The court held that a claim for loan recovery is barred by limitation if not filed within three years of the last transaction, and proper mortgage documentation is essential for enforceability.

ORDER :

Tamil Nadu Industrial Investment Corporation (in short “TIIC”) is a Public Financial Institution governed by State Financial Corporation Act, 1951. This petition is filed under Section 31 and 31(1)(aa) of the State Finance Corporation Act, 1951 for recovery of money from the respondents, who have defaulted in repayment of loan amount advanced on mortgage of immovable properties and hypothecation of movables.

2. According to the petitioner, the Directors of M/s Fenna Petro Products Limited, sought s Term Loan for its two projects one at Vadamadurai Village, Thiruvallur District and another at Ettayapuram Village, Tuticorin District. A sum of Rs 84.10 lakhs and subsidy bridge loan of Rs.11.30 lakhs was sanctioned on 10.08.1994 and 10.03.1995 respectively. The first respondent company availed only 50% of the term loan sanctioned. It could not implement the second plant at Ettayapuram Village. However, for purchase of LPG Cylinders and Valves, the first respondent company availed Hire Purchase Loan of Rs.90 lakhs on 28.08.1995 and the second respondent company availed Rs.150 Lakhs on 30.01.1996. For the loans, the respondents 3 to 6, who are the Directors of first and second respondent company, stood guarantee for the repayment of the loan. The fourth and sixth respondent gave their properties as security and created mortgage in favour of the petitioner (TIIC). Also fixed deposit of Rs.13.50 Lakhs for the Hire purchase Loan–I and Rs.22.50 Lakhs for the Hire purchase loan–II invested by the borrower company was given as security. After payment of few instalments initially, the first and second respondent failed to repay the loan as per the terms of the agreement. Hence, the loan account was foreclosed on 16.10.1997. The properties mortgaged and hypothecated were taken possession on 31.08.1998. However, on the application of the borrower, the High Court on 15.09.1998 ordered to release the possession to enable the borrower to revive the company, but subsequently, the BIFR petition filed by the borrower was dismissed and the petitioner (TIIC) repossessed the properties on 07.02.2000. The collateral properties at Nagarcoil was also taken possession by TIIC on 08.02.2000. The first and second respondent are the prime borrowers. The respondents 3 to 6 are the Directors of the prime borrower company and they are the personal guarantors for repayment of the loan. Hence, they are jointly and severally liable to pay a sum of Rs.18,429,890,115.65 as on 30.11.2016. On behalf of the petitioner, legal notice dated 25.01.2017 was sent to all the respondents calling upon them to repay the loan. The legal notices returned unserved with endorsement either as “not claimed” or as “left the premises”.

3. The relief sought in the petition are:

(a)direction to the respondent 1 to 6, to pay a sum of Rs 184,429,890,115.65/- ( Rupees One thousand eight hundred and forty two crores ninety eight lakhs ninety thousand one hundred and fifteen rupees and sixty paise only) as on 30/11/2016 with 17% interest for Term Loan (with quarterly rest) and 36% for Hire Purchase Loan pa compounded half yearly from the date of petition ( 08/06/2017) till the date of realisation in full.

(b) To permit the petitioner (TIIC) to sell the schedule mentioned th th property of the 4 and 6 respondent.

(c) To direct the respondents to pay costs and (d) such other order as deem fit.

4. According to the Respondents, they admit that the first and second respondent Company borrowed loan from TIIC in the year 1994 and 1995. The personal guarantee was given by the Directors at the time of borrowing, the said guarantee was never renewed thereafter. The Directors are not signatories to the loan documents. The property purported to be mortgaged with the petitioner is restricted only in