the finance charges of Rs. 1240,500/-(Rupees Twelve
Lakhs Forty Thousand Five Hundred only) . Due to Covid-19 and
as per the guidelines of RBI the period of payment was extended

till December 2023.

d. The last installment paid by the Respondent was in respect of

406installment on 70.02.2021. The Respondents committed
defaults from 41"t Installment. The Claimant issued a notice dated
01,.09.2021, calling upon the Respondents to pay the amounts due
under the loan agreement and also categorically stated that upon
failure on part of the Respondents to clear the amount due, the
Contract shall stand determined and the Claimant is entitled to
recover entire amount due including future installments.

e. The Respondents issued a notice dated 13.02.2021 denying and

disputing the interest payable under the agreement. The
Claimant vide letter dated i.9.03.2021 issued a reply to the above
 72

letter. Further, the Respondents filed complaints to RBI on

'14.04.202L and 10.05.2021. RBI called upon the Claimant to give
its explanation and the same was duly rendered by the Clainrant.
RBI vide order dated 26.07.2021. closed the said complaints under

clause 13 of Ombudsman Scheme for NBFC's, 20L8 on the ground

that there is no deficiency of service as stipulated under clause 8

of the scheme. Moreover, the L"t Respondent filed the same

complaint on different dates and the same were also closed by
RBI after due consideration.

f. The Respondents lodged a complaint dated 29.04.2021. with the

Inspector of Police, Kancheepuram but the same was closed.
Another complaint to RBI was made with the very same

complaint given to Police but the same was also closed. Being
dissatisfied, a complaint was lodged with the Hon'ble President
of India: The above acts of the Respondents are put forth by the
Claimant to show the mala-fide intention to wriggle out their
liability and to compel the Claimant to succumb to the ullawful
and illegal demands of the Respondents.

g. Therefore, the Claimant prayed for the reliefs sought.

15.The Case of the ResPondents:

a. The 1tt Respondent entered into a loan agreement with the
Claimant for Rs.1.5,00,000/-(Rupees Fifteen Lakhs only) on
27.09.2017 repayable with 50 equal installments' The monthly

installment was Rs.45,675/-(Rupees Forty Five Thousand Six

Hundred and Seventy Five only)' The rate of interest was 76'65%
 13

for the loan amount and the entire loan amount can be cleared
within 44 installments. The L't Respondent also availed another
loan from the Claimant for Rs.1.0,00,000/- (Rupees Ten Lakhs
only) on'1.4.06.20L8 repayable within 60 equal installments.

b. It is alleged that the Claimant had tampered with the details of

the LstSchedule of the 1'tAgreement and changed the date of the
Agreement to 28.09.2017 from 21..09.2017. The above loan was
secured by a mortgage deed registered on 25.09.2017 as
Doc.No.2885/2017 before the Sub-Registrar of Walajabad. The
simple mortgage deed reflected the rate of interest as 1.5.50%
(flat). The Claimant had fraudulently registered another
mortgage deed dated 1,4.06.2018 mentioning26.56% as the rate of
interest in order to secure the loan agreement dated L4.06.2018.

c. The L't Respondent regularly paid the monthly installment of

Rs.45,675/-(Rupees Forty Five Thousand Six Hundred and
Seventy Five only)upto February 2021, i.e. 31 months. On
19.01,.2021,, the 1rt Respondent paid a sum of Rs.10,00,000/-

(Rupees Ten Lakhs only) through online transfer to the

Tindivanam branch as directed by Kancheepuram branch.

However, no receipt was given for the said amount. Further, out
of the said amount, Rs.274,400/-(Rupees Two Lakhs Seventy
Four Thousand Four Hundred only) was deducted towards the
1st Loan agreement and Rs.7,25,571/-(Rupees Seven Lakhs
Twenty Five Thousand Five Hundred and Seventy One only)was
deducted towards the 2nd Loan agreement. The 1st Respondent

I
 t4

has paid a sum of Rs.31,01,050/-(Rupees Thirty One Lakhs One

Thousand and Fifty only) towards both the loan agreements.

