Can a financial institution recover a loan in 2014 which was disbursed in 1985
Sumit Aggarwal
(Querist) 27 September 2014
This query is : Resolved
My client took a loan of Rs 10 Lac from a Govt. Financial Institution in the Year 1985. Due to financial crises he could not repay the loan.
Now, in August 2014, the Govt. Financial Institution served a legal notice on my client demanding Rs. 6.5 Crore approx (inclusive of Principal & Interest) and; if amount is not paid within a week then Financial Institution shall issue a Personal Recovery Certificate in name of my client.
My query is:
Can the Govt. Financial Institution file a recovery suit after 29 years of disbursement of Loan Amount?
is the Suit not time barred under Limitation Act?
Can I file an injunction suit against the Financial Institution as notice is null and void due to limitation act?
Any other remedy if available then please suggest.
Thanks
Anirudh
(Expert) 27 September 2014
Dear Mr. Sumit,
I don't think it is as simple as you portray the story. It may not be that the bank granted the loan in 1985 and it is taking action in 2014. There may be many things that might have taken in between, and because of which the bank is in a position to claim limitation. Therefore, unless the full story (fact) is out, one will be hazarding a guess as a reply to your seemingly simplicitor query.
Advocate. Arunagiri
(Expert) 27 September 2014
It is an unbelievable story,
Principal (education Loan) = 10,00,000
Interest for 29 years = 6,40,00,000
Notice received for = 6,50,00,000.
Even if they charge 100% interest p.a. on the loan amount, the present claim will be Rs. 3 crore only. Do you mean to say that they have charged 222% p.a.
You may disclose the name of the Govt Institution, and other details. I will take it up as a public issue. I will issue notice (at my cost) to that institution for charging exorbitant interest.
Sumit Aggarwal
(Querist) 27 September 2014
As per Mr. Anirudh's Suggestion the Financial Institution has sent a few notice to my client during the period 1985-2014 and my client has not taken any action against any of the notice so far. But this time he is worried just because the issuance of Personal Recovery Certificate. The lender is one of the State Govt. Financial Corporation not any Bank.
As per the suggestion of Mr. Advocate.Arunagiri, Even it is unbelievable for me too that How Can a Financial Institution can make such a hefty amount of Rs6.5 crore for just a principal amount of loan Rs 10 lac only taken in 1985. But the truth is my client has received a legal notice of such a hefty amount.
The fact is my client has taken the loan of Rs 10 Lac in 1985 and admittedly it is not yet repaid. The last part payment was paid in 1990 and since then not even a single penny has repaid so far in that loan. I know the Financial institution has not disclosed the exact calculated amount in legal notice but some genuine amount is due to them.
In respect to public interest, at the time of sanction of loan in 1985, there was a proper contract executed between the lender and borrower therefore both are binding with that contract.
Presently I am looking out a legal recourse to protect my client.
It will be highly appreciable if my specific queries be replied what i raised in my main query.
Anirudh
(Expert) 27 September 2014
Dear Sumit,
If you are sure that the bank's claim is hopelessly barred by limitation, then defend your client on that basis itself.
T. Kalaiselvan, Advocate
(Expert) 28 September 2014
Verify all the details, scrutinise the papers, ascertain the on clause and then advise your client for an appropriate action.
Dr J C Vashista
(Expert) 28 September 2014
1. Your client is hiding some vital information, which you are required to dig out.
2. The Bank has a penal of competant lawyers who are well versed with the legal proposition regarding limitation.There is a huge gap of time between 1985 and 2014, if the statement may be believed for the sake of argument, which is unbelievable.
3. Issuance of legal notice do not extend limitation
4. Verify the facts of the case, documents and then decide the strategy to defend.
Rajendra K Goyal
(Expert) 28 September 2014
If we consider the rate of interest at 12% PA (It was higher in 1985 exact not given) the total payable amount for a loan of Rs. 10 lacs becomes Aprox. 3.19 crores in 29 years applying compound rate of interest. From the given figures the interest rate comes to 25% aprox. For exact position all the documents need to be referred.
As far as the limitation is concerned, whether your client has given any revival letter in last 3 years? Whether any immovable property was mortgaged ? Whether Bank was having any ex-party decree from court for recovery?
However, in the given facts Institution seems very negligent in follow up of the loan. You can take up the defense of limitation.
ajay sethi
(Expert) 28 September 2014
claim of bank appears to be barred by limitation
Advocate. Arunagiri
(Expert) 28 September 2014
There are conflicting decisions on the limitation of recovery by the banks.
malipeddi jaggarao
(Expert) 29 September 2014
As you are interested for only replies to the pointed raised by you I just venture to answer them:
1.Can the Govt. Financial Institution file a recovery suit after 29 years of disbursement of Loan Amount?
Ans: Yes, If it is not barred by limitation.
2) is the Suit not time barred under Limitation Act?
Ans: What is the nature of loan? Demand Loan requires revival letters or acknowledgements or signatures of part-payment vouchers once in 3 years. If it is term loan the starting point of limitation is different. If it is mortgage loan (if property is mortgaged, against that property) the limitation is 12 years. There should be proper link of limitation either by way of revival letters, acknowledgements or part-payments (if the payment voucher is signed by the borrower himself).
Can I file an injunction suit against the Financial Institution as notice is null and void due to limitation act?
First of all verify with the institution about the calculations and link of limitation. Some times, the Financial Institutions do take blank revival letters and use them later (which is illegal but to prove this is very difficult).
Any other remedy if available then please suggest.
Personally make a visit to the Financial Institution along with the borrower and find out the correctness of calculations and enquire about the link of limitation.
At the same time, your client has borrowed the money which should be repaid more particularly when he is having repaying capacity. Instead of fighting legally offer reasonable amount as One Time Settlement and close the matter.
T. Kalaiselvan, Advocate
(Expert) 03 October 2014
Expert Mr.Malipeddi Jagga Rao's observation and opinions/advise seems to be very meaningful and useful, you may think about adopting the steps advised.
