Legal Question in Civil Litigation in India

We are a banker. A Self Help Group (sponsored by District Rural Development agency-Group formed some two years back) was financed revolving fund (C/C limit) a year past and two months past it was advanced Term loan facilities for meeting its economic needs. Recently it surfaced that one of the members of the Group was impersonating his relative-the actual beneficiary and the whole Group was unaware of this. (The Group is an unregistered association of borrowers formed to borrow money from the bank with subsidy from Govt. in order to ameliorate members' socio-economic condition. It is virtually a clean advance with no collateral security as per GOI guidelines). The Group has since removed the impersonator; got recovered money advanced to him and inducted the actual beneficiary in his place. To brief you shortly, the group members execute an Inter-Se agreement between them in the initial stage and choose among them three members to act as President, Treasurer and Secretary to seek assistance and execute agreement/documents with a bank in this regard. The bank then executes a stamped loan agreement with so authorized representatives of the Group. In this case since the base document "Inter-Se agreement" got defective on account of one of its executants being a fictitious person, the subsequent loan agreement executed by its representatives is also bound to suffer the same defect. The conduct of the Group is otherwise satisfactory and they have recorded this in theirs resolution book (a copy of this given to bank) all the happenings and regretted for this and they acknowledged in this resolution the monies owned by them to the bank and theirs commitment to repay this. The moot point is how the bank should act in such circumstances i.e how we should get corrected our documents. Whether the resolution passed by the Group is sufficient to correct the infirmities of previous documents? Whether new loan account numbers should be given and the balance outstanding in the existing accounts be transferred to the newly opened accounts or in the existing loan accounts a simultaneous credit and debit entry of the outstanding amount be passed with the narration necessitating its need? The Loan accounts of the Group can not be adjusted because of the outstanding to the tune of around two lac fifty thousand in the both accounts (C/C as well as TL). The Group Members are economically poor. Please advice us expeditiously how to proceed so that bank interests are safe keeping in mind the probability that in future if account gets stuck and we have to initiate recovery proceedings in the Court of Law

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