Since the borrower did not make any default, the liability of the

guarantors and proceeding against the mortgaged property does

not arise.

d. The Claimant is charging interest at 26.650/o arbitrarily. When the

1.t Respondent offered to close the two loans, the Claimant
demanded a further sum of Rs.8,00,000/-(Rupees Eight Lakhs
only) towards the future installments.

e. The rate of interest charged by the Claimant is exorbitant and is

in violation of Tamil Nadu Money Lenders Act, 1957. The

Claimant had unilaterally and without the consent of the l."t
Respondent revised the loan repayment period till 10.12.2023

from 10.10.2022 which is more than a year. For a 6 months

moratorium the claimant had extended the repayment schedule
more than year.

f. The 1st Respondent has initiated legal action against the Claimant

and its officers for the misdeeds committed by them before

Banking Ombudsman and that issue is now pending before
Hon'ble. Madras high Court in W.P.No.26520 of 2021 arrd
W.P.No.9678 of 2022.

g. As hetd by Hon'ble Supreme Court in IOs.N.N.Global

Mercantile Prioate Limiteil Vs. I$s.lndo Unique Elame Ltil I
Ors. in Civil appeal Nos. 3802-3803 ot 2020 dated'25.04.20?i, an
 15

arbitration agreement which attracts stamp duty or is

insufficiently stamped cannot be acted upon. In the present case,

the arbitration agreement is insufficiently stamped on Rs.100/-
stamp paper and hence arbitration agreement is not valid.

h. Therefore, the Respondent prayed to dismiss the Claim and allow

the counter claim of the l."t Respondent to close both the loan
accounts as settled and further direct the claimant to return the
Original title document of the immovable property along with
costs.

DISPOSITIVE REASONING:

xIv
15. During the cross examination of CW1, the Respondent raised a specific
question with respect to insufficient stamping of the loan agreement
Ex.C2. Both parties have in fact addressed the said issue in their
respective written submissions. This issue was not raised by the
Respondent in their statement of defense and hence it was not framed
as an issue by this Tribunal. However, both parties have addressed
arguments on this issue and they have treated it as an issue to be
decided by this Tribunal. Therefore, this issue is now being taken up as
an additional issue and the issues framed by this Tribunal have been re-

casted to include this additional issue.

L7. According to the Respondents, the Ioan agreement Ex.C2 is

insufficiently stamped with Rs.100/- adhesive stamp. Reliance was
 16

placed on the recent judgment of the 5 Judge bench of the Hon'ble

Supreme Court in IuUs.N.N,Global Mercantile Prhtate Limiteil Vs.

IVl/s.lnilo Unique Flame Ltd & Ors. in Civil appeal Nos. 3802-3803 of
2020 dated 25.04.2023 to state that an arbitration agreement which
attracts stamp.duty or is insuJficiently stamped cannot be acted upon.
However, the Respondents have not stated as to what is the actual
value on which the loan agreement has to be stamped.

18. According to the Claimant, the Arbitration Agreement per se is not

required to be stamped. However, if the Arbitration Agreement is a
clause in an instrument which requires stamping, the instrument has to

be stamped in accordance with the prevalent rules in the state where

the instrument is executed. In the present case, the arbitration clause is
part of the loan agreement Ex.C2 and the same was duly and
adequately stamped in accordance with stamp rules prevailing in the
State of Tamil Nadu. However, the Claimant also did not state as to
what is the actual value on which the loan agreement has to be

stamped.

19. As per Article 5 of Schedule L to The Indian Stamp Act, 1899 deals with

stamp duty payable on Agreement or a Memorandum of an Agreement.

