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Meha Harish (Proprietor)     21 January 2013

Recovery by bank of insurance claim received from guarantors

Following is summary of sanctioned limits, payment after NPA / sarfaesi act and claim lodged by bank at DRT.

Particulars of accounts

Sanctioned limits on 1.12.05

Outstanding on 1.04.07 - NPA date

Paid by 15.09.08

Bank's claim
in recovery
suit at DRT
as on

Uncharged interest upto 26.08.09

   Cash Credit






   Mach. Term Loan






   Mach. Term Loan






   Packing Credit






   Foreign Bill disc.












Personal Home Loan






The claimed amount of Rs. 30.19 Lakhs is received as claim from ECGC and parked in suspense account at Branch. There are no more EMG security with bank of any property. The flat under Personal Home Loan belonging to Directors is mortgaged to Home Loan Loan a/c and is contnious security to above Business Loans. In addtion bank has Personal guarantee of directors.

AOD was not signed by borrowing Pvt Ltd company in view of illegal NPA classification inspite of no overdues, misapprprpation and siphoning of funds, etc. Banking Ombudsman has observed deficierncies towards failure under lenders Liabilities towards illegal NPA classification, refusal to upgrade a/cs and not attemting rehabilitation measures for the SSI-EOU unit.

OA is filed for recovery from Borrower and guarantors: The query now is:

1. Can the bank recover commercial insurance claim received from one guarantor (ECGC) from another guarantor (personal guarantee / continuing guarantee of Directors) to pay back recovery to ECGC.

2. Credit sanction terms state that besides EMG of one flat (subsequently sold under Sarfaesi act) and contnuing guarantee and Personal guarantee, the bank shall also obtain ECGC guarantee. Towards the ECGC guarantee the bank charged the business accounts the monthly premium. Therfore,how could the company not be the direct beneficiery of the insurance claim.

3. The proceeds of sale of mortgaged property was adjusted towards Mach Term Loans and 25% our share of Packing credit outstandings. (ECGC had paid 75% of outstandings of Rs. 40.29 Lakhs). bank did not share the recovery with ECGC before OA filing. Later bank did remit 6 Lakhs to ECGC when we fought with ECGC for all the wrong doings by bank officilas and ECGC officilas for having paid the claim inspite of knowing about illegal NPA and no dues position. Due to this sharing of recovery, can there be any further case of recovery from other guarantors??


Please guide. Thanks in advance.


 3 Replies

Meha Harish (Proprietor)     21 January 2013

Additional Information:


The Personal guarantee and continuing guarantee were signed to indemnify the bank for 'any losses incurred by bank'. In this case since the outstanding dues have been received by bank as claim from ECGC who also guaranteed the advance, can the bank proceed for recovery from other guarantors since it has not incurred any losses.


( the interest dues, as claimed by bank, are the dues being charged even after ECGC claims are received).

RAJU O.F., (Advocate)     21 January 2013

Although the claim amount is received from ECGC, the bank has to recover the maximum of their dues from the borrower and guarantors (excluding ECGC) and the bank has to return the same percentage of the recoveries with ECGC, being at the percentage of claim received from ECGC. In short, the receipt of claim amount from ECGC will not absolve the liability of the borrowers and guarantors. Better enlist the matter for amicable settlement through DRT-Lok- Adalath for which you have to approach the DRT where your case is pending.

1 Like

Rakesh Jain (retired)     16 March 2014

Opinion given by Shri Raju O.F. seems to be correct keeping in view that ECGC has not acted as a guarantor for the loan given by bank but being an insurance company provided the cover as an inddemnifier and paid the claim subject to conditions inter alia that bank shall not credit the amount to the account of the debtor and continue to recover the money and shall share the amount recovered , if any, in the same ratio as the loss was shared by ECGC with the bank.


For further discussion in the matter, I may be contacted on 8130009681.

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