Can bank ask guarantor to repay loan if borrower is missing


sir my father has given guarantee for a loan with a another guarantor, bank has kept a sale deed (registry) of plot which is in the name of borrower. sale deed is in possession with bank, but it is not mortgage with the bank.borrower has taken loan which is sponsored by govt. i.e a loan where subsidy is given by government. bank is saying that they have issued recovery challan and the document has been submitted to tehsil. advocate told that you have to approach high court in this case. borrower has ancestral property in his name. borrower is now untraceable. bank is asking to guarantor to pay the outstanding amounts..bank has liquidated the fixed deposit of borrower. Is this a secured loan or unsecured loan? what are the steps tehsil officials could take?can't we approach the district judge for stay or civil suit. ? why bank is refusing to sale the property.?


Answers (3)

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.


Googling your legal issue online?

The internet is not a lawyer and neither are you.
Talk to a real lawyer about your legal issue.

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.

Popular Recovery Lawyers

Advocate Rajesh Rai
Sector-19, Dwarka, Delhi
19 years Experience
Advocate Sunil Kumar Bakshi
Sector-16, Faridabad
32 years Experience
Advocate Saifuddin Saifee
Maharani Road, Indore
18 years Experience
Advocate J. P. Rinwa
Swej Farm, Sodala, Jaipur
18 years Experience

*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.

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 Recovery Lawyers at LawRato.com to address the specific facts and details. You may post your specific query based on your facts and details to get a response from one of the Lawyers at LawRato.com or contact a Lawyer of your choice to address your query in detail.


Related Articles


"LawRato.com has handpicked some of the best Legal Experts in the country to help you get practical Legal Advice & help."

Similar questions

What can I do if someone has withheld my payment and is not releasing the amount? I am an interior designer and I undertook an assignment for fin…

Read More

I frequently get phone calls from axis bank for credit card that i took six years back. sometime they come to my residence as well. I have paid all th…

Read More

I have a construction company registered in UP, and we have done construction job for one company in Meghalaya. After getting the complete work done t…

Read More

NBFC Recovery goons called my friends and my wife's office regarding my unpaid EMIs of personal loan. They abused my wife's colleagues. Police…

Read More