In specific, Clause (j) of Article 5 provides for the stamp duty payable
on instruments that are not mentioned in the clauses (a) to (i). The Loan
Agreement Ex.C2 falls within this clause and on the date of its
executiory the stamP duty payable was Rs'20/-' It is admitted by the
Respondents that the Ex.C2 is stamPed with Rs'100/- adhesive stamP'
 77

Therefore, the Loan Agreement Ex.C2 containing the Arbitration Clause

has been sulficiently stamped. This issue is answered accordingly.

ISSUE III
20.It is an admitted fact that the Lst Respondent availed a business
development loan from the Claimant for Rs.15,00,000/- (Rupees Fifteen
Lakhs only) which was repayable in 60 installments with each

installment being Rs.45,675/- (Rupees Forty Five Thousand Six

Hundred and Seventy Five only) starting from 10.11.2017 to L0.10.2022.
The loan agreement bearing no. KNCU2TF7709270027 (Ex.C2) was
entered between the Claimant and the 1"t Respondent wherein the
Respondents 2 to 6 stood as guarantors for loan agreement. The point of

dispute is that the Respondents allege that the agreed rate of interest
was L6.5% p.a. and not 26.65o/o p.a. as mentioned in the loan agreement.

This is to say that the Claimant had allegedly tampered with the loan
agreement by changing the date of the agreement as 28.09.20L7 instead
of 27.09.2077 and the rate of interest. In support of their contentiory the
Respondents rely on the Ex.R1, the deed of mortgage dated 25.09.2017
entered between the 2"d Respondent and the Claimant to secure the
above loan. The said mortgage had been registered as Doc.No.2855 of
2017 with the Sub-Registrar office at Walajabad. The mortgage money
mentioned therein is Rs.15,00,000/-(Rupees Fifteen Lakhs onty) which
was repayable in 60 monthly installments and each installment being
Rs.45,675/- (Rupees Forty Five Thousand Six Hundred and Seventy
Five only) payabte on or before L0h of every month. The rate of interest
mentioned in mortgage deed is 16.50% (flat).
 18

21. On perusal of schedule L to Ex.C2 it is apparent that it is dated

28.09.2017 and the anntalized/ellective rate of interest is 26.65% p.a.
Further, the said agreement bears the signature of the borrower and
guarantors whlo are none other than the Respondents herein. Except the
change in the clause pertaining to the interest rate, all other conditions

in the two documents are one and the same. Ex.R1 states that the date of
the loan agreement is 25.09.2017 on which date the loan sanction letter
was issued asleen from complaints given by the Respondents against
Claimant before various authorities. However, the sanction letter is not
part of the record before this Tribunal. CW1 in her proof affidavit stated
that the annualized/effective rate of interest mentioned in Ex.C2

(26.65% p.a.) is equivalent to the rate of interest mentioned in Ex.R1

(15.50% (Flat)). It is seen that there is a difference in the method of
calculation and the same can be inferred from the specific usage of
words such as "Annualized/Effective rate of interest" and "flat rate".
However, at the time of her cross examination, CW1 had deposed the
term " fla(' meant the interest rate would be flat for the year. During the
re-examination, CW1 reiterated that there is no difference between the
rate of interest .i.e.26.65% p.a. and 16.50o/o flat rule.

22. It is the case of the Respondents that the rate of interest agreed between
the parties is 16.50o/o p.a. and not 26.65% p.a. During cross

examination,RWl,while answering to question 7,had admitted to the

tenure of the loan to be 60 months and the monthly installment amount
to be Rs.45,675/-. However, RW1 insisted uPon the interest amount
being 1.6.5%as against 25.65% as mentioned in Ex'C2' He further
stated

and the rate of

that by taking the above amount as monthly installment
 79

interest as 76.50/", the loan can be closed by 44. months and not 60
months. When RW1 was asked as to whether he was aware that a sum
of Rs.2240,500/- (Rupees Twenty Seven Lakhs Forty Thousand Five
Hundred only) (Rs.45,575 x 50) to be repaid, the witness answered "N4
but we should complete this payment within 5 years" , Further, when this
Tribunal asked the witness about the total amount repayable according
to him, he answered "Rs.45,675 x 44 months: Rs.20,09,700/-". Having
admitted that the Respondents were aware that the loan has to be
repaid within 5 years and the monthly installment being Rs.45,675/-
(Rupees Forty Five Thousand Six Hundred and Seventy Five only),the

