Legal Question in Banking Law in India

My father had taken loan of Rs. 4,00,000 lakhs in the year 2000 in the local branch of Co-operative bank. For this loan amount there is no property is been plunged as well as no post dated checks also given, I am not sure on what basis such a loan has been given to my father. This loan amount has been utilized for doing a construction work on government contract by my father. On completion of the work, the amount which is supposed to be disbursed by government is not yet done, the payment is been struck in some government department for the past 10 years. My father died in road accident in 2001, after which this loan has been transferred to my mother, she is a housewife and now we are in a situation that we have to repay the loan and its interest almost now around Rs.10,000,000 lakhs. Bank has sent some notification through court to us to appear and we did a no show, however we sent a registered letter as well as telegram to them on we wont be able to attend due to ill health condition of my mother.

Further now, we are not having any property on my mother�s name, we are staying in rental house, with very less income which is just sufficient for our living.

In the above situation, is there any legal action possible from bank? Is there a possibility of getting this sorted out amicably out of court? What if we say we cannot pay the loan and file insolvency? Is there a way we can show the proof that we are yet to receive payment from government on the work completed by my father, and on receipt of the same we will pay the dues?

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