Hi, my cousin sister had signed a loan as the second guarantor for a relative for a mortgage loan. The said relative has defaulted the loan and an ARC company has initiated the auction of the property under SARFAESI act. Since the loan was under default for years (The earlier Coop bank didn't take this recourse for years), the outstanding loan amount is much higher than the original valuation of the mortgaged property. My questions are 1. What is the exposure to my cousin sister due to all this? 2. If the current market valuation of the property is much lower than the loan outstanding, what would ARC company do post auctioning (Current valuation is 40% of the outstanding amount)? 3. What would be the way to collect No-due-certificate or loan closure certificate from ARC post auctioning? 4. What would be the liability on the Gurantors once the auctioning/possession of the property is done by the ARC comapny (If the valuation/market rate is lower than the loan outstanding amount?) 5. How the reserve price is set if the market price is much lower than the loan outstanding amount?
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The liability of principal debtor is co extensive which that of guarantor
2) your cousin sister is equally liable for repayment of loan
3) ARC would sue to recover balance amount of loan in case sale proceeds are lower than amount sought to be recovered
4) only on repayment of loan amount would no due certificate be issued by bank
5) reserve price is set based on valuation report set by govt approved values
1. In the SARFESI proceeding only the secured asset is put into auction and the property of guarantor will remain unaffected.
2. The creditor later on can file civil suit for recovery of balance money and seek attachment of other property of the borrower or the guarantor.
3. Unless and until the total money is recovered as per stipulation of the bank no such certificate is issued. This has nothing to do with the actual amount standing due as long as the creditor is ready to settle on lesser amount.
4. Unless No due certificate is issued the liability of guarantor remains.
5. It is the benchmark followed by the creditor while putting the property for auction a,d the same varies with every secured creditor.
1. If the principle fail to pay the loan the bank can proceed against the guarantors. Bank can proceed to attach the property of sister.
2. See if recovery is not complete then they will proceed against the guarantors.
3. The certificate shall be given only after complete due is received and loan is closed.
4. The company shall proceed against the guarantors.
5. The bank shall set reserve price as per loan and valuation of the property.
1. Your cousin' property may also be attached by the company for auction sale to appropriate the outstanding due amount besides other properties mortgaged for making good the balance.
2. They may look for the properties of guarantor.
3. If the loan amount has not been fully recovered then they may not give no due certificate or loan closure certificate.
4. The liability is their property as they stood as guarantor.
When loan got defaulted ? May be barred by limitation.
Even guarantor is equally liable for loan repayment and bank can proceed directly agasint the guarantor.
Than ARC will file recovery suit agasint the defaulter and can also proceed agasint the guarantor.
No dues will issue only when outstanding clears.
Valuation report prepared by registered valuer that is only reserve price.
Guarantor is liable to pay the loan if principal debtor defaults the same. Even after auction if the estimated loan with interest is not recovered rhe guarantor will be liable for differential amount.
1. she is equally liable with the principal borrower. The ARC can either proceed against the principal borrower or the guarantors
2. they can have recourse to other properties and assets of the principal borrower and guarantors to recover all their moneys
3. if the total outstanding amount is not realised on sale of mortgaged property then there is no question of the ARC Issuing any no dues or loan closure certificate
4. guarantors liability is at the same footing as that of the principal borrower [see section 13 of SARFAESI]
5. reserve price will be set on basis of asking or sell rate or ready reckoner rate. It has got nothing to do with the loan amount
Dear Client
