In 2018, watch woman of our building asked my mother, who is a govt employee for a salary certificate, so that they can take loan of 1 lakh from SriRam Chits, my mother who was not willing at first, then agreed to be a guarantor to them, they told my mother that it is not surity sign, its just formality and we will pay up them every month. my mother was convinced that they would pay up and signed it. they payed sriRam for first 6 months out of 24 months, and then stopped paying. SriRam group is after my mother and she is paying them for the past 6 months. is there anyway to get out of this. she felt cheated. as she signed the document, theres nothing to be done now?
1. Well, legally there is no way your mother cna escape from liability of repaying the remaining money.
2. The guarantor is bound to repay the loan once the borrower defaults in making the payment. The guarantor can not force the creditor why they are running after guarantor and sparing the borrower.
3. However once the guarantor- your mother makes the payment she can intiate legal proceeding againt the borrower to get back ger money.
Liability of principal debtor is co extensive with that of guarantor
2) if principal debtor fails to pay chit fund would recover mo key form you
3) your money can sue the principal debtor to recover money paid by her in loan repayment
The Sri Ram group can recover their money from debtor and not from guarantor. so kindly check the loan paper what is your mother's role as guarantor or surety holder.
Being a guarantor she will be liable if not paid by original applicant. If she is only a witness then she is not liable. Need to check the actual documents for proper advice
Guarantor is equally liable to pay amount.
But stop paying. Sriram group have to file recovery suit which will file agaisnt the borrower and not your mother.
Please find out the details of the property of original borrower and file a suit against both to get discharged your mother from payments of remaining debt/EMI .
- As per the Supreme Court in the matter of Ganga Kishun of Uttar Pradesh, if a debtor defaults, it is the guarantor’s responsibility to repay the entire loan.
- Since, your mother signed as a guarantor , then due to non payment of the watch woman , she is liable to repay the loan amount to the Sri Ram Chits.
- However, if your mother is having knowledge of whereabouts of that watch woman , then she can lodge a complaint against her before the police for cheating in the name of guarantor.
- Further, your mother should also give a complaint before the Chits , after stating the main facts , and thereby request them to clear the loan amount in lump-sum amount .
- Further , you mother can also file a case against that woman for the recovery of paid amount as well.
No, there is no way to avoid this payment.
Try filing a complaint against the watchwoman
Your mother has to pay the loan amount since she stood as guarantor and can recover the same from the borrower separately by filing a money recovery case against her as per provisions of law.
In the above case, your servant is principal borrower and your mother is guarantor.
The liability is joint and several, if the principal borrower fails to re-pay, SriRam can go against guarantor, that is what is being done by your mother.
Only option your mother has is, pay up the amount / if possible go for OTS and close the issue by taking NO DUE CERTIFICATE / Full Satisfaction Letter from SriRam, thereafter, she can sue your servant for recovery of money paid by her to SriRam as guarantor against her default in repayment of amount borrowed (servant)
1. See mother signed as guarantor to loan in case the principal fails she has to fail loan there is no way out for same.
2. Your mother may initiate a civil suit proceeding to recover amount from her.
1. You can file a Police FIR, requesting investigation and charge-sheet, for offences like Cheating, Intimidation, Fraud, Breach of Trust, Mischief etc.... against both the persons, supported with all relevant supporting Documents, Evidences & Witnesses.
2. IF the Police does not take action, THEN you can file private criminal case u/s 156(3) Cr.P.C., in the local Magistrates court, seeking directions to the Police to investigate and file charge sheet. The said Person may come down for settlement.
From examining all the facts of your query I want to say that-
I can understand your mother’s problem in this regard. These cases are very common in various Courts of India and Supreme Court of India. I have dealt with such cases in Supreme Court. Large unpaid debts and continuing defaults by borrowers require the banks and financial institutions to initiate proceedings for recovery of dues against the principal borrowers as well as the guarantors under various legislations and forums, including the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for enforcement of security against the guarantors and under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 before the Debt Recovery Tribunals for recovery of debt against the guarantors. The Insolvency and Bankruptcy Code, which came into force on December 1, 2016, as a consolidated legislation to deal with insolvent and bankrupt persons, both natural and artificial, is also assisting the financial institutions to initiate corporate debt resolution process against guarantors.
There are already many cases against M/S. Shriram Chits Ltd. in Supreme Court of India, Madras High Court, Andhra High Court, Karnataka High Court.
To my mind the concept of guarantee is governed by the Indian Contract Act, 1882 ("ICA"), where under the contract of guarantee puts an obligation on a surety to honour the promise of principal debtor by paying the principal debtor's present or future debt, provided to him by a creditor in case of default by the principal debtor. The liability of a guarantor is co-extensive with the liability of the principal debtor and can be invoked without exhausting the remedies against the principal debtor, unless otherwise provided in the contract (of guarantee), i.e. certain exceptions could be created at the time of execution of the contract of guarantee vis-a-vis the obligations of the guarantor. However, limited rights have been provided to the guarantor that may assist him in discharging him from his liabilities in his capacity as a guarantor/surety.
Even the RBI's circular dated September 9, 2014 issued with reference to the Master Circular on Wilful Defaulters DBOD.No.CID.BC.3/20.16.003/2014-15 dated July 1, 2014, clarified that when a payment default is made by the principal debtor, the bank is entitled to proceed against the guarantor/surety even without exhausting the remedies against the principal debtor. In case the said guarantor refuses to comply with the demand made by the creditor/bank, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a 'wilful defaulter'.
Two options are available for your mother.
In the matter of Krishan Kumar vs. Syndicate bank & Ors. it was argued that the guarantor did not give any guarantee and had not signed any document undertaking to pay any money to the bank in the event of defendant no. 1 (principal borrower) failed to repay the same and the guarantor contended forgery by the bank manager. Court held that the finding of the trial court in holding the guarantor liable as much as the principal borrower was erroneous in light of the fact that the plaintiff bank had miserably failed to prove the authenticity of the guarantee forming the subject matter of the case.
Detailed discussion is required in such cases with complete facts.
You may contact my secretary to connect with me for clarification.
I hope you and your family are safe and healthy. Stay home and be safe during Covid-19.
Gopal Verma,
Advocate on Record & Amicus Curiae,
Supreme Court of India
1. The liability of a guarantor is co-extensive with that of the borrower. Your mother is liable to repay the loan if the borrower is unable to do it.
2. The lender can file a suit for recovery of money to recover the principal amount with interest and litigation cost from your mother. This apart, a FIR for cheating may also be filed against her.
3. At the most, she may approach the lender to restructure the repayment plan.
Dear Sir,
The best action would to be get those women (borrowers) caught by the creditors and ask them to deal directly.
File police complaint against Watchman u/s 406 420 of ipc.
as a guarantor your mother is liable to pay.
1. Your mother should file a case of fraud against watch woman and her family for making her guarantor by misrepresentation of facts.
2. Your mother should also send a legal notice to her for recovery of money paid to finance company.
The guarantors are liable to pay the bank if the person taking the loan fails to repay. You can file a recovery suit against them and a criminal complaint.
