Auction of mortgaged property against defaulted instalments

sree rama kumar (Querist) 20 August 2021 This query is : Resolved
My friend borrowed from a private bank pledging (a) his 3 properties and (b)2 properties of his wife, who is a guarantor. He could not pay the installments. The bank authorities are planning to auction properties (that are owned by my friend) to recover the dues. But my friend is requesting the bank authorities to auction the properties of his wife because the properties he own are worthier. The bank dues can easily be settled by auctioning the properties of his wife. But the bank authorities are not accepting his proposal. Is it correct ?

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Quick Summary

When a borrower defaults on mortgage payments, banks typically aim to recover dues from the borrower's pledged property first. While a guarantor's property can be used, it's generally considered after exhausting the borrower's assets. The bank has discretion, but proposals to auction the guarantor's property before the borrower's, especially if the borrower's property is more valuable, may be seen as unfair. Legal consultation is advised, particularly regarding specific proceedings like those under the SAFAESI Act.

kavksatyanarayana (Expert) 20 August 2021
Usually, the Bank authorities make public auctions through the Debt Recovery Tribunal. The decision of the DRT is final. If it is not through DRT, then consult a local lawyer.

Dr J C Vashista (Expert) 21 August 2021
Which Court / Tribunal the case is being adjudicated ?

Properties of guarantor can not be put to auction till exhaustion of all properties of principal borrower.

It is better to consult and engage a local prudent lawyer for appreciation of facts / documents, professional advise and necessary proceeding.

Advocate Bhartesh goyal (Expert) 21 August 2021
It's bank's discretion to whom property be auctioned first, generally bank recover due loan amount and interest from borrower's property.

K Rajasekharan (Expert) 21 August 2021
The bank is right. The proposal is unfair and ethically bad. The bank should, as it is being planned, auction the property of the borrower. Only when it is practically impossible it should go for the property of the guarantor.

Since it is a mortgage if the borrower can manage the amount somehow and pay the dues the property will not be auctioned.

P. Venu (Expert) 22 August 2021
The Bank cannot unilaterally take the decision to auction unless it is a proceeding under the SAFAESI Act. Even in those proceedings there are procedural requirements to be complied with. Your posting is deficient in those material facts.

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