Page 117 - A Banker Down the Rabbit Hole

Bank even may not proceed against the borrower if bank finds that there
was nothing recoverable from him. The liability of the guarantor is co-
extensive and concurrent with the liability of the borrower. Even if the
limitation or the legally permissible time to file suit in court has expired
against the borrower, the civil suit can still be filed against the guarantor
because the limitation period starts from the date of demand on the
guarantor to pay and not from the date of the loan. Hence, the guarantor
should understand the law of guarantee before signing a guarantee form
as the ignorance of law is no excuse.

I used to make it a point to meet the guarantor before sanction of the
loan and ask whether he knew that he was signing as a guarantor for
the loan. I also used to tell him further about his liability as a guarantor
as per law. Only when he still was prepared to stand as a guarantor, I
used to proceed further. This was done to save all the concerned parties
from any unhappy situation later.

Insights from the episode
1. The guarantor should not be misrepresented about his liability by
any one and banks need to cross verify this fact from the guarantors
categorically.
2. Ignorance of law is no excuse. Guarantors must be made to
understand this upfront.

— z —

114 | A Banker down the Rabbit Hole