Banks are very courteous when giving loans but can act as sharks when going in for recovery of a loan. One of the common conditions of banks in sanctioning a loan is to find a guarantor for repayment of the loan, in case the original person defaults in repayment. The guarantor is expected to act as if he took the loan himself, and the bank has all rights to adjust the amount due from any account of his in the bank, but to what extent? This was decided recently in Syndicate Bank vs. Narotam Jena in the Orissa State Consumer Disputes Redressal Commission.
Jena’s friend Niranjan Naik took a loan from the bank in 1980 and asked him to stand as a guarantor for the same. Unfortunately, Naik defaulted in repaying his loan and the bank turned to Jena to recover the amount in question. Jena had a Savings Bank Account with the bank, and some part of the money therein was transferred to a Fixed Deposit Account by the bank itself. In 1991, when Jena went to withdraw the money in his Fixed Deposit, he was shocked to learn that the same had been adjusted against the money owed by Naik. Jena protested, but it fell on deaf ears.
The matter went to the Consumer Dispute Redressal Forum at Jagatsinghpur, Orissa. The bank stated that Jena had converted his Savings Bank account to Fixed Deposit at his own request and that the bank had a general lien against all accounts of the guarantor. It further stated that Naik was a defaulter and since Jena was his guarantor, he was liable to pay the entire outstanding amount.
The Forum refused to believe that the client had asked for a Fixed Deposit, in the absence of papers from the bank to prove the same. It further noted that the bank had made no attempt to recover the dues from Naik.The bank asked to repay the full amount of the deposit to Jena along with 12 percent interest with an additional compensation of Rs. 5000 plus Rs. 300 as costs of litigation.
The bank went in appeal against the order to the State Commission which also upheld the lower Forum order. The Commission confirmed its order but reduced the interest payable from 12 percent to 9 percent.
