My Father was a Guarantor and Mortgager to a Business Loan in 2007. My father was not the actual Borrower. By 2012 the Loan was declared as a NPA and Bank decided to handover the loan and recovery to a Asset Reconstruction company (ARC). In 2017, a third person enters and decides to Settle the Loan as part of One time Settlement (OTS) with ARC. In June 2018 He paid part payment of the OTS amount and in return ARC released our Mortgaged property's original title deed and issued a letter that the title deed is being released against what was agreed in the OTS and against a certain amount. In Apr 2019, my father passed away and we thought the matter is closed. However, recently We got to know that the third has not respected the OTS and some part is still remaining and now we have been asked to appear in front of a recovery officer at Debt recovery tribunal. So my question is - to what extend I am liable (remember I am not part of the loan and was still a student in 2007) and can DRT attach the released house again?
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1) you are liable to extent of your inheritance
2) The legal heirs are liable to assume the promise executed by the deceased under the guarantee, but they are not liable for future liabilities of the principal debtor after his death unless such liability on legal heirs is expressly mentioned in the guarantee contract
Hi, When your property was released Now the DRT can't attach the property which was released. Suppose, if you received a summons from the DRT then only you will appear before the Court. Otherwise Don't appear before the DRT. Nothing will happen.
Dear client,
The legal heirs can only be liable only till the extent the promise was made by the deceased as per the guarantee contract. Secondly, DRT can not attach the released house again.
Thank you
You say that following a OTS, one property was released and as the OTS commitment was not fulfilled, now there is an attachment of the same property by the DRT. Yes, the attachment is valid in law. As your father was a guarantor, after his death his liability extends to his legal heirs also. It does not matter that you were a student at the time your father had extended his personal guarantee.
No, they have not attached - What I am asking is this Can Recovery officer in DRT has the power to attach a property that we had got released as part of OTS. Althought OTS was not fully completed?
Yes, the Recovery Officer has the power to attach any property belonging to the certificate-debtor in execution of the Recovery Certificate passed against the debtor by the DRT. You may, however, appeal to the DRAT against the Recovery Officer's action and pray for a stay.
RO can attach property that was released as part of OTS as full payment was not received as per OTS
As OTS was not honored it has lapsed. However you will get credit for whatever money that was paid under the OTS by the third party to the ARC
So the lender can take steps to recover the balance outstanding
The recovery officer can pass an order for attachment of your property to satisfy the outstanding claim
It does not matter whether you are the actual borrower or not as the liability of the guarantor is co extensive with the borrower
The lender can follow the legal heirs of the deceased guarantor to recover the outstanding
1. If the mortgaged property has been released and the original title deed has been returned to you in writing then there is no further charge on the said property.
2. DRT can not ordinarily attach the property which has already been released by the Bank unless O.A. has been filed by the Bank.
1. Your father is the guarantor to the loan for which he has entered in to the shoes of the Borrower.
2. If the Bank has filed an Original Application (O.A.) and has got the Order from the P.O., the Recovery Officer can attach the property of the Guarantor which includes the released property.
1. Your father is the guarantor to the loan for which he has entered in to the shoes of the Borrower.
2. If the Bank has filed an Original Application (O.A.) and has got the Order from the P.O., the Recovery Officer can attach the property of the Guarantor which includes the released property.
1. Your father is the guarantor to the loan for which he has entered in to the shoes of the Borrower.
2. If the Bank has filed an Original Application (O.A.) and has got the Order from the P.O., the Recovery Officer can attach the property of the Guarantor which includes the released property.
1. Your father is the guarantor to the loan for which he has entered in to the shoes of the Borrower.
2. If the Bank has filed an Original Application (O.A.) and has got the Order from the P.O., the Recovery Officer can attach the property of the Guarantor which includes the released property.
If the home loan agaisnt the property has not been fully discharged then the lender can start the process of attaching the property, by taking possession and proceed with the auction sale of the property and can adjust the outstanding loan amount from the sale proceeds and if there is any balance amount after such adjustment, that will be disbursed to the legal heirs of the deceased borrower.