witness contradicts himself by stating that the loan with the above
monthly installment could be settled in 44 months. It is clear from the
Exhibits C2 and R1 that the tenure of repayment for the loan is 60
months and Rs.45,675 / - (Rupees Forty Five Thousand Six Hundred and
Seventy Five only) is the monthly installment. In fact, the Respondents
have issued two notices through their Advocate on 13.02.2021. (Ex.R3)
arrd 12.07.2021 (Ex.RS) wherein they have admitted the monthly
installment. Even in the said notices it is stated that the loan could be

settled in 44 months. Generally, every loan would have an interest

component attached to it and based on the repayment schedule, the
monthly installments are calculated. Each monthly installment will
include the part payable towards the principal and the part payable
towards the interest amount. By paying the said monthly installment
properly, the entire loan along with interest would have been repaid at
the end its tenure. This being the basis for loan transactions, the
explanation given by the Respondents in the Ex.R3 and Ex.R5 and to
this Tribunal's question during cross examination that the loan can be
 20

repaid in 44 months by paying Rs.45,675/- (Rupees Forty Five

Thousand Six Hundred and Seventy Five only) as monthly installment
does not appear to be logical.

23. Further, when there is no ambiguity in Ex.C2 and ErRl irr respect of
the tenure of the loan and the monthly installment, the oral evidence of
RW1 cannot be considered as the same is contrary to the documentary
evidence i.e. Ex.C2 and R1. A simple calculation to find the actual rate
of interest taking the loan amount as Rs.1.5,00,000/- (Rupees Fifteen
lakh), tenure bf the loan as 60 months (5 years) and the monthJy
installment as Rs.45,675/ - (Rupees Forty Five Thousand Six Hundred
and Seventy Five only) would give 16.500/o as the rate of interest.
Therefore, on considering the admission by the Claimant that the

arurualized/ eilective rate of interest on 26.65% p.a. to be equivalent to

16.50% (flat) and contention of the Respondents that the rate of interest

agreed between the parties is 16.57o p.a., this Tribunal holds that there is

no unilateral modification of the rate of interest. This issue is answered

accordingly.

ISSUE I
24.The Respondents, in their statement of defense had made a specific

allegation thai the date when the agreement was entered into was in
tact27.09.2077 and not on28.09.2077 as mentioned in Ex.C2.It is alleged

that the Claimant had tampered with the date of the agreement and
interest clause. When a specific question was Put to RW1 during his
after
cross examination as to whether he had signed the document
reading out the contents, he answered "l do not ktrow if I haoe
signed this

n
 27

agreement but I am certain I signed an agreement zohich contained an interest

amount of only 16.5%".On further cross examination about the

production of any document before this Triburial to show that the
agreed rate of interest was only 16.5%, RW1 answered positively and
asserted that he has filed a document which shows the rate of interest as

76.5% FLAT per .rnnum. In other words, the witness refers to Ex.Rl.
The Respondents in their legal notices dated 13.02.2021. and 72.07.2027
marked as Ex.R2 and Ex.RS did not raise the issue of tampering the loan
agreement (Ex.C2). In Ex.RS, the Respondents in para 12 have stated

that subsequent to their complaint on 08.06.2021 to Kanchipuram Police

and Deputy Inspector general of Police, Kancheepuram, they had
received the copies of the loan agreements containing rate of interest as
26.65% and26.92% towards the loans for Rs.15,00,000/-(Rupees Fifteen

Lakhs only) and Rs.10,0Q000/-(Rupees Ten Lakhs only) respectively.

