My nephew who ran a Pvt. Ltd company, took a loan from a local co-operative bank in 1998 against Stock (raw material, in process goods & finish goods), Machinery, Furniture & Fixtures. In 2001 he stopped paying interest towards the loan. I am Guarantor in this loan along with my other nephews (borrowrer's brothers) and my sister.
What are the duties of the Bank once they come to know that the borrowrer of this type of loan has gone default? They had declared this account to be NPA in 2001 while the borrowrer has shown the stock worth the original loan amount in 2004 statement. Shouldn't this stock be confiscated by bank?
Also is it okay to give a loan of Rs. 25,00,000/- without taking any property as security?
Now they are asking me to pay the outstanding amount. Can I ask them to handover the "stock" to me against my payment of the outstanding?
Can I file a suit of Negligence on the part of bank under section 139 of The Contract Act 1872? What are the chances of my release as guarantor from this loan against this suit?