C S Padmanabhan (Dy General Manager) 12 December 2013

Liabilities of failed business

Dear Sir,

I am 70 yrs old working as Consultant in Odisha. My son was running a Pharmacy in Chennai for the last one year which was taken over from my family business with liability of over Rs.30 Lakh. The new business is under his proprietorship. Due to business pressure he had borrowed heavily from private sources and also run up unpaid bill to over Rs.32Lakh. The owner of the Nursing Home has asked to vacate premises though he has five year lease agreement.

To help him a bit I had cleared his private loans to the tune of Rs.40 Lakh from my life savings. Still the business loans are pending (Rs.32 L) and private unsecured loan of Rs.20L and some jewel loans.

I have a vacant land worth Rs.60L which I wanted to gift him later.

My son has married four years back and has a 3 yr old daughter. Most of the problems of borrowing was done under pressure from his wife who felt father-in-law was rich enough to take care of the problem.

Please advise what my son should do and I should help him.

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2 Replies

BAALASUBRAMANNYAMM (Advocate) 12 December 2013

Kindly think about the following:

(1) Now, either yourself or his(your son) father-in-law, has to support to your son from get-out from the present financial problems. (2) If any immovable properties stands in the name of your son, alienate or mortgage them and clear off the dues. (3) If not in a position to go for 1 and 2 option, better to file I.P.( Insolvency Petition).

sanjay kumar (BE/ LLM in Corporate Laws) 19 December 2013

This is a tricky situation. Even if you clear all the loans of your son, what is the guarantee that he will not become indebted again in future particularly when you think that his wife and not he is behind the whole mess. If your son declares insolvency to the tune of Rs.70.00 Lakhs, he will have tough time in restarting his life again because he will have lost all his credibility.Selling your assets to pay the loan is also not advisable because you will lose all your savings. In my opinion, you have to deal as follows :(1) Talk straight with your son and his wife that you are unhappy with the things and are not in the position to clear the dues.(2) Have a clear idea of his income. If his income is sufficient to pay the principal + interest then you can take a loan by mortagaging your assets. (3) If his income is not sufficient for the full amount, take a loan for the partial amount and balance from your saving. A Rs.70 Lakh loan @13% interest x 4 years will cost about Rs.2.00 Lakh/month to repay(principal+interest). But then ,the EMIs are to be religously paid every month or else the interest burden alone will smash you.