Bank lending and recovery - unfair practices


Mr. X is a relative of borrower B (Director in this Private Ltd Company). B asks X for guarantee by keeping property and takes him to Bank (Public Sector Bank) in Jan 2013.

X (with B) takes the property papers to bank and X signs on Consent Letter and Sanction Letter for 50 Lacs.

B starts business and after few years i.e. 2016 goes bankrupt.

Bank starts asking X (and other stakeholders) to deposit 85+ Lacs. Notices were sent by bank.

X is surprised as to how this huge amount has been asked from him. And starts become worried about Property Papers kept in bank. Please note that no other communication with X has been done by Bank/B in past until the account got NPA.

X starts communication with bank and ask for releasing his property and willingness to pay 23 Lacs of his 46 Lacs Property. Please note that X is still under impression that valid documents were signed and bank is a keeper of Code of Conduct.

In various verbal communication with bank, X comes to know that Bank has increased Cash Credit Limit of Borrowers to 80 Lacs in July 2013 and thus 85 Lacs with interest is being asked. Properties worth 1 Crore was already with bank including other stakeholders.

Since X is aware of only one visit to bank with B, there is no communication thereafter and starts sensing something is amiss.

Bank starts verbally assuring X that signatures were taken in advance and thus 80 Lacs is what is valid for him to pay.

Various visits to bank led to procrastination from bank employees and this led X to file an RTI. First RTI was rejected as the RTI was not signed by X (lack of RTI knowledge).

Again, an RTI was filed asking for Consent Letter for 50 Lacs and 80 Lacs. Due to lack of knowledge about proper documents to be expected from bank i.e. Exact Document Name in Bank's Terminology.

RTI reply says consent letter is available for 50 Lacs. Did not find for 80 Lacs.

X approaches bank for showing the documents, though manager always used to dodge the request.

Bank continues to send 13(2) and various notices to X, making him in pressure to pay. Verbally assuring that you will be released if you pay partially.

Bank takes Symbolic Possession of Property. Also, filed a Caveat with DRT. This hit the panic button.

X agrees to pay 40 Lacs if bank releases the property papers. To this, bank ask for 45 Lacs (written documents available). Bank ties this offer with a last date as X has started asking about his documents.

X asks for his signed documents from bank (Email Conversation by help of some known starts from here), though the documents were not provided before the last date.

Finally, due to pressure of Physical Possession X gives 45 Lacs and releases property papers on last date of bank offer.

X starts pursuing the matter with Higher Authorities as the Branch seems to be rotating around the same dubious statements. X comes to know about actual documents’ name, bank take from any guarantor.

Nodal Officers were involved and bank gave documents (without stamp on Xerox copy), to X. Please note that Bank mentioned that it has provided Guarantee Deed also (written letter given).

On getting documents checked, X sees no document signed by him. X again starts asking for such documents. X sees that bank has renewed the cash credit limit in 2015 also.

This started bank stating that all documents are provided, though was not specifically replying that Deed of Guarantee was available or not.

Finally, the matter was escalated to Chairman and things started churning out with Branch started giving response in 5 Days.

Branch admitted it has no documents available with them (Guarantee Deed for 50 Lacs and 80 Lacs both). Also, it has no records of any communication done with X in past.

After this, it seems to be fraud done by Branch in providing loan to B for mutual benefits. Once B goes bankrupt and not paying back, it became a matter which will come in light to higher levels.

To cover this up, bank tried doing a recovery and closing the matter. Despite knowing that documents are not there they did a recovery from X.

X has asked Chairman his opinion on this recovery from him. Awaiting response.

Please let me know what can be done and is X liable to pay for the wrongdoings done in past between borrower and bank?

B is still working in an MNC. B's father used to manage business. Though, both have fled from city.

 
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Retired employee.

You have posted a large paragraph, whereas the essential is what was your commitment amount to Bank, while offering equitabel mortgage of property and offering third party guarantee.

You ought to have asked the bank to provide certified copies of all documents in their possession as a record to fix liability on you as co-obligant.

It is true that in memorandum while offering Equitabel mortgage, no amount is written as one has to pay stamp duty.

To overcome this, in addition to EM, Bank takes third party guarantee and that document stipulates amount advanced, and every time the limit is enhanced as per sanctions, fresh documents must be obtained from the guarantor also.

Unless those documents are seen, it is improper to offer comments.

 
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Lawyer in Hyderabad.Email Id:ramachary64@gmail.com

If you are able to cross 90 days time of default then your case is given to a specialised agencies who can do anything to get money back. Banks normally refrain from using muscle power these days. They use social pressure, phycological pressures to get money back.

