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Abhimanyu Jham (Proprieter)     25 June 2013


Dear Sir/Madam,

I Have An Account in Bank Of India CC Limit Of 40Lacs and Bank Guarrantee is of 60Lacs In Favour Of NSIC And Margin Money of Bank Guarrantee is 20Lacs FDR . Due To Financial Crunch this Bank gurrantee is Invoked By NSIC After Adjusting 20 Lacs From 60 Lacs and My Payment of 8 Lacs is also adjusted in bank guarrantee amount . Balance amount is merged in my CC Account and made my CC Account in OD account. And Made My Unit Sick...

Whether They Can Merged Like This???? 


 10 Replies

Advocate Sastry (Advocate)     25 June 2013

Invoked Bank Guarantee amount will be debited to CC account... Your payment of Rs. 8 lakhs is adjusted to CC account.. Bank must have taken "Letter of Lien and Set Off " from you at the time of  taking the documents. Hence their action is correct.

JT Rajasuriya, Chennai (Advocate 98410 53790)     25 June 2013

It appears that they have done the arrangement without giving any kind of notice to you thereby making your unit sick. You can represent and seek some kind of a restructuring so that you could be able to run the unit

narendra.s.p (Chief Manager(Law))     25 June 2013

It is a wrong practice to debit the liability of invoked babk guarantee to the Cash Credit account. This will wipe off the drawitg power available in the Cash credit account. The devolved Bank Guarantee / LC liability  should be kept seperate unless the borrower has been sanctioned interchangable limits.

MANOJ HARIT (LAWYER)     25 June 2013

I agree with narendra s.p. Sir. You need to contact a lawyer with complete set of documents to understand the legal position.

You should also write to the Bank to allow u to use CC Limit and keep BG lability separate. You can also ask for bridge loan, if the financial crisis is temporary. 

But be proactive and bring all the facts on record.


Abhimanyu Jham (Proprieter)     26 June 2013

Dear Sir,

Thank you Very Much For Your Reply , But I Have Not  Given any Letter Of Understanding To Merge Bank Guarrantee into CC Limit. Without my Concern Bank Has Taken This Step.

Plz Give me Some Advice Or Ruling Against This Matter...? Plz Guide Me Soon What Step Should I Take..?

Thanking You,,


MANOJ HARIT (LAWYER)     27 June 2013

Mr. Abhimanyu,

Have u written to the Bank as suggesyed by me yesterday? Do that first. If u require any further consultations u may send a mail.


Prasun Chandra Das (Banker)     27 June 2013

Mr A.Jham - you say that due to financial crisis, NSIC had invoked the BG. Therefore, your business was already in crisis. Pls do not blame the bank - your unit did not become sick just because the bank merged your BG limit to CC limit.


BG limit is non fund based working capital limit, and CC is fund based working capital limit. If it is mentioned in your sanction letter and/or loan agreements that the bank has the right to merge BG with CC or CC with BG, then bank is correct in doing so. Frankly, even with the little information you provided, I think it is better that your fund based working capital limit has increased.

Abhimanyu Jham (Proprieter)     28 June 2013

Mr Das,

I M Not Blaming Bank , I M Sicking Help From All ..

1)I M Aware Of It Bank Guarrantee Is Not Fund Based,

2)My Bussiness is in Crisis Because My CC Limit is 40 Lacs While They Have Merged Balance Ammount in CC Limit, Its Become OD and Bank Has Stop Transaction. and They Have Asked For Reduce Of OD. and they have made the account NPA.

3)They Have Started Doing Synchronisiation Act. 

4)My Sanction Letter of Loan aggreament and bank guarrantee are separate.

Thanking You,

Anjuru Chandra Sekhar (Advocate )     01 July 2013

Verify what is the interest that bank should (legally) charge (as per agreement terms) on account of Invoked BG account which has now become a fund based limit.  If it is lesser than the interest on CC limit, you can file for damages. If it is more than than the interest on CC limit they have done a favor to you.  But on the other aspect, you can file for preventive relief (injunction petition under specific relief act) to prevent him to merge both the accounts because that will stall your flow of working capital and hurt your business and without doing business you cannot repay the loans.  The better way is to first try to convince the bank to initiate Securitization proceedings if they wish but keep the CC limit as it is so that a possibility is left for you to generate revenues out of business.  If that is not heeded, file for injunction petition on the same lines.

Anjuru Chandra Sekhar (Advocate )     03 July 2013

Sections 59-61 of Contract Act explain how the repayments made by debtor is to be appropriated where the debtor has several debts to repay with same creditor.  The rule of appropriation is, 1. where the debtor impliedly or expressly conveys to the creditor that out of several debts, the amount of repayment that he is tendering is to be appropriated towards a particular debt, it becomes the duty of the creditor to appropriate it to the debt that the debtor had referred.  This is S.59.  2.  Where the debtor fails to invoke his rights under S.59 and keeps silent but makes some payment, it devolves on the creditor to apply it to any one of the debtor's debts, including that of time barred debt.  This is S.60.  3.  Where both debtor and creditor both together do not invoke their rights under S.59 and S.60, under exceptional circumstances, then the appropriation must be done lawfully in such a way that the first debt (in chronological order) must be extinguished first from the first payment....second from second payment (if first one is extinguished) and so on and so forth.  This is S.61. 


It is illegal for any banker to club two accounts unilaterally without discussing it with the debtor.  Contract act provides the right to debtor by way of S.59 so that the creditor does not exploit him by appropriating the sums paid to his advantage by appropriating it to his own advantage and to the disadvantage of debtor. 

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