Legal Question in Banking Law in India

20.01.2013

Dear Sir / Madam,

The Co-operative Society (patsanstha) is not entitled to abruptly invoke action on the guarantors unless and until there is a shortfall in recovery of the total outstanding loan amount, after sale of the all the asset(s) mortgaged / pledged by the borrower with the bank, at the time of acquiring the loan. Primarily, it is solely the borrower responsibility to settle the entire loan. Since Guarantors only lend surety, their liability is secondary. In a nutshell, the borrower has to be declared "insolvent" for the bank to initiate recovery action on the guarantor(s). Recovery of the net shortfall thereafter from the guarantors is pari pasu i.e all the guarantors make good the net shortfall to the bank in equal proportion, unless specifically agreed to otherwise.

Regards,

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A guarantor whether 1st or 2nd or 3rd can be proceeded against for recovery. Unless the borrower gets stay of the entire award in the appeal filed by him the guarantor can be proceeded against.

i agree with Adv Radhakrishnan