If the sale proceeds amount is not sufficient to adjust the outstanding loan amount then the bank may look for any other property lying in the name of the borrower or the surety for recovery.
If the loan is still outstanding and you people do not honor the demand made by the bank to repay the balance amount then the bank has rights to attach the house property to adjust the outstanding loan amount out of the auction sale proceeds by auctioning the house property now attached..
Dear Sir,
You have file interim application and get an order restraining recovery officer again issuing notices to you legal heirs and making efforts to attach your property. The matter was already settled and your father’s guarantee-ship was already discharged.
- As per law, in case of a default, the loan guarantor will become liable for timely repayment of the outstanding loan amount along with the penal rates and charges incurred due to non-payment of the loan.
- Since, your father was guarantor by way of mortgaged property documents , then on the disbursal of the loan amount the bank was under obligation to return the documents of your father.
- Further , with the return of documents of the property , the name of your father should be delete from the guarantor agreement .
- Hence, the bank or RT officer cannot take any legal action against the legal heirs of your father for the payment of remaining amount .
Thank you for your responses - It seems the answer is not clear as half of the responding Lawyers have stated that DRT can attach the already released property and the other half saying they cannot. So that's not very helpful. Let us say, My father was alive and DRT went ahead with the auction process and my father took part in the auction process and bought the house once again to his name? Would that have been possible? Also, Does approbation and reprobation apply to my situation at the moment? ARC released the property against an amount which they seem fit.
Yes father could have purchased property in auction
recovery officer will ask you to file affidavit of your assets
He can pass orders not to sell the property
- As per Supreme Court, if a property owner fails to pay his dues to the bank, then the bank has the legal right to sell off his immovable property to recover losses.
- Further, if the defaulter wants to purchase that property after paying the entire dues of the bank , then the auction will stand cancelled, and he would be able to claim to the property again.
- Hence, your father can approach the bank to purchase the auction property with the defaulter , and on refusal he can move an application before the auction ordering court i.e. DRT, for cancelling the auction and transferring the same to him.
The release of the property earlier by the ARC was conditional and not absolute. As the OTS commitment was not honoured in full, the attachment of the property by the Recovery Officer is in order. You could very well participate in the auction and buy back the property now or appeal to the DRAT against the attachment.
Without giving the proper details you are asking questions based on your own imagination about the law.
Hence any proper opinion can be rendered only after ascertaining the current status of the case before DRT and the status of the proeprty.
For this one should produce the relevant case papers before an advocate and get an opinion in person.
In public forums like these, you will get opinions based on the information you have provided.
Dear Client,
Yes, it would be possible for your father to purchase property in auction. Also, it is possible for approbation and reprobation if you have failed to repay and buy back the same property.
Thank you
Of course you will not get a unanimous reply
Different lawyers will have different views
That is how law works
Otherwise there would never be 2 disputing parties before a Court whose issue is to be resolved
Coming to your follow up query-
A borrower or guarantor who has defaulted in repayment can participate in the auction in which his property is being sold. There is no restriction against the same.
But then if you think logically if the bank allows the defaulter borrower to participate in the auction then its running a risk that the auction sale will most probably not be completed since if the borrower could not pay the loan of the bank, how would he pay the sale price of the property? So bank would permit the borrower to bid for the auction knowing fully well that ultimately it's an act by the borrower to delay or avoid the sale of his property
On a second thought the OTS was altogether a new contract. If the full amount was not paid under the OTS then the bank cannot again approach DRT but it has to file a money recovery suit against the borrower and guarantor. It would be a commercial summary suit.
The loan transaction between the bank and your father as guarantor and the borrower came to an end when the OTS was floated by the bank and acted upon. If there is any money still left to be paid under the OTS then bank cannot invoke Sarfaesi act again and go to DRT
This defense you can take in the hearing before the Recovery officer
Also I think there are certain properties which are exempted from attachment under s. 60 of civil procedure code. Let me check that and get back.
Only if a case is made out for the same otherwise they can't
