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Commercial property mortgage to a cooperative bank

One of my friend has mortgaged his commercial property to a cooperative bank. 
he has gone insolvent and has not been paying his emi 

what action will the cooperative bank take in this case

Will they take an action on his personal property as well 

will the personal property of his family members also be at stake


 15 Replies

Dr J C Vashista (Lawyer)     24 May 2021

Originally posted by : Chetan
One of my friend has mortgaged his commercial property to a cooperative bank. 
he has gone insolvent and has not been paying his emi 

what action will the cooperative bank take in this case

Will they take an action on his personal property as well 

will the personal property of his family members also be at stake

Your friend is already stated to have been declared insolvent, implies that all his assets and liabilities have already been taken care / disbursed by the Court.

Whether the property stated to have been mortgaged with cooperative bank has been included in the assets or not ? If it has been calculated it is not out of his assets and disbursed to creditors, however, if not, insolvency proceedings are incomplete / false / fake.

What is the opinion and advise of the lawyer engaged by your friend in his insolvency case, who is well aware about facts and circumstances of the case and an able, competent and intelligent enough to get your friend declared insolvent, as stated by you ?

It is not your personal case for seeking obligation of experts on this platform. Let your friend may post all relevant facts.

The query is stated to be commercial hence it is advisable for your friend to consult a local lawyer for any further question if s/he has lost faith in his/ her counsel.


Sankaranarayanan (Advocate)     24 May 2021

it seems author's imagined query 

M V Gupta (Advocate)     24 May 2021

What do you mean when you say that your friend has gone insolvent? Has he been declared insolvent by the Court? If not, the Cooperative bank can,apart from proceeeding against the mortgaged property, also enforce his personal obligation to pay the loan amount from his other assets, if the sale proceeds of the mortgaged property do not satisfy the full amount of debt.

G.L.N. Prasad (Retired employee.)     24 May 2021

The bank first takes exclusive possession of the property and they can auction it and recover the amounts.  For the balance of the amount if any, the bank is having the first charge/priority for recovery..  Your friend might have filed IP before a competent court, and the genuineness of the creditors as per his application will be probed into, and the objections/counter filed by the creditors has to be taken into consideration, and depending on facts as stated in account books/IT returns, and if any assets are transferred into the name of nearest friends or relatives shortly before filing insolvency petition, the court declares your friend as the solvent and distributes his assets as per the priority-Govt. Taxes, Bank borrowing, and rest proportionate distribution if an asset remains in between creditors.  In the case of such a Big friend of yours, generally, he never needs the advice of friends as he might have decided to resort to such a serious final test after deliberations with professionals.

P. Venu (Advocate)     24 May 2021

What do you mean by "he has gone insolvent"?


SIVARAMAPRASAD KAPPAGANTU (Retired Manager)     24 May 2021

Gone insolvent,

Mortgaged Commercial Property


What are these terms?


A person cannot go insolvent just like that unless he approaches a Court and the Court finds it necessary to declare him insolvent then only it shall be deemed that he is insolvent.  What exactly you mean by commercial property?  Anyhow, the property is said to be under mortgage to the Coop Bank.


When he is declared insolvent, Coop bank shall not leave the matter like that. They shall recall the entire loan and shall proceed to auction the Mortgaged property. When the proceeds of the mortgaged property are not enough to cover the liability with them, they shall file a petition before the Court to include them as Creditors for a share in the other properties. 


That is what will happen.


He is not able to pay back the loan or emi

G.L.N. Prasad (Retired employee.)     24 May 2021

Merely because the borrower can not pay the EMI, the borrower can not be declared insolvent.  Banks do take another solvent person of high worth as guarantor in addition to maintaining a proper margin of the property while advancing amounts. Posting that someone has gone insolvent when he is really having net worth may amount to defamation.

Adv. Sagar Verma (Lawyer)     24 May 2021

No, they cannot attach/sell/auction your friend's personal property. To recover the balance amount of loan taken on Commercial Property acquired through mortgage will be attached/sold/auctioned. Also your friend must have got notice from bank for the payment of pending amount, don't ignore that, send a reply notice.

Thanks and regards,
Adv. Sagar Verma

T. Kalaiselvan, Advocate (Advocate)     24 May 2021

Since all home loans are secured by a mortgage of the asset, the bank/financial institution can initiate proceedings to enforce the mortgage. They can sell the asset after attaching it by way of public auction or private treaty. They can exercise their rights under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SARFAESI Act. The latter being the most expeditious remedy,

If the sarfaesi act is not applicable then after auctioning the mortgage property, if there are any guarantor then the collateral given by the guarantor would be invoked for recovery.

Preliminary notices are sent to the borrower mentioning the amount overdue with interest and penal interest. If the bank has reason to believe that the customer is willfully delaying the repayment, or if the customer has not come forward with a definite plan of action to repay the dues, the bank can opt for legal proceedings. If there is a guarantor, the bank might approach him, as according to the guarantor agreement, he is supposed to pay the loan when the applicant defaults.

In case if the borrower has given any property as the collateral in that case the ownership of the property will go to the lender and then the lender can sell the property and recover the loan amount.

Actually banks don't immediately seize the assets of borrowers after default. "Since all home loans are secured by a mortgage of the asset, the bank/financial institution can initiate proceedings to enforce the mortgage. They can sell the asset after attaching it by way of public auction or private treaty.




What % of the commercial property can be the minimum bid value by the cooperative bank

cause the property value is way higher than the mortgage loan amount

if we feel that the bid is unjust can we stop it or get a stay. 


G.L.N. Prasad (Retired employee.)     24 May 2021

Now the focus was shifted in the query of your friend to "we" Good. In an open bid, the bank gets market valuation by their valuer/engineer and fixes the minimum bid on such market value, no one can say and this must be published in newspapers.  If the bid amount is higher than the outstanding loan + interest + penalty + expenses, then that amount will be kept as a Sundry deposit and will be refunded to the borrower, if there is no further attachment legally from creditors through a garnishee order.  The borrower can also bid or his friends can also bid the amount, and finalization of the bid amount is at the discretion of the Bank and the Bank does not bother about the actual value and concerned about covering their legitimate dues only.  In several cases, as borrowers may influence bidders against the participation, the bank requests their valued clients to participate in the bid and help them in recovering the amount. and naturally helps them.

The court can not intervene in such bids unless there is something unlawful.  Contact your local advocate for further guidance on getting such an injunction against the bank etc.  If you doubt about credentials of a bank, enter into some type of agreement for the sale of the property, with a condition for liquidating the dues of bank and then payment of rest after clearance from a bank, at the time of Registration. and through this you can save tens of thousands as expenses.

T. Kalaiselvan, Advocate (Advocate)     24 May 2021

I endorse the views expressed by expert Mr. G.L.N. Prasad which is elaborate and complete.

Any addition to this would be a repetition, hence I consider that the opinion of the said expert would suffice and  a suitable reply to your further query. 

Krushalkumar Sheladiya (Advocate)     26 May 2021

In this case, Your friend's personal property and the mortgaged property can be taken by the cooperative bank through the legal process. Is your friend has been declared insolvent by the Court? if yes, then your question is wrong.

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