We started a factory in the food processing sector and obtained a loan from a bank (Vijaya bank, Bank of Baroda now).
We are 6 investors with 4 directors. The bank asked for collateral/guarantors for the loan and 4 of us gave
(3 directors and 1 investor) .Unfortunately our managing director (one of the 4 directors) passed away early this year.
None of the other directors or investors are willing to come forward to run the factory. In the meanwhile a real estate company
came forward to take over the factory and the loan. They replaced the directors with their own directors. But the
collateral/guarantors are still with the bank. They paid EMI for a few months and are now not interested in continuing as the market
is very tough. So, they stopped paying EMI for the last 3 months.
The bank has sent letters to the original guarantors who gave collateral saying that the account is in NPA and demanded us to pay the loan
in full failing which they would take away the properties given as collateral, under section 2 of section 13 of the Sarfaesi Act 2002.
A few of the guarantors have also invested amounts (far more than the value of the collateral) in the business and are already at risk of losing their investment.
Can you please let me know what would happen and how to deal with this issue?
1. The bank has given 60 days to clear the entire loan amount and interest. The amount is huge and none of us have the ability to mobilize such a large amount.
2. Would the bank sell the properties of the investors/directors given to the bank as collateral? If so, would they do it immediately after 60 days?
3. Would the bank try to sell the factory and then recover the balance by selling the mortgaged properties of the investors? The value of the factory
(land, buildings, machinery etc) is much more than the loan balance. But given the current situation and the fat that the bank has declared NPA, many investors may be
waiting to get the factory at much below the loan balance.
4. In case there is a deficit in the loan balance even after selling the properties assigned as collateral, would the bank come after other properties of the
investors/directors?
5. In the even the bank sells all the assets, what would happen to the amounts invested by the investors/directors?
Thanks in advance!
CAclubindia
