Regarding right of guarantor against prl. borrower
vijay bhaskar
(Querist) 22 March 2014
This query is : Resolved
'A' proprietor of a firm obtained loan from State Finance Corporation in the year 2008 in the name of 'FIRM' by hypothecating the goods and articles present in the firm and also deposited his title deeds by creating a charge in favour of the bank. 'B' stood as guarantor to the firm and deposited his title deeds as surety. Now the principal borrower had committed default and his whereabouts are not known. The SFC issued notice to 'B' to clear outstanding balance amount or else they will proceed against the property of 'B'. Now it is learnt that the principal borrower had also obtained loan in another bank in the year 2010 by creating charge over the property which was put as security and created charge in SFC. 'B' paid the outstanding loan amount in order to avoid action of the Bank against the property of 'B' as the bank officials are preparing to proceed against the property of 'B' instead of the property of 'A'.
After clearing the loan amount by 'B', 'B' will enter into the shoes of State Financial Corporation under right of Subrogation.
My question is that Whether the entire rights of SFC will transfer to 'B' under Law once the dues cleared by 'B' including the charge over the property of 'A' which was offered as security to SFC because 'A' had also obtained loan in another bank basing on the same title deed i.e., same property?
Please do clarify legal position, as 'B' wants to file a civil suit to recover the amounts paid to SFC from the principal borrower. Suggest in which way 'B' interests can be protected against principal borrower?
ajay sethi
(Expert) 23 March 2014
how can principal borrower obtain loan from another bank on title deeds deposited by guarantor with SFC without consent of guarantor ? Did you consent to another loan being taken by principal borrower on your title deeds?
once loan has been repaid by guarantor the gurantor is entitled to proceed legally against the principal borrower and recover amounts paid by him to SFC . he can also insist that title deeds of his property be returned to him . it is necessary to see documentation done by second bank with principal borrower in 2010
Guest
(Expert) 23 March 2014
Does not seem to be a realistic position.
If title deed of 'A' is in possession of SFC, it is not possible to take loan from another financial institution on the basis of the same title deed unless the SFC has agreed for tripartite agreement with the other lender.
Secondly, even if the loan of borrower 'A' is cleared by the guarantor, it is not understood, how the querist has come to the conclusion that being a guarantor he is deemed to have stepped in to the shoes of the lender against the borrower? The guarantor cannot automatically step in to the shoes of the lender against the borrower. Guarantor cannot exercise any right over the property of 'B'm which is already under encumberance, unless that is duly released by the lenders and that too only on obtaining specific attachment order from a court of law against the encumberance-free property after observing due legal process.
vijay bhaskar
(Querist) 23 March 2014
Thank you for your valuable suggestions.
The principal borrower obtained the loan from another bank some how without the knowledge of the guarantor. There is also no tripartite agreement between the SFC, guarantor or other financial institution. As on today the property is with SFC. Can the guarantor can seek attachment over the charge of SFC.
Guest
(Expert) 23 March 2014
Only SFC can seek for attachment over the property assigned against the loan. Guarantor cannot exercise any right on the property till that is not released by the SFC after amortization of loan dues.
T. Kalaiselvan, Advocate
(Expert) 24 March 2014
Expert Mr. Dhingra has opined and advised to a very great extent.The guarantor can file a suit for recovery of the loan amount cleared by him on behalf of the borrower from the borrower.
