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shyam (nil)     18 April 2012

Bank loan directors liability

 Pvt Ltd Company run by me and another Director had availed Working Capital and Term Loan under CGTSI Scheme from a nationalised Bank. The Bank had issued Loan Allocation Letter mentioning that the Loan is sanctioned under CGTSI Scheme. And the bank also charged the Insurance Premium to be paid to CGTSI Trust owned by Govt of India and SIDBI. The Loan became NPA after we repaid more than 80 % of  the Loan. The Bank have already auctioned off the secured assets of the Company based on an interim order of Subcourt. Instead of invoking CGTSI Insurance Cover , the Bank filed a money suit and obtained an order from Subcourt to recover the Loan outstanding from the Assets of the Directors of the Company. Is this maintainable considering 1) Loan was sanctioned under CGTSI Scheme which covers the Business Risk under Insurance and also because as per CGTSI Scheme, no third party guarantee(Directors Guarantee is considered as third party guarantee) should not be obtained 2) The Limited Liabilty of Directors of the Company as per Companies Act. I heard there are some supreme court rulings in this regard.  Is Appeal to set aside the Subcourt order the only legal remedy? Is it worth to file a Review petition in the subcourt and enlighten the judge on the above 1) and 2) . An irresponsible and unprofessional lawyer who represented the case in Lower court did not agitate 1) and 2) to convince the Judge. Judge decreed the Bank case in the lines of an ordinary money suit overlooking the CGTSI Scheme and Companies Act etc



 2 Replies

sahil kumar (cosultancy)     19 April 2012


You are absolutly right on the concept of liablity of the director is limited to the extent of its share holding amount, personal assets of the director can not be attached beyond the share holding capacity. hence my sincere advice is to hire a good law firm to look after the matter.

swift action must be taken as yor appeal against the order  may not be admitted if it failed to comply with limitation Act , which basicly provides norms for the time duration in which the appeal has to be filed.


shyam (nil)     19 April 2012

Thank you Mr Sahil Kumar
May I know if it is possible to move an indigent petition for court fee waiver as per 1870 Court Fee Act , as the Company is defunct and does not have cash flow.

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