There is no allegation as to the date of the loan agreement being
tampered in that complaint. In fact the above legal notice would state
that the date of the agreement as28.09.2017. Further, the Exhibits R5 to
R8 would reveal that the Respondents did not raise the issue of
tampering/altering the date of the agreement and same is being raised
for the first time before this Tribunal.

25.Ex.C2 has the signatures of all the Respondents and they have not
disputed their signatures in the loan agreement. The Respondents
neither produced nor took steps to place the loan agreement which has
the rate of interest mentioned as 16.50% and the date of the agreement
as2L.09.2021before this Tribunal. Further when RWL was asked to point

out the portion where tampering had taken place, he pointed that the
 22

tampering had taken place in the column showing annualized/effective

rate of interest as 26.65% and the date column. This Tribunal asked the
witnessto explain the tampering as there was no overwriting or
tampering in the rate of interest column as alleged. The witness
answered as follows:
"'fh.e tanryeing could haoe taken place by using an lnk Eraser or
.
they could haae taken an extrn signature on an extra sluet
containing the same schedule I and left the rate of interest blank
to be fllid in later.
fi.rther adds that another area to
Witness

show tampering with Ex.C2 is the date found in schedrile I as

28.09.2017 uhereas the loan agreement is registered on

2L.09.20L7. Therefore, this schedule L cannot be the schedule

before the sub-registrar's ofrrr.The agreement does not haoe any
witne sses aerifuing the execution. "

25.From the cross examination of RW1, it is clear that the witness had
contradicted himself and his answers to the questions relating to the
tampering of Ex.C2 are inconsistent with one another. Further, a loan
agreement is a document which does not require attestation and
therefore, the witness columns being partly filled or being empty does
not make the document invalid or inadmissible. Therefore, a mere

statement or allegation that Ex.C2 being tampered by the Claimant

without any proof is not enough to disbelieve the said document
especially when the tampering is not apparent. Thus, the issue I is
answered accordingly.
 23

rss
2T.lnsofar as the repayment of the loan is concerned, it is the case of the
Claimant that the total amount payable under Ex.C2 is Rs.27-,40,500/ -
(Rupees Twenty Seven Lakhs Forty Thousand Five Hundred only) at

the end of 60 months. As on 28.01.2020, the Respondents have paid 26

installments. Thereafter, from 10.03.2020 to 10.08.2020 moratorium had
been granted in light of the RBI guidelines. No payments were made
during the said period. Thereafter the payments that were made
subsequent to the moratorium period were adjusted towards the dues
that arose before the moratorium period. The last payment that was
made was towards the 40u installment as on 70.02.2021. An ex-gratia of

Rs.7,981./- (Rupees Seven Thousand Nine Hund-red and Eighty One

only) was credited and adjusted against the dues payable by the
Respondent. Thereafter, the Respondents defaulted in making
payments. It is seen from the table at the end of para 11 of the claim
statement, the Respondents have paid a sum of Rs.15,52950/-(Rupees
Fifteen Lakhs Fifty Two Thousand Nine Hundred and Fifty only) and a
balance amount payable along with the other charges is Rs.18,54,640/-
(Rupees Eighteen Lakhs Fifty Four Thousand Six Hundred and Forty

only). The Claimant has filed the Statement of - Account before this
Tribunal as Ex.C19 in support of its contention.

28.The Respondents claim that they had paid a sum of Rs. 31,01,050/-
(Rupees Thirty One Lakhs One Thousand and Fifty only) as on
1,0.02.2027 towards the two loan agreements entered between the

parties. Therefore, the entire loan agreements were repaid. The

Respondents did not mention as to how much was paid towards
each

I
 24

loan but claims to have paid Rs.45,675/ - (Rupees Forty Five Thousand
Six Hundred and Seventy Five only) regularly for 31 months up to
February 2021' towards Ex.C2. In effect, the Respondents admit to *re
version of the Claimant that the last installment paid by the

Respondents was on 10.02.2021.. Thereafter, no payment was made

towards the loan agreement.

