I have an enquiry from a borrower of a student loan for overseas education. The lender has sanctioned a loan against their apartment as security which was in the name of the student's father. The borrowers as per the loan agreement is the father, son (student) and his mother.
At the time of sanctioning the loan, the father was the sole breadwinner of the family and also the sole owner of the property mortgaged (apartment). After sanction of the loan and before the commencement of repayment, the the father died. The lender had financed for Insurance premium and had deducted from the sanctioned loan amount at the time of loan payment.
It has come to light now that the father's insurance was declined by the insurer on medical grounds. The lender instead of declining loan on medical grounds, chose to insure the student instead of his father who was the only earning member and also the owner of the mortgaged property. The son (student) has now completed his course and has not found a job yet.
The lender is harrassing the widow and the student who is now overseas and forcing him to return back to India. My question is:
- Is it not the fault of the lender who ought to have insured the real breadwinner and the property owner and if not declined the loan itself. If they have properly insured, they would have easily had a recourse and collected the loan by way of assignment.
- Though insurance may not be mandatory, it appears that there was an intention to insure since the lender deducted the insurance premium and chose to insure the wrong person. Can we contend that they should have insured the earning member and the owner and therefore they have committed a clear mistake by insuring the student who has no source of income (until now)?
