Civil Procedure Code (CPC)

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Guarantor in a secured loan

(Querist) 23 May 2014 This query is : Resolved 
hello there once again

i am standing as a guarantor against the secured loan (house loan where house has been mortgaged to the bank).

few days ago i received a letter saying that loan has over due and it shall be cleared.

my question is in such case how do i defense myself because, the property was mortgaged to bank that is why loan was sanctioned, then why not bank auctions the property and other assets of creditor to recover loan then look at me to recover rest of amount as guarantor.

what shall be my defense?

Sudhir Kumar (Expert) 23 May 2014
bamk has a right to recover loan from you even without resorting to sale of proeprty.
Rajendra K Goyal (Expert) 24 May 2014
A guarantor in a loan is liable jointly or severally to pay the loan. Bank always try to recover the loan before auctioning the mortgaged property.

You should go through the terms and conditions of your guarantee agreement to confirm the justification of Bank action.
ajay sethi (Expert) 24 May 2014
guarantor is jointly and severally liable for loan repayment
Guest (Expert) 24 May 2014
Not only guarantor, but also his legal heirs are also liablle to get the loan cleared either by the borrower or by self in case of default by the borrower.
malipeddi jaggarao (Expert) 24 May 2014
The guarantor's liability is co-extensive with that of Principal Debtor. The Creditor is at liberty to go against the borrower/borrower's property (if mortgaged); guarantor/guarantor's property (if property) either individually or severally. It is his choice. The guarantor has no defense to say that the creditor should exhaust the remedies against the mortgaged property and look upon the guarantor for the residual if any. However, once the guarantor pays the debt on demand of the creditor, he is entitled to all the securities which are originally available to the creditor and he can start the process of realizing the repayment made by him. Literally, he steps into the shoes of the creditor.

That is the reason why, one should be very careful to give guarantee to others unless he has the full confidence that the borrower will repay the loan. In other words the guarantor is instilling confidence in the creditor about the borrower's repayment capacity and any failure, the guarantor will be held responsible if the creditor so chooses.

Anyway, the purpose of notice to you, is to assert the pressure on the borrower to clear the overdues. Practically the Bank may also choose to go against the property. But it is also your duty to assert pressure on the borrower for the repayment.
K.K.Ganguly (Expert) 25 May 2014
1. You are jointly or severally liable to repay the said debt,

2. Normally, Banks initiate SARFAESI Proceeding to sell the mortgaged property to realise the outstanding due first,

3. The amount realised is insufficient or if the mortgaged property can not be taken possession or or sold due to various reasons, Banks file Original Application before DRT agaisnt the Borrower & the Guarantors for realising the outstanding by selling the properties of the Borrowers & Guarantors,

4. Banks pray for the attachment of the properties of the Borrower & Guarantor for the above purpose.
T. Kalaiselvan, Advocate (Expert) 25 May 2014
Expert Mr. Malipeddi Jagga Rao has very thoroughly and perfectly explained you the position and facts which binds the guarantor under the said circumstances. Now if you face the crisis, you may put pressure on the principal debtor to clear the loan amount to safe guard yourself or face the law.
Sudhir Kumar (Expert) 26 May 2014
you can even file civil suit against the Principal debtor.

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