Legal Question in Business Law in India

12.02.2017

Dear Sir / Madam,

Your friend has taken a business loan from the Bank and you are the guarantor having given your house as security towards repayment of the loan by your friend to the Bank. You haven't mentioned the principal loan amount and the outstanding dues against the loan as of date. Legally speaking, you are not supposed to sell your flat till your friend's business loan is repaid and settled and / or the Bank had relieved and released you as the guarantor. If neither event has happened, your sale of your house offered as surety to the Bank to a third party is invalid, null and void Secondly, when you say that you have sold the house to that third party, you ought to have received the consideration from that party towards the sale. The third dimension and contention that you have to collect Rs. 10 (Ten) lakhs from your friend arises, if you both had an understanding among yourself prior to the loan, that the value of your house being offered as security to the Bank by you for your friend''s business loan is Rs. 10 lakhs. And further, if you had also mutually agreed with your friend that if he / she fails to repay and settle the loan, he / she will pay you this amount. Summing up, if you have received say Rs. 15 lakhs by way of sale for the flat, you owe the Bank, the amount of shortfall / net loan amount outstanding in your friend's name limited to maximum Rs. 10 lakhs. You can then get your house documents released from the Bank and transfer it to the buyer. You may check with the buyer whether he is willing to be the guarantor for the loan in your place for your friend's loan..

Regards,