Regarding giving surety for loan and that loan taker defaults

Querist : Anonymous (Querist) 03 January 2012 This query is : Resolved
sir,
i would like to ask the consequence and legal action taken by the bank, in case , a loan taker defaults, to the person who has given surety for that..

detailed story is like this:
my father gave surety for the loan taken by my cousin brother to buy tractor in a subsidized rate(as my cousin is a farmer). later he could not pay the loan amount back to sbi(bijapur, chhattisgarh). till now no action has been taken..
now my father is in tension, 4 years went and very negligible amount is paid as my cousin is good for nothing. now i want to know what can be the legal actions and how can that be avoided with minimum of financial implication as my father is going to retire this yr and he is primary school teacher.

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Raj Kumar Makkad (Expert) 03 January 2012
A surity is equally responsible for the return of the loan amount and if loanee fails to repay, the turn of the guarantor starts. Even sometime, banks try to recover from the person to whom it is easy to recover may he be loanee or his guarantor so it shall be good if you persuade your cousin to get his account regular and repay loan amount at least in time so that the service beenfits of your father may not go in repaying his laon amount.

Prakash Yedhula (Expert) 03 January 2012
The well known principle in law is that liability of the surety is co-extensive with the borrower unless it is otherwise provided by the contract.

Querist : Anonymous (Querist) 03 January 2012
what if my father also defaults and don't pay the loan back...against whom legal action would be taken....

prabhakar singh (Expert) 03 January 2012
It appears you could not follow what is meant by 'coextensive'.
To explain in other words the liability of a
principal debtor and surety is joint and several and creditor is with right to proceed against the two jointly or against any of the two.
Then if your father fails to honor the debt due,the bank after assessing the soundness of the debtor can proceed against both or any of the two.

ajay sethi (Expert) 03 January 2012
agree with experts bank can proceed against loan taker and guarantor

Deepak Nair (Expert) 04 January 2012
The bank will initiate legal action for recovery of the amount from your father and your cousin.
First, they will attach the tractor for which the loan is given and if they could not recover the entire outstanding amount from the sale that tractor, they will move to the court for recovery of the remaining amount from your father and cousin.

Querist : Anonymous (Querist) 05 January 2012
but in such cases primary responsibility should lie on the the debtor....and...if cousin is earning through other means he should be held responsible to pay back the left out dues.

Deepak Nair (Expert) 05 January 2012
You are right.
If the bank finds that your cousin is able to repay the loan, then they will recover the loan from your cousin.
But, since your father is guarantor, he too is equallyliable.

M/s. Y-not legal services (Expert) 05 January 2012
am agree with experts.,

if your father also failed mean the attachment proceeding will be commenced to compensate loan amount.,

-tom-