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Resending query with more description  & Seeking advise in case of guarantor for immovable property. Resending query with more description & Seeking advise in case of guarantor for immovable property.

2 years ago

Dear sir/Madam,

One of my relatives had avail loan 10 years ago from the cooperative bank for construction of commercial property for which I had signed as a guarantor. I believe that he was a constant defaulter to pay instalment but somehow he had managed bank staff & bank also for their own benefit if any, renewed his loan for higher value by mortgaging the same constructed property.

3 years back he had been declared defaulter by his bank and seized his constructed property for Bank Auction.

In the process of Bank Auction, Even after three consecutive attempts, his bank failed to sell his property to any buyer due to higher auction value.

The Bank approaches the office of the District Deputy Registrar of Co-operative Societies to get a certificate from them to transfer property in favour of the bank. DDR had sent notice to all defenders including the principal defaulter and other guarantors to pay outstanding within 30 days and also ask us to be present on a particular date to express our stand if any for the transfer of property for which I was absent due to ignorance from my end due to lack of knowledge of the situation.

In the next step, according to The Maharashtra Cooperative Societies Act 1960, under Section 100, for Transfer of property that cannot be sold, the DDR had issued a certificate to transfer this property in favour of the Bank with following instructions.

1. Instructed the bank to transfer the property in their favour but transfer value was not mentioned in the certificate
2. Instructed the bank to get more and more income by renting out /operating this property by themselves.
3. All taxes will be paid by the bank.
4. Bank will maintain a separate credit/debit & loss and profit account of property for all defaulters.
5. Bank should try to sell this property at the earliest.

The bank is under process to transfer or already transferred the property for which I don’t have any idea.

I am seeking your advise to discharged from guarantor liabilities since I think the bank has given more loans against overvalued mortgage property. Also, can we treat this transfer of property as a violation of the original agreement to get out from the guarantor’s liability? or is it just the next process of the banking system after the auction process?
Kindly advise.

Anik

Responded 2 years ago

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A.Hello,
Guarantor Discharged by Primary Debtor Release: According to Section 134 of the Indian Contract Act, the guarantor is relieved from its duties under a guarantee contract if the creditor and the primary debtor negotiate an agreement releasing the principal debtor. Yes, this transfer might be considered a breach of the original contract.
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Ayantika Mondal @ Prime Legal

Responded 2 years ago

A.Hello Sir
Contact with bank and talk out with them that you are withdrawing from the liabilities of Guarantor. It would be banks discretion. Although in any case you had to pay the money to the bank as a guarantor that you could recover from the principal debtor under rule of subrogation under the Indian Contract Act.
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Ayantika Mondal @ Prime Legal

Responded 2 years ago

A.Hi,
Guarantor Discharged by Release of Primary Debtor: Section 134 of the Indian Contract Act states that the guarantor is freed from its obligations under a contract of guarantee if the creditor and the principal debtor reach an agreement by which the principal debtor is released. Yes this transfer can be treated as a violation of the original agreement.
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