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Urgent - guarantor's responsibility

Guest (Querist) 01 November 2014 This query is : Resolved 
Hi,

One of my friend (Guarantor) had given guarantee for CC loan of someone (Mr. A) against mortgage of Business property to Co-operative bank.

Guarantor is salary earner.
Property is 80% of loan amount.

Now Mr. A is unable to replay that CC loan and property so mortgaged is insufficient to repay the laon & Mr. A has no other asset to pay full amount of loan.

My questions are below :

1- What assets of guarantors will be affected during the case, movable, immovable, salary, bank balances, cash?

2- Will bank be ready to settle the case at 80-90% recovery? (I dont know if banks do so)

Thank for reply.

Regards,
Rita
Sudhir Kumar, Advocate (Expert) 01 November 2014
irrespective of mortgage the guarantor can be made to pay.
Rajendra K Goyal (Expert) 01 November 2014
Guarantor is liable towards the liability. Bank may prey to attach his salary, property, bank account to recover its dues.
Guest (Expert) 01 November 2014
Ms. Rita,

If it is your personal problem, as a guarantor, supposedly for your employer, you seem to have been involved badly in debt by his tricks.

However, as a Finance manager, you may like to understand that on failure of principal borrower to repay loan, the guarantor remains fully liable to repay that along with interest/ penal interest, which can be recovered from any of his source of income, i.e., salary, bank balances, any movable or immovable property. Not only that, as per the legal jargons of the terms of the guarantee, even the heirs of the guarantor are also made liable to repay the amount of said loan.
Guest (Querist) 02 November 2014
Thanks all.. One more question, is there any relief to second guarantor or all guarantors and borrower are jointly responsible?
Sudhir Kumar, Advocate (Expert) 02 November 2014
There is joint responsibility.

However guarantor can :-

(i) sue the borrower for the loss incurred.
(ii)get hold of the mortgaged property if any.
Isaac Gabriel (Expert) 02 November 2014
As per the Cooperative societies act,principal borrower has to be exausted before procedings against the surety,though the surety is resposible for the loan.The act has an in built mechanism for the recovery.
Sudhir Kumar, Advocate (Expert) 02 November 2014
as per contract act the lender need not run after the borrower he can recover straightaway from the guarantor.
Guest (Querist) 02 November 2014
As per Bank intimation they will take action as per Maharashtra Co-Operative Society Act.
K.K.Ganguly (Expert) 02 November 2014
1. By executing the guarantee agreement, the guarantor steps into the shoes of the borrower and gets burdened with the responsibility to repay the loan taken by the borrower,

2. The guarantee will be limited to the amount specified in the guarantee agreement irrespective of the amount of financial accomodation availed by the borrower,

3. If there are more than one borrower, the Bank/Society may recover the outstanding loan amount either from one or from all the guuarantors as it deems fit,

4. The Bank/Society can settle the loan at ledger balance waiving much of interests since the loan amount has been under mortgaged,

5. Ask the Borrower to submit a one time settlement proposal to the Bank/Society.
V R SHROFF (Expert) 02 November 2014
no more to add.
Guest (Querist) 02 November 2014
Thank you so much all.. all the answers really helped a lot in understanding.
T. Kalaiselvan, Advocate (Expert) 06 November 2014
I agree with the opinions of experts especially to the suitable and proper reply by expert Mr. Dhingra, nothing more to add.
Sudhir Kumar, Advocate (Expert) 07 November 2014
I may also be permitted to agree with Mr Dhingra.
Devajyoti Barman (Expert) 08 November 2014
query is of academic interest only.
Guest (Expert) 13 November 2014
You are welcome Ms. Rita.


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