Cgtmse loan npa

A company has an outstanding loan taken 2 years ago from public bank due to losses incurred in adverse market conditions . This loan is under collateral free CGTMSE scheme for Small Scale Industry from govt where 75% guarantee for loan is provided under scheme. The directors and are unable to pay back the loan to the bank and the account has been declared NPA by the bank . All company assets have been sold to reduce the outstanding and the proceeds have been deposited in the bank. The directors have taken personal guarantee for the loan while taking the loan but no assets have been given as collateral .  In such a scenario please clarify the following :

1. Can SARFAESI Act 2002 be applied by bank as no asset of directors has been given as collateral , only personal guarantee has been given ? Will this case go to Debt Recovery Tribunal or Civil Court .

2. Since 75% of the guarantee is provided under CGTMSE by govt. for new entrepreneurs can directors be held liable to pay outstanding debt by court .  

3. What should be course of defense taken by directors of the company ?

Looking forward to feedback on this subject from the knowledgeable lawyers on this forum .


Lawyer in

Since it is public bank, the case will be filed in Debt Recovery Tribunal only. Directors are personally responsible to clear the loan. as per new R.B.I. guidelines to all banks, even guarantors are also may face willful defaulter risk.


CGTMSE scheme from government is to support new entrepreneurs with loan without collateral and there is always a chance that all start up companies will not succeed . So should this not be considered in court of law if a case of willful default is not established.  Can any lawyer cite example of court ruling for CGTMSE loan case or provide some more information on this topic.




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