I agree with Mr.Bharat Chugh. Nationalised banks, especially the four South Canara District origin four banks, have been continually revising their guarantee bond drafts, in the light of court judgements and have been adding clauses providing for waiver by guarantor several conditions relating to suretyship. So, unless the fine print is seen, the scope for taking advantage or even taking a proper defence in case of a suit being filed against you, can not be advised adequately in this limited forum.
One thing that strikes me is that you have stated that the loan was contracted in 2003 under "TMRY" scheme and that you had received a notice in 2004. Please check up whether all these over seven years no notice was ever received or whether any registered post addressed to you have been returned. Normally, no bank remains idle for so long and with proliferation of computer based activity from 2002 onwards, automatic generation of notices have been programmed and invariably all parties including surety are addressed.
Also, the TMRY is undecipherable. There was one PMRY scxheme, or Prime Minister's Rozgar Yojana under which educated unemployed were given loans. There were several conditions in the scheme, as to quantum of loan, margin to be broght in by the borrower and security norms, including surety requirements. It may be possible in your case some norms might have been violated due to over-enthusiasm of lower level officials. Bankers were generally vary of granting loans under the scheme as it was considered a political bounty with least chances of recovery, which was also true largely. If any such violation was there, it can be taken up in defence in a suit.
I do not advise negotiations since the experience in that sphere suggests that it works out normally against the borrower/surety. In nationalised banks, branch level officers do not have any power to take decisions regarding even waiver of 1 re. interest. But they would not betray this by stating explicitly. The only suggestion you would receive is to submit a 'proposal' which would be recommended to higher authorities. This 'proposal' would be in writing by you, which would commit you on all issues forever. Even if there is a favourable response eventually, which is very rare, it would be falling far short of your original expectation but you can not now resile. Also, in most of the cases, only oral information would be provided about the conditions of 'one time settlement' and nothing in writing. This may prove disastrous in defending the suit, if one is launched later on by the bank.
Also, there is law of limitation. You have not stated whether you have signed any acknowledgement of debt subsequent to the notice in 2004 or corresponded with the bank, on the issue of loan repayment either by you or about persuading the borrower. These would constitute 'evidence'.
At this stage, if, you feel that you are to shell down money unjustly for the intentional default of the borrower, it is better to face the suit, if and when the same is filed by the bank. It is easier to defend than to succumb to pressure, even though most people do not like to even harbour an idea of going to a court.
