• Can bank attach a property of guarantor who acted as guarantor for a Pvt Ltd company

I have a Private Ltd Company with 3 directors , myself having 90% of the stake and acting as Managing Director, 2 years back i have took a business loan in the company name and till 4 months back i were paying the EMI correctly, due to some fraudulent activity happened against the company , the company went into huge loss and could not able to meet even its operational expenses.

While taking the loan since company or its director dont have any property, bank has requested me to give a guarantor who has some property , as per my request my father acts as guarantor for the company and signed in the loan agreement and provided with a land tax copy, no property has mortgaged.

Now bank has send a legal notice and threatening my father to repay the loan else they will attach the property under sarfaesi act , my father is not connected with the company in any ways apart from the father and son relationship.

Do the bank have the right to attach my father property as the loan has taken in the name of pvt ltd company ?

If my father sell this property to my mother or any 3rd party will they able to cancel / freeze the deal by securing a court order ?

What will happen if company file an insolvency with NCLT and they accepts the request ? still my father property will attach by the bank ?
Asked 4 years ago in Civil Law

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8 Answers

It is advise that you file an insolvency petition at the earliest before NCLT failing which the bank has right to recover the loan from your father, since he acted as gurantor.

Hos property will not be attached in any manner under SARFESI.

Regards

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

Yes under the sardesai act the principle debtor and the guarantor has same liability and the ba k at same time can initiate proceedings against both.

Yes bank can file for the possession of rhe property with the magistrate under section 14. Further can send notice for the symbolic possession.

See if bank goes in nclt and the company is declared insolvent after that also if amount is remaing then in that case company can proceed against that guarantor.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

The liability of principal debtor is coextensive with that of guarantor

2) bank can attach your father property

3) sale of property by your father can be set aside by court as it has been done to evade the creditors

Ajay Sethi
Advocate, Mumbai
87947 Answers
6207 Consultations

5.0 on 5.0

Yes. It's option of the bank and guarantor is liable to pay and guarantor's property can be attached till realization of amount and same can be put into auction for sale.

Konda Srinivas
Advocate, Hyderabad
211 Answers
2 Consultations

Not rated

1. Guarantor is also taken within the fold of definition of ‘borrower’ under Sec. 2(f) of SARFAESI Act. The liability of a guarantor is co-extensive with that of the borrower. The guarantor could be sued without the principal debtor being sued. The very object of the guarantee would be defeated if the creditor is asked to postpone his remedies against the surety until he has exhausted remedies against the principal debtor. SARFEASI Act deals with Enforcement of Security Interest only. Under SARFAESI Act only the mortgaged properties can be sold by the secured creditor and if there is any shortfall then Section 11 of Security interest (Enforcement) Rules makes provision for secured creditor to move application before DRT to proceed against other properties of borrower which are not mortgaged.

2. If your father sells the property then secured creditor will have to challenge the sale as sham.

3. Even application for insolvency will not absolve your father from his liability.

Ashish Davessar
Advocate, Jaipur
30761 Answers
971 Consultations

5.0 on 5.0

1. borrower of loan includes the guarantor

2. guarantor has provided his property as security to the lender bank against the loan granted by the bank

3. so the bank can take all measures against the borrower, which includes the guarantor, under s.13(4) of sarfaesi to realise its dues which includes conducting auction of the mortgaged property which was provided by the guarantor for the benefit of borrower

4. so the bank is right in proceeding against the secured asset i.e. your father's property, which was mortgaged to the bank against the loan

5. even if you file proceeding in NCLT, the bank can still proceed against your father's property

Yusuf Rampurawala
Advocate, Mumbai
6882 Answers
79 Consultations

5.0 on 5.0

Dear Client,

Guarantor is defined in the SARFAESI Act as ‘borrower’ for the purpose of the Act, So proceeding under the sarfaesi act is permissible in same way bank proceeds against the actual borrower but only against the secured assets.

But here is catch SARFAESI act enforces against the secured assets (mortgaged) which is not in your case. So his property can`t be attach and he is free to GIFT or sale to any of his choice before any court stay on property.

Insolvency process will constitute against both principal borrower and personal guarantor.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

The bank can go ahead with the recovery process under the provisions of SARFAESI Act to attach and take possession of the proeprty of the guarantor even though he has not mortgaged the property, but had expressed his willingness to render the property as collateral security to the loan amount.

After being issued with a notice, if the guarantor is alienating the proeprty then the subsequent purchaser cannot be able to make a claim on this for the intentional act done by the guarantor.

Insolvency with the NCLT or even a winding up petition may not stop the bank from recovering the amount by attaching the property of the guarantor under sarfaesi act.

T Kalaiselvan
Advocate, Vellore
78104 Answers
1543 Consultations

5.0 on 5.0

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