Guarantor Ordered to Deposit Rs.10 Lakh for Loan Settlement; Bank to Assess Application, No Coercive Action Allowed.

The HC disposed of the writ petition by directing the guarantor to deposit Rs.10,00,000 with the Bank within four weeks, along with an application for loan settlement. The Bank must assess the application per guidelines within four weeks. Until then, no coercive action is permitted. Compliance will result in the return of possession, with restrictions on dealing with the property without Bank's consent. Non-compliance allows the Bank to proceed legally. An urgent certified copy of the order is to be issued as per rules.

---

---

Issues:
Challenge to notice under Section 13(4) of SARFAESI Act by guarantor regarding possession of mortgage property.

Analysis:
The writ petition was filed by the guarantor challenging the notice issued by the Bank under Section 13(4) of the SARFAESI Act, seeking to prevent the Bank from taking physical possession of the mortgage property. The petitioner, as the guarantor for the loan availed by others, argued that they should not be held responsible for the default of the principal loanees. The petitioner expressed readiness to deposit a substantial amount for settlement of the loan. The Bank had already taken possession of the property and decided to auction it due to an outstanding loan amount of Rs.40,86,138 as of a specific date. The Bank agreed to consider a down payment and application for settlement if the guarantor deposited a substantial amount within a prescribed time.

The Court, considering the guarantor's position and the fact that the mortgaged property was their residential house, directed the petitioner to deposit Rs.10,00,000 with the Bank within four weeks, along with an application for settlement. The Bank was instructed to evaluate this based on existing guidelines and past practices within four weeks. No coercive action was to be taken regarding the property until a decision was made on the settlement application. Upon the guarantor's compliance with the deposit requirement, possession of the property would be returned with the condition not to deal with the property without Bank's permission. Failure to comply would allow the Bank to take legal steps as provided by law.

The writ petition was disposed of in accordance with the directions given, and an urgent certified copy of the order was to be issued as per rules.

---