Legal Question in Banking Law in India

Re: Guarantor liability

If the total outstanding amount is more than 10 lacks than the bank most probally will opt for action under secutirusation act. If the loan is below 10 lakhs they may file proceedings against the principal borrower and against garuntors in Debt Recovery Tribunal. Gurantor is liable at par with the principal borrower.

Re: Guarantor liability

It depends on Bank's decision to take action against defaulter by recovering his property or by filing suit against borrower and/or gurantor.

Re: Guarantor liability

Guarantor is jointly and sevrally liable to pay to the bank or FI in terms of guarantee. Generally the prime security is exhausted first and if not then only guarantors properties are attched and sold for recovering the dues

Re: Guarantor liability

In India banks can recover the loan amount from guarantor as well as from borrower. both the options are open to the bank.

1. they can file a suit for recovery and attachment of property.

2. or they can file an application before the concerned megistrate for appointment of Receiver and to take possession of the mortgaged property.

Re: Guarantor liability

(1) The bank is likely to file a suit jointly against the borrower and guarantor;

(2) auction of the property may be their last resort; but, yes, they may take possession.

(3) alternatively, instead of filing a suit, the bank straightway take possession of the mortgaged property under Securitization Act.

(4) You can pay the loan and claim the property;

(5) If you suffer any liability as guarantor, you can recover your losses from the principal borrower in separate proceedings.

Re: Guarantor liability

The guarantor's liability is co-extensive with that of the principal borrower.Normally in housing loans the lender bank will take possession of the mortgaged house under SARFEAESI Act and sell it and for any shortfall, they can sue the guarantor also. The best protection for the guarantor is to pay off the debt, as and when demanded and take all the mortgage documents from the Bank and proceed in civil suit against the borrower.

Re: Guarantor liability

Banks generall get the decree to auction the house and later on if the amount received on auction is less then the recoverable dues the same is recovered by the bank by instituting legal procceding against the guarantor.

Re: Guarantor liability

By various pronouncements by the High Courts and Supreme Court of India, the Guarantor's liability has been made almost absolute and once a borrower defaults, then the lender has every right to proceed against either the borrower or the guarantor or against both. The Guarantor can not escape the liability.

It is the sole discretion of the lender as to which mode to adopt for recovery of its dues. Common sense tell us that the lender would resort to the option which is easy and less cumbersome. The lender can either file a suit in the civil Court (if dues are more than Rs.10 lakh, then such suit can be filed only in the Debts Recovery Tribunal) or it can proceed under the Securitisation Act 2002. The said Act is very severe from borrower's or Guarantor's point of view. The lender has to just give a notice under the Act and then it can proceed to take possession of the asset and then auction it off to realise its debts.

Sunil Goel

advocate