Allahabad High Court: Banks Can Recover Full Dues From Guarantors

When someone borrows money from a bank, another person sometimes promises to pay it back if the borrower cannot.

That person is called a guarantor.

A bank in India asked a court for help because a borrower did not repay his loans.

The court said the guarantor is just as responsible for the money as the borrower.

The bank can ask the guarantor to pay everything, even before it tries hard to get money from the borrower.

A small part of the guarantors' salaries was being taken every month to pay the debt.

The guarantors said this was not fair and went to court.

The court said it was allowed because of an old law called the Indian Contract Act.

This law says a guarantor's promise is as strong as the borrower's promise.

So the guarantors must pay, but later they can ask the borrower to give the money back to them.