29.It is evident from Ex.C19 that for the period between 10.03.2020 to
10.08.2020 no interest was levied and no amount was paid. It is also
clear from Ex.C19, the Respondents did not pay the monthly
installment foi ttte 26rt,, 2g*,, 35r]' and 37ft installments. part payments
were made towards 36ft and 38m installment. The payment towards the
above-mentioned installments were adjusted on 20.0'1,.20X when an
amount of Rs.\74,400/ -(Rupees Two l^akhs Seventy Four Thousand
and Four Hundred only) was paid towards the 39m installment. The
Respondents claim that a lump sum of Rs.10,00,000/-(Rupees Ten
Lakhs only) was paid on 79.01..2027 by 1.t Respondent through online
transfer to the Claimanfs branch at Tindivanam as directed by the
Kancheepuram branch. Out of the said Rs.10,00,000/-(Rupees Ten

Lakhs only), Rs.2,74,400/-(Rupees Two Lakhs Seventy Four Thousand

and Four Hundred only) was deducted towards the l."t loan and
Rs.7,25,577/-(\ttpees Seven Lakhs Twenty Five Thousand Five
Hundred Seventy One only) towards the second loan and no receipt for
the Rs.1O00,000/- (Rupees Ten Lakhs only) was given by the Claimant'
Assuming for the moment that no receipt was given towards the
payment of Rs.10,00000/- (Rupees Ten Lakhs only) by the Claimant' as

admittedbytheRespondents,thetransactionisanonlinetransaction'
 25

hence an online receipt would have been generated. However, the same
was not filed by the Respondents. Though the Respondents filed the
statement of accounts of the l..t Respondent for the period 15.0L.20A to
22.01,.2027,the same is not part of the evidence u, it *u" objected by the

Claimant when it was tendered to be marked through 5ft Respondent

who is not a party to the said document. This Tribunal accepted the
objection and also permitted it to be marked through the l..t
Respondent. For the reasons best known to the Respondents, 1st

Respondent did not enter the wibress box to mark the same. Hence, the
said document cannot be looked into by this Tribunal and it is proved
that the Respondents have committed defaults and delayed in making
payments.

30. As per clause 5 ol Ex.C2, it has been agteed that the Respondents are
liable to pay the monthly installments regularly and in default the
Respondents are liable to pay overdue interest and other charges as
stipulated in schedule 3 to the loan agreement in addition to the
monthly installment. The Claimant issued a notice to the Respondents
vide letter dated 01..09.2021 (Ex.C11) to the Respondents demanding the
Respondents to pay the overdue amount of Rs.4,01,839/-(Rupees Four
Lakhs One Thousand Eight Hundred and Thirty Nine only) within 7
days, failing which the agreement would stand terminated and the
entire amount Rs.16,43,770l-(Rupees Sixteen Lakhs Forty Three
Thousand Seven Hundred and Ten only)would become due and
payable. The said notices returned to the claimant with the
endorsement that "Addressee moved,,. The Claimant vide letter dated
12.1,0.2027 nominated an Arbitrator and marked a copy
to the
 26

Respondents. The above letter was delivered to the Respondents. From

the above discussions, it clear that the Respondents have committed

defaults in payment towards the monthly installment and it is an event
of default as per clause 8 of the loan agreement and the consequence as

stipulated under clause 9 of the loan agreement ensues. Thereby, the

loan agreement was terminated and the entire dues including the future
installments became payable. Further, the Respondents did not prove
that they had repaid the entire loan of Rs.27,40,500/- (Rupees Twenty
Seven Lakhs Forty Thousand and Five Hundred) and hence the
Respondents are jointly and severally liable to repay the balance due as

claimed by the Claimant. These issues are answered accordingly.

