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Prasham (Proprietor)     13 April 2014

Contract act - section 62

Dear Experts,

 

I am a guarantor to my Nephew's Loan which has gone bad. Case for recovery is going on in the civil court and as per our understanding there are many complications. One of the things I've just come to know is Indian Contract Act, Section 62. 

 

In the original contract (Loan Agreement) Bank, Borrowrer and myself were the parties. Borrowrer is a Pvt. Ltd company with 4 Directors. There are 2 Guarantors i.e. myself and another. 

 

About a year back the 2nd Guarantor approached the bank and after negotiations made a settlement with them. He gave cheques of the negotiated amount. Somehow he couldn't amass the required funds and hence the cheques were returned. Neither myself nor the company directors were informed nor have any of us gave any writing consent for the settlement.

 

Now can we apply the Indian Contracts Act, Section 62 and show that the Original Contract has been replaced by a new contract and hence the parties left out in the new contract can't be held liable for the recovery of the outstanding Loan ?

 

Please help.

Regards

Prasham



Learning

 6 Replies

Prasham (Proprietor)     17 April 2014

No Replies !!! 

 

Experts please help :) 

Prasham (Proprietor)     22 April 2014

Experts please help :) 

malipeddi jaggarao (retired banker)     22 April 2014

“About a year back the 2nd Guarantor approached the bank and after negotiations made a settlement with them. He gave cheques of the negotiated amount. Somehow he couldn't amass the required funds and hence the cheques were returned. Neither myself nor the company directors were informed nor have any of us gave any writing consent for the settlement.

Section 62 of Indian Contract Acts reads as under:

 Effect of novation, rescission, and alteration of contract.- If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. Illustrations.

Where is the question of novation, rescission and alteration of contract in this case.  Bank has the right to make demand on the guarantors and if the guarantor makes payment or offers to pay will it attract the provisions of Section 62? 

 

If he strikes a full and final settlement with the Bank and the Bank and if you have any documentary evidence to this effect and your consent is not obtained by the Bank, then only the provisions of Sec.62 will come into force. 

 

Instead of trying to avoid your responsibility, better all of you ask for OTS and honour your commitment. 

1 Like

Prasham (Proprietor)     22 April 2014

I have a copy of the new settlement done by the bank and the 2nd guarantor. I or the borrowrer weren't informed or taken consent about the settlement. 

Can I use the Section 62 ?

malipeddi jaggarao (retired banker)     22 April 2014

Send a letter to the Bank that they have failed in their duty to take the other guarantor into confidence while agreeing for the compromise with the another guarantor and you can not be held responsible if the debt is not repaid by him as mutually agreed upon.  Ofcourse, only the guarantor can take shelter under this provision, but not the principal borrower.

1 Like

s.santhosh (OWNER)     23 September 2014

I AM A CABLE OPARATER  IN ADILABAD   I WAS SIGHN A AGREEMENT  WITH A GTPL  ( GUJARATH TELE LINK PVT LTD ) AHMEDABAD      OUR TRANSACTION AS VERY GOOD  BUT    NOW THE COMPANY  AS  TRANSEFOR OUR  AGREEMENT WITH   ANOTHER OPARATER  OUT OUR      NOLEDGE  SO HOW CAN WE  GET STAY PLEASE SIR MY CELL 09908879933 THANKS


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