If the bank declares a loan account as NPA and enforces possession/sale of the borrower/guaranter's assets via the SARFAESI Act, is there any priority which bank can follow if there are multiple guarantees? Example - Borrower A takes a loan of 5 CR from a bank. Guaranter B, C and D provide surity against that loan. When, the loan gets declared as NPA, will the bank follow any guidelines for repossession of assets of A, B , C and D?
Asked 3 years ago in Civil Law from Bangalore, Karnataka
1) Liability of principal debtor is co extensive with that of guarantor
2) bank can proceed against principal debtor and guarantor simultaneously to recover its dues
3) it would depend upon value of collateral security in bank possession and bank would seek to sell the same for recovery of its dues
1. The liability of a guarantor is co-extensive with that of the borrower. The guarantor can be proceeded against only when there is default by the borrower.
2. The bank is not required to follow any order of precedence when proceeding against multiple guarantors. It goes without saying that the borrower or the guarantor, as the case may be, can seek a stay order against taking of possession of their assets.
1. Not necessarily. There is no such provision in SARFAESI Act,2002 which stipulates that properties detailed chronologically shall have to be taken possession of and/or sold,
2. It is up to the Bank's discretion as to which mortgaged property it will sell/posses first.
Hi, Bank has to taken the possession of the property which is mortgaged and not the property of the Gurantor.
2. First Bank has issued a notice under section 13(2) of the Act and wait for 60 days and thereafter issue a notice under section 13(4) of the act and wait for another 60 days and thereafter it will take the possession of the property.