31.RBI vide circular dated. 27.03.2020 announced Covid - 19

Regulatory Package wherein the Commercial banks, financial

institutions and NBFC's like the Claimant herein were permitted to
grant a moratorium of three months on payment of all installments
falling due between 1"t of March 2020 and 31"t May 2020. Residual
tenor of the loans will be shifted by three months. However, the
interest shall continue to accrue on the outstanding portion during

the moratorium period. RBI vide another circular dated 2i.05.2020

permitted the Commercial banks, financial institutions and NBFC's
to further extend the moratorium period from 1st of Iune of 2020 to

of August 2020. However, the interest shall continue to accrue

31..t

on the outstanding portion. In the present case, the moratorium

has

not
- been extended by the claimant and the Respondents have
It is evident from the records before this
, objected to the same.
 27

Tribunal that no payment towards the installment between March

2020 lo August 2020 were made by the Respondents. Thus, the
Respondents had availed the benefit granted to them. Therefore,
there was nothing wrong on the part of the Claimant to extend the
term of the loan. The issue IX is answered accordingly.

32. The loan transaction is a commercial transaction given for the

purpose of business development of the 1't Respondents' Dental
Hospital. This Tribunal while answering issue III has held that the
rate of interest as 16.5o/o. The Claimant asserts in the proof affidavit
and in her cross examination that the annualized rate of interest is
26.65% p.a. is equivalent to 16.5o/o (flat) rate as reflected in the
mortgage deed Ex.RL as claimed by the Respondents. The Hon'ble
Supreme Court in para 79 ol Nedumpilli Einance Co, Ltil, o. State
of Kerala, (2022) 7 SCC 394 has held that the Tamil Nadu Money
Lenders Act, 7957 will not be applicable to NBFC's as they are
governed by RBI. As Tamil Nadu Money Lenders Act, 1957 is not
applicable to the claimant being an NBFC the issue IV is answered
in negative.

33, As per Ex.C2, the further rate of interest i.e., overdue interest is
36o/o p.a. towards the outstanding dues. As held above, in light of
the occurrence of event of default, the outstanding amount payabte

to the Claimant is Rs.18,54,540/-(Rupees Eighteen Lakhs Fifty Four

Thousand Six Hundred and Forty only). However, this Tribunal
deems that 367o is exorbitant and in light of section 31 (Z) (a) and
(b) of the Arbitration and Conciliafion Act, 1996, tttts Tribunal
 28

deems it reasonable to award the pendent lite interest and future

interest at 9%.

34. Insofar as issues II and XI are concerned the same cannot be entertained
by this Tribunal for two reasons. This Arbitral Tribunal was constituted
by the Hon'ble Madras High Court vide order dated 02.08.2022 to
adjudicate upon the disputes between the parties arising out of Ex.C2
only. Further, the alleged agreement dated 1.4.06.2018 bearing

agreement no. KNCU2TF1806200001 has not been filed before this

Tribunal and the simple mortgage deed dated 1.4.06.20L8 though filed
by the Respondents is also not part of the evidence before this Tribunal
in light of the order dated 02.05.2023 passed in I.A.No.7 of 2023. Though
the Respondents claim that the said agreement is in addition to the L"l
agreement as Rs.10,00000/-(Rupees Ten Lakhs only) was availed as a
top-up loan to the already existing loan of Rs.15,00,000/- (Rupees

Fifteen Lakhs only), adjudication cannot be made in the absence of any

supporting documents or evidence to Prove the same. Hence, these
issues are answered accordingly.

35.In so far as issues X and XI are concerned, the Hon'ble Supreme in Booz
Allm €t Hamilton In c. a. SBI Home Finance Ltil., (2077) 5 SCC 532 has
held that the disputes relating to Mortgage Deed are not arbitable'
Hence, this Tribunal cannot adjudicate uPon these issues and are
answered accordinglY.

n
 29

RELIEFS GRANTED
1. The Claimant is entitled to Rs.18,54,640/- (Rupees Eighteen Lakhs Fifty
Four Thousand Six Hundred and Forty only) from the Respondents
jointly and severally.
2. The Claimant is also entitled to pendent lite and future interest @ 9o/o on
the above-mentioned amount till the date of realization.
3. The Claimant is entitled to cost to the extent of Advocate fees. This
Arbitral Tribunal has conducted and adjudicated the proceedings pro
bono at the request of the Respondents.

