06 October 2012
My fathers's friend Mr. X take a loan of Rs. 1,00,000 in 20007 form Delhi narik Sehkari Bank Ltd. which is register under Delhi Co Op Societies Act 2003 and my father and one other person give surety/guarantee for loan of him, as they are already member of that society.
Mr.x was paying loan regularly, but in 2011 that man lost his job and is not paying his loan, after one year notice to Mr.X, but he did not respond to any notice of bank of Rs. 70,000
and now in oct 2012 my father got summened from Registrar of Arbitration, registrar called both the surety on 9.10.2012
I want to ask position of two surety (one o f of him is my father ),
who will be first liable for loan, 1. Personal Assets of Mr. x is first liable ( as he have two home in Delhi which valued about 30 Lacs ) 2. or two surety have to pay Loan of Mr. X
and if Two Surety have to paid loan , are both surety can recover amount from him. legally
Please help me in this case, so that i can help my father
07 October 2012
The primary liability of payment is of the principal debtor. But in case of his default such amount can be recovered from the surety. Where there are more than one surety then they will be jointly and severely liable for such amount. If such amount is paid by surety then he/they can legally recover such amount from the principal debtor.
02 August 2024
In the situation where a loan borrower defaults, the liabilities and responsibilities of the sureties (guarantors) and the borrower are determined by the terms of the loan agreement and relevant legal principles. Here’s how the liability of sureties and the borrower generally work:
### **1. Liability of the Borrower and Sureties**
**Borrower's Liability:**
- **Primary Responsibility:** The borrower, Mr. X in this case, remains primarily liable for repaying the loan. His personal assets are the first line of recovery for the lender. This means the lender can initially attempt to recover the outstanding amount from Mr. X's assets.
**Sureties' Liability:**
- **Secondary Responsibility:** The sureties (your father and the other person) have agreed to guarantee the loan. This means that if Mr. X fails to repay the loan, the lender can approach the sureties for recovery. The liability of the sureties is secondary but can be enforced if the borrower defaults.
### **2. Legal Sequence of Recovery**
**1. Exhausting Borrower’s Assets:**
- **Initial Recovery Attempt:** Typically, the lender will first attempt to recover the outstanding amount from Mr. X's assets. This includes taking legal action to attach or sell Mr. X's property, such as his homes in Delhi.
**2. Calling on Sureties:**
- **Default Action:** If the lender is unable to recover the full amount from Mr. X's assets or if the borrower’s assets are insufficient, the lender can then demand payment from the sureties.
**3. Sureties’ Rights:**
- **Contribution and Recovery:** Once the sureties have paid the amount, they can seek recovery from the borrower (Mr. X) for the amount they paid on his behalf. This is done through a process called "contribution" or "subrogation," where the sureties can file a suit against Mr. X to recover the amount they paid to the lender.
### **3. Practical Steps for the Sureties**
**1. **Legal Representation:**
- **Consult a Lawyer:** Given the involvement of legal and financial complexities, consulting with a lawyer is crucial. The lawyer can guide your father and the other surety through the legal proceedings and help them understand their rights and obligations.
**2. **Recovery from Mr. X:**
- **Suit for Recovery:** If your father and the other surety have paid the loan amount to the bank, they can file a civil suit against Mr. X to recover their respective shares of the amount paid.
**3. **Documentation and Evidence:**
- **Maintain Records:** Ensure all documentation related to the loan, the guarantee, and any payments made are well-documented and preserved. This will support any legal actions taken to recover the amount from Mr. X.
**4. **Dealing with the Registrar of Arbitration:**
- **Compliance:** Attend the arbitration proceedings as required. The arbitrator will likely determine the extent of liability of the sureties and the procedures for payment and recovery.
### **Summary of Liability and Recovery Process:**
1. **Borrower's Assets First:** The lender will first seek recovery from Mr. X’s personal assets. 2. **Sureties’ Liability:** If the borrower’s assets are insufficient, the lender can claim the outstanding amount from the sureties. 3. **Recovery by Sureties:** After paying the amount to the lender, the sureties can pursue legal action to recover the payment from Mr. X.
By following these guidelines and seeking appropriate legal advice, your father and the other surety can navigate the process of handling the liability and potentially recovering their payments from Mr. X.
CAclubindia
