Legal Question in Banking Law in India

Where the third guarantor can be summoned civil custody without issuing warrants to borrower , and the first two guarantors in the event borrower fails to pay the debts in time? what is the liability of the third guarantor? The loan availed by the borrower from patsanstha ( Co-op. Society) in 2001 and has some immovable property, the cost of which exceeds the loan amount. Please mention the liabilities of borrower/guarantors. The borrower has filed an appeal in co-op . court, pune against the award declared by co-op court solapur.

Asked on 1/20/13, 3:12 am

3 Answers from Attorneys

Fca Prashant Chavan Expert Edge LLP

0 users found helpful

0 attorneys agreed

20.01.2013

Dear Sir / Madam,

The Co-operative Society (patsanstha) is not entitled to abruptly invoke action on the guarantors unless and until there is a shortfall in recovery of the total outstanding loan amount, after sale of the all the asset(s) mortgaged / pledged by the borrower with the bank, at the time of acquiring the loan. Primarily, it is solely the borrower responsibility to settle the entire loan. Since Guarantors only lend surety, their liability is secondary. In a nutshell, the borrower has to be declared "insolvent" for the bank to initiate recovery action on the guarantor(s). Recovery of the net shortfall thereafter from the guarantors is pari pasu i.e all the guarantors make good the net shortfall to the bank in equal proportion, unless specifically agreed to otherwise.

Regards,

(You can mail me for further on-line advice at [email protected])

Answered on 1/20/13, 7:19 am

Mark as helpful

J. Radhakrishnan independent Practice

0 users found helpful

0 attorneys agreed

A guarantor whether 1st or 2nd or 3rd can be proceeded against for recovery. Unless the borrower gets stay of the entire award in the appeal filed by him the guarantor can be proceeded against.

Answered on 1/20/13, 8:19 am

Mark as helpful