• Inability to pay Company Loan

My father took a loan to run a company (in Ahmedabad, Gujarat) around 5 years back which is shut down now (On paper still running). However, the CC (Cash Credit) loan of 30 Lacs is still due with the bank. The bank has a house and an FD (worth rs. 10 Lacs) as a guarantee for the remaining 30 Lac CC loan. Since its a CC loan, the EMI (around 50,000) that we have to pay every month contains only the interest part. We have kept on paying this EMI from more than a year since the company has shut down and not a single rupee has reduced from the 30 Lacs since its a CC loan.

It's very difficult to pay the whole 30 Lacs and even the EMI every month. The other two partners of the company are not ready to sell their house and the FD respectively.

We took the balance sheet of the loan account from the bank and we see that we have paid to the bank more than the original loan amount that was taken from the bank 48L = 30L (CC) + 18L(Term Loan). The term loan has already been paid, ONLY the 30L CC loan is left. The balance sheet shows that we have paid around 62 Lacs to the bank since the company had started.

My question is, is there a provision in law to get a waiver from paying this CC loan looking at the situation above and let me summarize it again - Company is not running, Not at all in a position to pay the CC loan and even an interest EMI, have already paid amount to bank more than the loan amount taken as per the balance sheet?

Or, are there any other ways to come out of this huge financial crisis?
Asked 7 years ago in Property Law
Religion: Hindu

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3 Answers

1)the problem in your case is bank has FD of Rs 10 lakhs andf house as collateral for the loan

2) use the FD of Rs 10 lkahs to reduce Loan taken by the company

3) as far as balance amount of Rs 20 lakhs is concerned call upon the bank to seell the house to recover its dues

4) express inability to repay the loan as company has closed

5) mention that as against loan taken of Rs 48 lakhs company has paid Rs 62 lakhs till date

Ajay Sethi
Advocate, Mumbai
96748 Answers
7804 Consultations

1. The waiver can be made only by the bank in its discretion. No court of law can waive the CC loan in entirety or a part thereof.

2. Seek audience from the Manager of the bank if you wish to restructure your loan.

Ashish Davessar
Advocate, Jaipur
30763 Answers
972 Consultations

Taking a loan helps us circumvent our lack of large sums of liquid cash. And, we pay back the loan with interest, in EMIs.

Sometimes, because of circumstances beyond our control, we are unable to repay our debts in a timely manner.

The FD amount of Rs. 10 Lakhs and the house property given as collateral security may be availed to repay the loan which remains unpaid.

You can talk to the bankers and request for adjustment of the collateral security in the form of fixed deposit available with the bank and explain them the circumstances that the company is closed now, hence it may not be able to repay the loan.

The house proerty now as collateral may be auctioned to adjust the loan by the sale proceeds.

The property which was used as collateral for the loan can be repossessed and later auctioned by the lender after following due legal process.

All borrowers are provided the opportunity and have the right to approach the bank if there is any difficulty in repaying the installments and to choose an option to restructure their debt to enable a smooth repayment process.

further proceedings depend upon the customer’s approach to the issue and his current circumstances. The legal procedures will definitely not emerge out of the blue, it is a process resorted to if initial measures do not yield results.

If a borrower is unable to maintain the terms and conditions of his loan, he can request the lender to relax the same. This may lead to reduction of charges, lowering of interest rate, lengthening of the loan tenure, moratorium on interest, etc.

The borrower may be bankrupt or in no position to make further payments. He may get the option to settle the loan through a small payment. Recently, a bank offered a settlement offer to its NPAs in the education loan sector, in which up to 90% of the principal and 100% of the interest were waived off.

You may also put some efforts to negotiate with the bank based on your circumstances.

T Kalaiselvan
Advocate, Vellore
86950 Answers
2334 Consultations

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