Dated at Chennai on this the 7m day of September 2023

(v.P
(soLE ARBTTRATOR)
 30

ANNEXURE.I
A. LIST OF DOCUMENTS FILED AND MARKED BY THE CLAIMANT
s.No. DATE DESCRIPTION EXHIBIT
NO.
1. 22.04.2022 Authorization Letter Ex.C1

2. 28.09.2017 Loan agreement entered into by the Ex.C2

Respondent with the Claimants

3. 13.02.2021, Legal Notice issued by the Respondents Ex.C3

4. 19.03.2021 Reply issued by the Claimant Ex.C4

5. 1.4.04.2021. Complaint given by the second Ex.C5

Respondent with the RBI

6. 29.04.2021, Complaint given by the sixth Ex.C5

Respondent with the Inspector of Police,

Kancheepuram
7. 18.06.2021. Explanation submitted by the Claimant Ex.C7

to RBI
8. 12.07.2021. Legal notice issued by the Respondent Ex.C8

9. 19.07.2027 Letter issued by the Inspector of Police, Ex.C9

Kancheepuram

10. 26.07.202L Order passed by RBI Ex.C10

11. 01.09.2021 Demand Notice dated 01.09.2027, along Ex.C11

with postal receipts, returned covers of

R1 to R5 and postal tracking of R6

Complaint given bY the first respondent Ex.C12

72. 22.01..2022

Explanation submitted by the Claimant Ex.C13

13.
Ex.C14
L4. Order passed bY the RBI
 31

15. 21,.04.2022 Complaint sent by the Respondent to the Ex.C15

Honorable President of India

76. 12.10.2021, Letter of Reference Ex.C16

17. 09.11,.2022 Order passed by the Hon'ble NCLT Ex.C17

approving the Scheme of Amalgamation

18. 30.11,.2022 Fresh Certificate of Incorporation Ex.C18

79. 1.4.09.2022 Statement of Account Ex.C19

B. LIST OF DOCUMENTS FILED AND MARKED BY RESPONDENT

s.No. DATE DESCRIPTION EXHIBIT

NO.
1. 25.09.2017 Deed of Simple Mortgage entered into Ex.RL

between the 2nd Respondent and the

Claimant
c 13.02.2021, Letter of the Respondents' counsel Ex.R2

addressed to the Claimant

3. 19.03.202L Reply letter of the Claimant, to the Ex.R3

Respondents' counsel
4. 17.06.2021, Letter of the Claimant to the 2nd Ex.R4
Respondent
5. 12.07.2021 Letter of the Respondents' counsel Ex.R5

addressed to the Claimant

6. 19.07.2021, Report of the Inspector of Police. District Ex.R5

Crime sectiory Kancheepuram District
addressed to 6th Respondent,2nd
Respondent's son
7. 26.07.2021 Rejection order issued by the RBI Ex.R7
 32

Ombudsman (Banks and NBFCs), RBI,

Cherurai to the 2"dRespondent

8. 27.09.2021, Report of the Superintendent of Police Ex.R8

Assistant District Crime section,

Kancheepuram District addressed to the
2"dRespondent

9. 12.10.2021, Letter of the Claimant addressed to the Ex.R9

Mr.Y.K.RajaGopal, Advocate f Arbla ator,

Cherurai with copy marked to the L't
Respondent
10. 09.11,.2021, Reply letter of the L'tRespondent counsel Ex.R10

addressed to the Claimant

ANNEXURE II
List of Witnesses Examined
Claimant's Side:
M.Mageswari, Employee of the Claimant bearing No.M322 (CW1)
Respondent's Side:
Mr.D.Kalaiselvan (6m Respondent) (RW1)

Dated at Chennai on this the 7m day of Septembet 2023.

v
(soLE ARBITRATOR)