Srikanth (Director) 06 November 2012

Can a guarantor close the cc account without the borrower

I am running a pvt limited company , with one more director for which we are having an cc limit of 80 Lakhs in Punjab national bank, in the year 2006. myself and my father has given two properties worth 105 lacs and 65 lacs as collateral security and guarantors. my father had a rift with me after 5 years and sent a lawyer notice to the bank in June 2011 informing them he is withdrawing the guarantee, on this basis the bank has frozen my acct. subsequently the same bank as sanctioned two loans with 43 Lakhs ( the main frozen account) and additional 90 Lakhs separately with the undertaking that I have to serve the interest for the 43 Lakhs and no debits are allowed. I have requested the bank along with the sanction letter to freeze the credits and the credit should be only from our company cheque with our request. The bank agreed for the same and given in written. now the guarantor is requesting the bank that he will settle the 43 Lakhs and release the documents. the problems here is the document which my father has given as collateral (land belongs to him and the building has been constructed by our company thru cheques and the same has been in the books of accounts and income tax from 2001 onwards). we have requested the bank not to part the documents since the building is ours . can a guarantor close the loan without borrower , the bank has never recalled the loan, nor we have a defaulters.. how to prevent this?. Need an expert comments and early advice on this

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6 Replies

narendra.s.p (Chief Manager(Law)) 07 November 2012

Please obtain a copy of the Guarantee agreement signed by you and your father. Check if it is irrevocable. If not ,you can revoke the guarantee by sending a registered notice:

You wiill be liable for the dues of the borrower Ias on the date of service of notice. If the bank continues to permit operations in teh loan account after receivingyour notice, then you can take advantage of the operations/remittences in the account by aplying clytons rule.

Srikanth (Director) 07 November 2012

sir, I am the director who is going to suffer by my fathers action. i dont want to freeze my account , it should continue and at the same time, the collateral document of my father should not go out of the bank for the reason , the building worth 60 lakhs has been built by our pvt ltd company .

Surendra Gupta (Banker) 10 November 2012

The Guarantor wiill be liable for the dues of the borrower as on the date of service of notice to PNB. If the bank continues to permit operations in the loan account after receiving notice, then Guarantor's liability to the bank will reduce with each credit entry in the account and any fresh debits if allowed by PNB shall not be binding on the Guarantor. Since the land is registered in the name of the guarantor (your father) and he has mortgaged the same with the bank, the guarantor has the option to clear all the dues of the borrower, get all the limits cancleed and take back the title deeds from the bank. The Other Director cannot prevent this.

The only option available with the Borrower is to negotiate with the bank (PNB or any bank) for sanction of fresh credit facilities.

I am a retired Banker from PNB and have been dealing with such matters. You can consult me if you so desire.

Surendra Gupta (Banker) 10 November 2012

The only option available with the Borrower is to negotiate with the bank (PNB or any bank) for sanction of fresh credit facilities.

I am a retired Banker from PNB and have been dealing with such matters. You can consult me if you so desire.

Srikanth (Director) 10 November 2012

Dear Guptaji, My friend is the other director, whereas My father is not the director of the company, only he is a guarantor. the property which he is given as collateral security, the land belongs to him, the building is put up by our company. Please share your email id and contact, so that i can call u

Surendra Gupta (Banker) 14 November 2012

A guarantor (whether he is Director of the company or not) is a Co-Oblicant and his liability is joint and several. The bank has choice to proceed against all/any co-oblicant. Since the land belongs to your father (who is a Guarantor) and has mortgaged the land to the bank, the property constructed at any time automatically stands mortgaged to the bank. Please advise whether your company has entered into any agreement with your father (Guarantor).

You can contact me at skg_fbd@yahoo.com. I can share my mobile No. with you via email.