The 1st Defendant approached the bank for a loan
for agricultural purposes, and a sum of `USD 700,000.00 as overdraft facility
was sanctioned as agricultural loan. Subsequently, the facility was several
times enhanced to US D 1,303,033.50, interest inclusive, by 9th
January 2015. The loan was not repaid and recovery proceedings were initiated
by the Plaintiff against the Defendants.
So far as the Credit Guarantee Certificate by PASS is
concerned, it is purely an agreement which amounts to contract between the
parties creating a third-party security and the security could be insisted upon
up to 60% liability on the part of PASS to offer themselves as collateral
security and therefore the bank was entitled to take recovery measures upon
PASS sixty days after the expiry of the facility as PASS can be termed as
Co-obligant /sureties of a third party. Once the documents are executed and
acted upon the terms and conditions imposed by the lending bank, becomes terms
of contract. Having agreed to repay the loan amount as co-obligant, PASS who
signed the loan document is liable to pay the loan amount and it stands on par
with the borrower