Finance company filed case against me in car loan
10-Mar-2023 (In Banking / Finance Law)
I am a guarantor in car loan. My friend has purchased a car for which he was not paying installments from year, so we have surrendered the car. But now Finance company has filed an arbitration case against me in Chennai. Please suggest as an guarantor still I have any responsibility and also now what I need to do.
A lot will depend on the agreement existing between you and the bank. It is also important to verify if the bank has recovered the dues by sale of the car. Generally speaking, the bank can certainly sue the guarantor independently. Would be happy to take a look at the relevant agreement and documents if you wish.
Firstly as a guarantor a person is liable to repay the loan amount as much as a borrower. So technically the finance company can have a claim against you. However whether and to what extent the finance company can successfully recover the amount from you will depend on 2 things-
1. The terms and conditions of the loan agreement to ascertain if surrendering of the car makes any difference to the rights and liabilities of the parties.
2. If your friend has made repayments to the financing company then that amount will be subtracted and the financing company cannot claim that amount from you.
Given the present circumstance and the facts stated by you here, the first thing you must do is take all the documents to a lawyer and seek advice as to whether in light of the fact that the car has been surrendered, the terms and conditions of the loan agreement, gives rise to any claim against you. Secondly you must then be advised how you must proceed in the arbitration proceedings (provided there is a valid and a binding arbitration agreement).
1. The terms and conditions of the loan agreement to ascertain if surrendering of the car makes any difference to the rights and liabilities of the parties.
2. If your friend has made repayments to the financing company then that amount will be subtracted and the financing company cannot claim that amount from you.
Given the present circumstance and the facts stated by you here, the first thing you must do is take all the documents to a lawyer and seek advice as to whether in light of the fact that the car has been surrendered, the terms and conditions of the loan agreement, gives rise to any claim against you. Secondly you must then be advised how you must proceed in the arbitration proceedings (provided there is a valid and a binding arbitration agreement).
Yes you are responsible and to enforce the arbitration award the finance company in order to recover their money will file an execution in which they will make the guaranteer a party in order to recover the money.
Disclaimer: The above query and its response is NOT a legal opinion in any way whatsoever as this is based on the information shared by the person posting the query at lawrato.com and has been responded by one of the Divorce Lawyers at lawrato.com to address the specific facts and details.
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