If some body is real notorious to be able to deal with all this, banks can't do anything apart from sending court notice under section 58 of negotiable instrument act .

once you come under 58 section, it's is really difficult to get away. It's a punishable offence.

So please pay EMI on time. Don't take loan if cant pay.

 
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Consultant

You have taken up the problem prematurely, when stated, "X has asked Chairman his opinion on this recovery from him. Awaiting response." Let X receive response from the Chairman and come on this forum, if he does not get justice in the hands of the Chiarman of the Bank.



 

 
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Sir. Your point is valid, though it seems I am not able to make my point.

X has paid already and is not having any issues provided there is no wrongdoing done between Creditor and Borrower. Please note that the Bank releasing 80 Lacs without any deed with Guarantor is equivalent to bank funding this company on its own accord. There is no Guarantee Deed for 50 Lacs too.

My understanding is bank should have "Deed of Guarantee" if X is a guarantor. This deed will have clauses to increase the loan amount (if bank desires) with Borrower. Also, this deed is important for any guarantor to ensure that he/she obtains the rights to pursure borrower for recovery. Please note that B is working in an MNC as a salaried employee. 

Indian Contract Act, 1872 Section 134-143 provides various rights to surety so that Creditor and Borrower does not misuse the collateral/guarantee kept. Ex: 5 Crore Property Kept for a loan of 1 Crore, can Creditor increase the loan to Company as 4 Crore without surety consent and confiscate the property if company defaults/insolvent?

Equitable Mortgage without a Contract is valid? My understanding is bank should have Deed of Mortgage, if not Guarantee Deed. Thanks for help.

 
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Consultant

What bank does has no relevance, unless you have some legal problem with your own loan account, if any. If you want to know the bank's internal procedure for that you may have to approach the bank, not the LCI, as none can speak on behalf of the bank as his representative or spokesman.

 

 
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Biggest Problem for X is to certain his/her liability with Bank.

Since there is no contractual documents available with bank which ascertains the same (having signature of X at least), it is getting dificult.

X has received all Xerox Copies from Loan File and all the copies are signed by Borrowers only, no signature from Guarantor/Bank Representative is available on them. Also, bank mentioned that no more documents are availble on record (which to me means that no more deeds are available).

Though I agree that certified Xerox Copies are needed, which X has already asked and bank has agreed to provide.

You seem right in saying that the case is premature from legal point of view, I will get Certified Copies and will wait till Chairman understand if the recovery of X is legal or illegal.

Thanks all of you for help. 

 
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Consultant & Legal Analyst

Originally posted by : Manish Jain
Biggest Problem for X is to certain his/her liability with Bank.

Since there is no contractual documents available with bank which ascertains the same (having signature of X at least), it is getting dificult.

X has received all Xerox Copies from Loan File and all the copies are signed by Borrowers only, no signature from Guarantor/Bank Representative is available on them. Also, bank mentioned that no more documents are availble on record (which to me means that no more deeds are available).

Though I agree that certified Xerox Copies are needed, which X has already asked and bank has agreed to provide.

You seem right in saying that the case is premature from legal point of view, I will get Certified Copies and will wait till Chairman understand if the recovery of X is legal or illegal.

Thanks all of you for help. 

 

When you don't know X, whether X is he or she and problem is his or her, where is the logic of stretching the thread unduly too far? Apparently, it cannot be X's biggest or the smallest problem, it is your biggest problem that you have been unable to present the case appropriately to find answer to your academic query.

However, if there is any slightest truth about problem with X, he or she may better consult some local lawyer by showing his or her documents to file a case with the consumer forum.

 

 
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Consultant

Appreciably, perfect observation by Shri PS Dhingra!

 

 
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Probably I was not able to justify myself earlier, have a look at the documents coming out. Already this matter is with CVO of bank, hope we get justice.

Please dont take it otherwise, lawyers seeing a typical case either do not understand the case or say that your signature are there. Nobody understands that signature are taken much earlier thus stamp manipulation is visible. I will update more as documents I want get completely out from bank. 

Sanction Letter for 80 Lacs is not signed by any bank official for reasons we can understand. We were never there and limit rise was a conspiracy to eat money.

I have made somethings hidden in this, as dont want to land up in defamation by bank.

 

50 Lacs Stamp Paper with No Date when it was released from Treasury or Franked. One of the below two stamp were purchased in Year 2011 for a guarantee deed getting signed in Year 2013.

80 Lacs Stamp Paper Used:

 
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