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sheeladharan (PROP)     20 July 2014

Third party guarantor in sarfaesi

dear sir

             am a senior citizen aged around 73 years. i own a property at hyderabad a site of 350 sq yards which is kept as a third party collatery to a cold storage in 2009 . i have been asking for the withdrawl of my guarantee as i want to sell my land from 2012 december. the firm is a registered partnership firm with 4 partners in it. i am not a partner of the firm. on march 2013 out of my pressure the managing partners have approached the banker and put a requsition for the substitution of the property. the banker did not respond and in november 2013 the banker invoked sarfaesi act on the firm.

        i approached the hon.high court for justice the banker immediately after reaching the notice sent a proposal rejection letter for substitution .

      the managing partners approached the drt and got status quo order on possession of properties .high court disposed the case and gave liberty to question the rejection. we again approached the high court and asked the same. and we even asked to give a fdr of the value taken as collateral or substitute with a property with suits the norms of the bank. high court ordered to approach drt for the same.

     in march 2014 banker initiated a criminal case on the managing partners of the firm and now a week back status quo order is also dismissed and main case is pending at drt. the banker has sent the final auction notice now. 

  after the initial notice is issued the firm paid 70% of the dues and capital loan is also not a npa. this firm has got 2 sorts of loans 1. capital loan and2. ware housing loans.

   ware housing loans are directly given to the farmer who stores his produce in the storage. based on the quality and quantity check report of the storage the bank issues the loan and primary guaranty is the stock and primary borrower is the farmer. the banker also filed recovery suits on the farmers.

        how can i get my property back . pl suggest me the possible ways



 3 Replies

Rangee (Lawyer)     21 July 2014

Mr. Sheeladharan,

The rejection of substituting the property in collateral surety is not with in per view of Sarfesi Act 2002. Hence the issue has to be challenged before Local Court or High Court. It is suggested better make payment of amount due before sale date  and  take back of the documents from Bank. 



c.p.s. ramachary (1500)     21 July 2014

What I understand from your version in the query is that, you are not a partner in the borrower firm, but you have created charge over your property as security for certain credit limits availed by the firm which in turn slipped to NPA status on account of default in repayment of the debt. Substitution or waiver of any security charged in the account would be absolute discretion of the bank. For this reason, perhaps, the High Court might have directed the principal borrower firm to approach DRT. 

DRT also cannot exercise such discretion for directing the bank to rewrite the contract as per your desire. It is for the bank to satisfy itself on the point of substitution. Any payment made after issuance of 13(2) notice does not have any impact on the action initiated by the bank under SARFAESI Act. I do not find any merits to contest, in this case. You may approach the bank and convince them arranging the bank any other property of borrowers to secure the debt and get released your property which was offered as security.

Your property will be security until closure of the account by repayment of the debt in full together with charges incurred in the litigation. Do not take wrong steps to loose money and valuable time which is irrecoverable 

Nadeem Qureshi (Advocate/     21 July 2014

You may file an appeal before DRT against bank/FI and try to get stay on auction

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