Legal Question in Credit and Debt Law in India

Respected Sir/Madam,

My mother applied for a loan for Rs. 10,000 in 2002 at a nearby cooperative bank. At the same time there was another person availing loan. Since both parties did not have anybody who could give surety, the bank suggested each of us to give surety for the other's loans. My mother gave surety for the other person and he gave surety for my mother. Yes, this is the biggest mistake we did but it was a desperate time and we were in dire need of money.

My mother repaid the loan on time. However after a couple of years, the person to whom we gave surety died and his family turned down all requests for taking over responsibility - they totally distanced from anything to do with this loan.

The bank, after a gap of 10 years are now chasing us for loan recovery which has come up to Rs. 80,000. After a lot of back and forth between the bank, they have reduced the recovery amount to Rs. 40,000. But, we need a bit of legal advise on the following questions before we go ahead with payment.

1. Is there any general rule on what happens to a loan once the loan holder dies, or does is depend on the clauses mentioned while availing loan?

2. What is the bank's responsibility on recovering loan from primary loan holder. We are informed that the person has not paid even a single EMI. Is the bank allowed to approach us after 10 years gap for paying the money?

3. Is there any other advise which you would like to give on this situation.


Asked on 3/12/13, 7:00 am

2 Answers from Attorneys
Fca Prashant Chavan Expert Edge LLP

12.03.2013

Dear Sir / Madam,

(Anjanapura, Bengaluru, Karnataka)

1. The borrower and his legal heirs in the event of his death are the primary persons through whom the bank is supposed to recover the loan.

2. The loan is barred by the limitation clause of three years. Your mother can take recourse under the fact that the loan recovery is already time barred and she can refuse payment of the amount.

Regards,

FCA Prashant Chavan

Mumbai

(You can also mail me for any further on-line advice at [email protected])

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Answered on 3/12/13, 7:08 am
Jayesh Desai Jayesh Desai

When did the other person die? When did he pay the last installment? If he has not paid any installments in last three years - from the date the recovery was initiated by the Bank; then the claim would be barred by law of limitation and bank would not be legally entitled to recover it.

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Answered on 3/13/13, 2:16 am


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