DEED OF GUARANTEE
Personal guarantee for a housing loan, given under the Indian Contract Act, 1872
Loan account / sanction reference: __________
Borrower: __________
Lender: __________, __________
Guarantor: __________
Loan amount: __________
This Deed of Guarantee is made at __________, __________ on __________.
BY
__________, __________, aged about __________ years, resident of __________, PAN __________
(the "Guarantor". In this Deed "I", "me" and "my" mean the Guarantor. Where two persons sign as Guarantor, those words mean each of us, and our liability to the Lender is joint and several.)
IN FAVOUR OF
__________, __________, acting through its __________ branch at __________ (the "Lender").
Background
A. By its sanction letter dated __________, the Lender has sanctioned to the Borrower a housing loan of __________ (the "Loan"), in respect of the property described in the Schedule to this Deed (the "Property").
B. The Borrower is my __________, residing at __________.
C. The Lender has required a personal guarantee as a condition of __________.
D. At the Borrower's request, and knowing that the Lender is acting on the strength of this Deed, I have agreed to give that guarantee, on the terms set out below and on no other terms.
E. I have been given a copy of the sanction letter, I have had the opportunity to take independent legal advice, and I am signing with an understanding of what clause 3 of this Deed means.
1. Definitions
1.1 "Guaranteed Obligations" means everything the Borrower owes the Lender under the Loan from time to time — principal, contracted interest, penal charges levied in accordance with the Reserve Bank of India's directions on penal charges in loan accounts, insurance premia properly debited to the loan account, and the Lender's reasonable and documented costs of recovery. My liability for the Guaranteed Obligations is subject to any monetary limit expressly stated in this Deed.
1.2 "Loan Documents" means the sanction letter dated __________, the loan agreement, and the security documents executed for the Loan.
1.3 "the Act" means the Indian Contract Act, 1872.
2. The guarantee
2.1 I guarantee to the Lender the due payment of the Guaranteed Obligations. If the Borrower fails to pay any amount when it falls due, I will pay that amount to the Lender on written demand made in accordance with clause 4.
2.2 This is a continuing guarantee within the meaning of section 129 of the Act. It extends to the Loan as a whole and to every amount outstanding from time to time (subject to any monetary limit stated in this Deed), and it is not discharged by any intermediate payment or by the loan account standing at nil at any point in time. It remains in force until the Guaranteed Obligations are paid in full, subject to clause 12.
2.3 This guarantee is in addition to, and not in substitution for, any security the Lender holds or later takes for the Loan.
3. How far my liability goes — read this clause before signing
3.1 Under section 128 of the Act, my liability as surety is co-extensive with that of the Borrower. In plain terms: I owe what the Borrower owes, except to the extent this Deed limits it.
3.2 The Lender is not required to make a demand on the Borrower first, to sue the Borrower first, to obtain a decree against the Borrower first, or to enforce or sell the Property first, before it demands payment from me. It may proceed against the Borrower and against me at the same time.
3.3 Where the Loan is secured by a mortgage of the Property and the Lender takes action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, I acknowledge that section 13(11) of that Act entitles the Lender to proceed against me as guarantor without first taking any of the measures specified in clauses (a) to (d) of section 13(4) in relation to the secured asset. I record that I am a "borrower" within the meaning of section 2(1)(f) of that Act, and that I am accordingly entitled to the notices that Act requires to be given to a borrower, including the notice under section 13(2). The Lender will serve those notices on me at the address in clause 15.
3.4 Subject to any limit stated in this Deed, the Lender may demand from me the whole of the amount then due under the Loan or any part of it, and may make more than one demand.
3.5 I understand that a demand under this Deed may be met out of any of my assets and my income, and is not confined to the Property.
4. Demand and payment
4.1 A demand on me must be in writing, must be served in the manner set out in clause 15, and must state the loan account number, the total amount claimed, and a working of how that amount is arrived at.
4.2 I will pay the amount demanded within 15 days of receiving the demand.
4.3 A statement of the loan account signed by an authorised officer of the Lender will be accepted by me as evidence of the amount due, unless it is shown to be wrong.
4.4 The Lender will give credit against my liability for every amount it recovers from the Borrower, from the Property, or from any other guarantor, and will inform me of any such recovery within 30 days.
5. The protections I am not giving up
This clause is the substance of the bargain from my side.
5.1 I do not waive, and this Deed does not exclude, sections 133, 134, 135, 139 or 141 of the Act, except as expressly provided in clause 5.3.
