Can bank ask guarantor to repay loan if borrower is missing

640 votes

*The loan was secured only to the extent of the FDR amount which they have already liquidated. The outstanding amount is not secured.
*Tehsil cannot take any steps if there is no order of the court.
*Since the property is not mortagegd with the bank, so they cannot sell the property.
*As guarantor to the loan, your father is liable to pay the loan amount to the bank if the borrower does not.
*You do not need to go to the High Court.

Bank must have filed a suit for recovery against your father or they must have sent your father a legal notice to pay the outstanding amount.
So, you must be prompt in defending your case or replying the notice appropriately which otherwise would be decided against you by the court.

Advocate Bidit Kumar Deka LawRato

936 votes

In your case the loan is unsecured loan and ig the borrower is not paying the loan amount the bank have every right to intiate the recovery proceedings against the guarantor. For more details you need to personally come with relevant documents then only I can advice you properly.

Advocate Brajesh Kumar LawRato

731 votes

The guarantor of a loan is liable to pay it if the debtor fails to clear it, the Supreme Court has ruled, while maintaining that financial institutions too cannot act like property dealers in recovering the debts.A bench of justices BS Chauhan and Dipak Misra also said the guarantor cannot insist that the creditor must first exhaust all remedies against the principal debtor before recovering the debts from the surety holders."There can be no dispute to the settled legal proposition that in view of the provisions of Section 128 of the Indian Contract Act, 1872, the liability of the guarantor / surety is co-extensive with that of the debtor."Therefore, the creditor has a right to obtain a decree against the surety and the principal debtor.
"The surety has no right to restrain execution of the decree against him until the creditor has exhausted his remedy against the principal debtor for the reason that it is the business of the surety/ guarantor to see whether the principal debtor has paid or not," said Justice Chauhan, writing the judgement for the bench.The apex court gave the ruling on an appeal by one Ganga Kishun, who had stood as a guarantor to a bank loan, raised by one Ganga Prasad, who had died without clearing it. Ganga Kishun had come to the apex court against the Uttar Pradesh government's decision to recover the loan arrears from him after the death of principal debtor Ganga Prasad. While dismissing Ganga Kishun's appeal, the apex court, however, faulted the government's decision to auction Ganga Kishun's entire stretch of land for Rs 25,000 to recover an arrears worth Rs 8,500 only and not confining the auction to only 1/3rd of the land which could have fetched the arrears.
Secured loans are those loans that are protected by an asset or collateral of some sort. The item purchased, such as a home or a car, can be used as collateral, and a lien is placed on such item. The finance company or bank will hold the deed or title until the loan has been paid in full, including interest and all applicable fees. Other items such as stocks, bonds, or personal property can be put up to secure a loan as well.
Secured loans are those loans that are protected by an asset or collateral of some sort. The item purchased, such as a home or a car, can be used as collateral, and a lien is placed on such item. The finance company or bank will hold the deed or title until the loan has been paid in full, including interest and all applicable fees. Other items such as stocks, bonds, or personal property can be put up to secure a loan as well. In the instant case since the bank has nor mortgaged the title deed of the property therefore it is not a secured loan, although, the title deed is in the possession of the bank. The bank is not selling the property because the title deed of the same has not been mortgaged with the bank.

Advocate Harish Chandra Yati LawRato