cpc

personal guarantee - important


If a unit is collateralized with a bank and the loan has turned NPA and bank want to recover their dues: (the promoter has also given his personal guarantee)

1. Is the promoter legally bound from selling his personal assets or does the bank need to get stay from court to prevent promoter from selling his personal assets?

2. if one personal asset is mortgaged with some other bank, can the bank create a second charge on the asset?

3. can bank proceed with the personal guarantee of the directors without first selling the mortgaged assets?

4. Is it a usual practise for directors who have given persoanl guarantee to transfer/ sell assets to save the asset from bank sale and how valid is the sale?

 
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CS

See answer to your query as follows:

 

1. Is the promoter legally bound from selling his personal assets or does the bank need to get stay from court to prevent promoter from selling his personal assets?

 

Answer: The promoter can sell his personal assets covered by personal guarantee after receiving No Objection certificate from Bank. 

 

2. if one personal asset is mortgaged with some other bank, can the bank create a second charge on the asset?

 

Answer- Yes such second charge is vaild but it is subject to the rights of first charge holder. 

 

3. can bank proceed with the personal guarantee of the directors without first selling the mortgaged assets?

 

Yes the bank can proceed. However, in such case promoter has the right to recover the amount from the Company which took the loan.

 

4. Is it a usual practise for directors who have given persoanl guarantee to transfer/ sell assets to save the asset from bank sale and how valid is the sale?

 

If the property is sold without NOC from Bank. The transferee gets the title subject to the charge of the Bank. 

 
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I disgaree with views of Shri Gurmukh.

 

I give below the correct answers to your querries:

 

Q. Is the promoter legally bound from selling his personal assets or does the bank need to get stay from court to prevent promoter from selling his personal assets?

 

Answer: The promoter can sell his personal assets covered by personal guarantee without obtaining anybody's permission. 

 

2. if one personal asset is mortgaged with some other bank, can the bank create a second charge on the asset?

 

Answer- No such second charge can be created without the written consent of the mortgagor & first mortgagee. 

 

3. can bank proceed with the personal guarantee of the directors without first selling the mortgaged assets?

 

Yes the bank can proceed. However, in such case promoter has the right to recover the amount from the Company which took the loan.

 

4. Is it a usual practise for directors who have given persoanl guarantee to transfer/ sell assets to save the asset from bank sale and how valid is the sale?

 

My answer is yesin respect of those assets which are not charged to the bank.

 

 

I am a practising banker and dealing with such matters.

 

You can contact me for further clarification/assistence 

 
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Chief Manager(Law)

Whether the borrower's assets are to be proceed first and only thereafter for the balance the guarantor's assets should be enforced? This was the position of Law before 1992 , in Manku Narayan's Case. The decision of Manku Narayan was overruled by the Supreme Court in Indexport Vs. SBI in 1992. The supreme court has observed that Bank is entitled to a composite decree being mortgage-decree agaisnt the mortgagors and personal [money] decree against all defendants.

 
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