The Bank gave a loan of Rs. 4.00 crores to a contractor for Irrigation works against the security of Property provided by our private Trust. The said contractor defaulted and the Bank Filed the Recovery Suit in DRT and got the decree against the contractor and the Trust.
The contractor had filed a civil suit against the State Govt for the amounts due for the project executed by him. Meanwhile the Contractor died. The legal heirs (His wife, one son and one daughter) pursued the above case aginst the state Govt and got a decree for Rs. 20 crores.
The Bank filed a WP in High Court to recover the amounts due from out of the amounts receivable by the Contractor’s legal heirs from out of the amounts receivable from the above decree in the civil court. Thereafter the legal heirs of the contractor and the Bank agreed for a one time settlement for Rs. 7.00 crores and filed the settlement letter with the respective affidavits regarding the settlement. The High Court directed the Irrigation Department to pay amount to the bank into the account of the legal heirs of the contractor and directed the bank to deduct 7.00 crores from out of the amounts and pay the balance amount to the legal heirs of the contractor. Accordingly the irrigation Department paid the amounts to the bank into the account of the legal heirs of the contractor. The Bank after deducting the above settled amount of 7.00 crores paid the balance amount to the legal heirs of the contractor.
The settlement letter between Bank and the legal heirs of the contractor mentions the following:
- The loan amount is settled in full.
- The Bank is at liberty to proceed against the Trust for any further recovery.
- This letter cannot be treated as Novation of Contract.
All the above was done behind the back of the Trust and in the entire processes of settlement the Trust was not involved.
Now the Trust gave a letter to the Bank to return the original Documents of the property given as security as the loan is cleared and the amount settled is paid in full.
The Bank without replying to the letter filed an IA in the DRT for taking action against the properties of the Trust.
- In view of the above measures taken by bank after receiving the full settled amount from the Principal, what are the remedies available to the Trust?
- The mention in settlement letter that The Bank is at liberty to proceed against the Trust for further recovery and that this letter cannot be treated as Novation of Contract has the legal sanctity.
- If there was any further due how can bank refund the balance amount to the legal heirs of the contractor after deducting the settled amount of Rs. 7.00 crores?
- Will there be still any liability of the Trust once loan account is settled in full by the principal borrower
- Can there be a case of ‘Breach of Trust”
- Who can give us an order directing the Bank to return the Documents to Trust, the High Court or DRT.
I am representing the Trust seek legal advice urgently.
