I have recently observed that a well known Public Limited company "which is currently under Liquidation" took a bank loan in one of its Group companies/Guarantor worth Rs 33 crores. The Loan Account became NPA and the bank issued a DEMAND NOTICE on 03/12/2010. One of the directors with 50% shareholding in the Guarantor company which owned the mortgaged asset resigned in March, 2011. The Bank took possession of the property in May, 2011. Now in 2015, when the bank put up the property for auction as per SARFAESI Act, the director who resigned from the Guarantor Company formed a Partnership Firm along with four other partners. This Firm won the auction for only 11.5 crores when the dues of the bank were more than 30 crores and the market value of the property was also 30 crores and Bank transferred the property to this new firm. SO basically the loan defaulter/Guarantor bought his own mortgaged asset in another firm through auction at a much lesser price. IS IT LEGAL? CAN THE AUCTION BE QUASHED? WHAT CAN ONE DO ABOUT IT?
Hello,
Former owner’s cash is as good as anyone’s cash and as such there is no provision in law which prohibits the same but if you challenge the same the theory of lifting the corporate veil will be applied to see that whether there was some malafide behind this or not but since you are saying that other partners are different in the partnership firm I do not thin that the said challenge (if any) will sustain.
Regards
what was the reserve price fixed in auction ?
2) sale could not have been done below the reserve price
3)the guarantor is not debarred from bidding in auction
The reserve price of the auction was Rs 11 crores. This company and its directors have been declared as 'willful defaulters' So by this logic if Person X who has to pay 100 rupees to the bank, he can resign from the company, form another fresh firm with his friends and buys it from the bank at a much lesser price. Don't you think lot of people who default on loans but have the capacity to pay can take this road?
Property was not sold at rate lower than reserve price
2) in an auction bidders can submit their quote for purchase of property. Highest bidder would be successful
3) in the present case bank has sold the property to highest bidder
4) bank would sue the company and guarantors to recover the balance 19 crores
5) the directors guarantors are not absolved of their liability to pay the balance amount
In this case, can the bank recover the balance 19 crores from the personal assets(which were not mortgaged) of the director Guarantor as per RDDB & FI Act? Can his personal assets be attached/freezed as per law? The bank has not taken any action against this Director Guarantor as yet. This Director Guarantor after acquiring the property again from auction(several plots) is trying to illegally acquire my sister's plots in the same colony in Uttar Pradesh.
The liability of principal debtor is co extensive withat of guarantors
2) bank will obtain recovery certificate against principal debtor and guarantors
3) in proceedings before Recovery officer guarantor will have to disclose on affidavit properties owned by them
4) the said assets can be attached and sold to recover the bank dues
SO basically the loan defaulter/Guarantor bought his own mortgaged asset in another firm through auction at a much lesser price. IS IT LEGAL? CAN THE AUCTION BE QUASHED? WHAT CAN ONE DO ABOUT IT?
There is no illegality in it.
The bank which is a lender, if is ready to suffer the loss then what is the problem.
The guarantor may have been owning that company earlier but once the bank took possession of the same it is deemed that the property has been transferred unto the bank.
Therefore the guarantor through another company bought this property back, hence there is no illegality in it.
The bank may in collusion with the parties might have settled the matter and it is legally valid settlement, hence an outsider has no authority to question the bank's business transaction on such matters.
In good faith, if you want to expose such high corruptions, you may make a representation to the competent authorities, you may aproach them with substantial evidences on the fraud that took place and request them to initiate appropriate action against the erring staff and the buyer who bought this property on subsequent sale deed.
So by this logic if Person X who has to pay 100 rupees to the bank, he can resign from the company, form another fresh firm with his friends and buys it from the bank at a much lesser price. Don't you think lot of people who default on loans but have the capacity to pay can take this road?
Until and unless a fraud or scam unearthed and exposed to the world, such things would keep happening all over in the corrupted world.
If you are concerned about this issue and in the public interest you may submit an application to the authorities competent enough to investigate the alleged scam and initiate appropriate legal action.
In this case, can the bank recover the balance 19 crores from the personal assets(which were not mortgaged) of the director Guarantor as per RDDB & FI Act? Can his personal assets be attached/freezed as per law? The bank has not taken any action against this Director Guarantor as yet.
It is for the bank authority to decide about recovering the balance amount that is due to the bank by defaulters.
They will be looking for some source to recover the Money due to them.