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Shaunak Chakraborty   10 May 2024

Query regarding cgtsme loan default and role of family in loan recovery

Dear Sir, I have a query regarding how banks will recover a defaulted CGTSME loan and how will be the borrower's heir be affected. My father started a marine engine business in the year 2020 for which he has two loans open today. The first loan is a Loan Against Property (LAP) and the other is a CGTSME loan with an outstanding loan balance of 76 lakhs and 38 lakhs respectively. Today his business has stopped due to losses in the previous years and his partners have left him. He is unable to find a new partner and as a result, unable to secure further loans to restart his business. In such a situation, I am ready to take the burden of the mortgage loan and re-pay it. However, I don't have the capacity to re-pay the CGTSME loan. He has assets worth 20 lakhs.  My father wishes to gift his property to me.   Since his business has stopped today and assuming he won't be able to secure further loans, what procedure will the bank follow to recover the defaulted loan and can the bank enforce me/his family members to pay?



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 2 Replies

T. Kalaiselvan, Advocate (Advocate)     10 May 2024

Your father cannot transfer his property to you or anyone by any mode of transfer because he has availed loan against the property. 

Since he cannot claim title to the property till settlement of the loan he cannot transfer the same by gift deed in your favor. 

If you cannot repay the loan then what is the purpose to be solved by joining your father as a partner in his firm. 

Besides,  if the partners have quit the company,  then the partnership firm will stand dissolved automatically as per the AOA or MOS or the conditions of the firm.

No doubt the children of borrower cannot become liable to repay the loan amount of the firm. 

P. Venu (Advocate)     11 May 2024

To my knowledge, mortgaged property could be transferred to another person subject to exceptions. Is the lender agreeable to the proposed transfer. 

The partners alone are liable for the partnership firm in their individual capacity. However, the legal heirs of a deceased person is liable to the extent of the properties they have inherited.


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