CHENNAI: The Debts Recovery Tribunal-III of Chennai has set aside an order of a bank to auction immovable properties of two loan guarantors over repayment default by the principal borrower who had played fraud on the bank in collusion with an official.
V Shankar and his wife S Lalitha of Chennai filed an application under the securitisation and Reconstruction of financial assets and Enforcement of security interest (SARFAESI) Act, 2002 before the tribunal seeking to quash an order of Punjab National Bank to put on auction their immovable properties as part of recovery of loan dues.
They furnished guarantee to N Lalitha Rani, proprietor of a private company (M/s Sathvika) for a bank loan. Rani, in connivance with a branch manager of the bank, had got Rs 9.5 crore credited into her account against the sanctioned amount of Rs 8.95 crore and diverted the money to some other accounts.
Rani also defaulted on repayment, thereby passing the liability on the guarantors, and the bank initiated auction proceedings for recovering Rs 14. 55 crore under SARFAESI Act.The applicants contended that they cannot be accounted responsible for the default of the principal borrower since she had played fraud on the loan with the collusion of the branch manager.
The debt claimed by the bank is not a legally enforceable debt.Therefore, action cannot be initiated against the security of immovable property belonging to them in the individual capacity, they argued.
The presiding officer of the Debts Recovery Tribunal-III of Chennai, Ganapathi KRK, in his recent order, restrained the bank from initiating action against personal properties of the guarantors on the ground that the debt due and recoverable from the principal borrower is confirmed to be a fraudulent debt by the bank itself.The tribunal also set aside SARFAESI actions against guarantors but gave liberty to the bank to proceed further in accordance with the law regarding any other property available to them.