5.2 Variance in terms (section 133). The Lender will not make any change in the terms of the Loan that increases or extends my exposure — an increase in the sanctioned amount, a fresh or top-up facility on the same security, a change from a floating rate arrangement to a fixed one or the reverse, or a restructuring of the repayment terms — without my prior written consent. If it does so without my consent, I am discharged as to transactions subsequent to the change, as section 133 provides.
5.3 What is not a variance. A change in the applicable rate under a floating rate arrangement already recorded in the sanction letter, and the consequent change in the EMI or in the tenure carried out in accordance with the sanction letter and with the Reserve Bank of India's directions on the reset of floating interest rates on EMI-based personal loans (circular dated 18 August 2023), is not a change in terms for the purposes of clause 5.2. The Lender will nevertheless inform me in writing of any reset that changes the EMI amount or the tenure.
5.4 Release of the Borrower, time, and composition (sections 134 and 135). If the Lender releases the Borrower, or makes any contract with the Borrower to give time to the Borrower or not to sue the Borrower, or compounds or settles with the Borrower, without my consent in writing, I am discharged to the extent that sections 134 and 135 provide. Mere forbearance to sue does not by itself discharge me (section 137).
5.5 The security (section 141). I am entitled to the benefit of every security the Lender holds against the Borrower for the Loan, whether or not I knew of it when I gave this guarantee. Where the Loan is secured by a mortgage of the Property, the Lender will keep that mortgage in force and will keep the property insurance for the Property running through the loan account. The Lender will not release, substitute or part with any security for the Loan without my written consent. If the Lender loses or parts with any such security without my consent, I am discharged to the extent of the value of that security.
5.6 Impairing my remedy (section 139). The Lender will not do anything, and will not omit to do anything which it is legally bound to do, where the effect is to impair my eventual remedy against the Borrower.
5.7 Sale of the Property. If the Lender takes possession of the Property and sells it, it will do so in accordance with the applicable law and rules, will give me notice of the intended sale at the same time as it gives notice to the Borrower, and will account to me in writing for the sale proceeds. My liability reduces by the net amount realised.
6. What the Lender will give me
6.1 Within 15 days of execution, the Lender will give me a copy of this Deed as executed and accepted, a copy of the sanction letter, and a copy of its schedule of charges as applicable to the Loan.
6.2 The Lender will give me a statement of the loan account within 15 days of a written request from me, free of charge once in each financial year.
6.3 The Lender will inform me in writing:
(a) within 30 days, if any instalment remains unpaid for more than 30 days;
(b) before the loan account is classified as a non-performing asset;
(c) by giving me a copy of any notice recalling the Loan, any notice under section 13(2) of the SARFAESI Act, 2002, and any proceeding filed against the Borrower or against me; and
(d) before it reports me to a credit information company as a defaulter, and before it initiates any proposal to classify me as a wilful defaulter.
6.4 Notice under clause 6.3 is not a condition precedent to the Lender's right to make a demand on me, but a failure to give it is a matter I may raise in the grievance process in clause 16.
7. Credit reporting — what this guarantee does to my own credit
7.1 I understand that this guarantee will be reported to credit information companies under the Credit Information Companies (Regulation) Act, 2005 and the Reserve Bank of India's credit information reporting directions, and that the Loan will appear on my own credit report showing me as guarantor.
7.2 I understand that if the Borrower is late or defaults, that conduct will appear on my credit report, will affect my credit score, and may reduce my own capacity to borrow, whether or not the Lender ever makes a demand on me.
7.3 The Lender will report my status accurately, and will update the credit information companies within 30 days of the Guaranteed Obligations being paid in full so that no live guarantee obligation continues to be reported against my PAN.
8. My rights if I pay
8.1 On payment of the Guaranteed Obligations, I am invested with all the rights which the Lender had against the Borrower, as section 140 of the Act provides.
8.2 The Borrower is under an implied promise to indemnify me under section 145 of the Act. That promise is also recorded expressly in the Borrower's Acknowledgement at the end of this Deed.
8.3 On payment in full, the Lender will, at my cost, deliver to me such of the Loan Documents and security documents as I reasonably require, and do such acts as are reasonably necessary, to enable me to enforce my rights against the Borrower and against the Property.
8.4 Until the Guaranteed Obligations have been paid in full, I will not enforce any right of subrogation, contribution or indemnity in a manner that competes with the Lender, and will not prove in any insolvency of the Borrower in competition with the Lender.
9. Where there is more than one guarantor
9.1 Where two persons sign this Deed as Guarantor, our liability to the Lender is joint and several, and the Lender may recover the whole amount from either of us.
9.2 As between ourselves, we are liable to contribute equally to the whole of the amount unpaid by the Borrower, and where we are bound in different sums, to pay equally as far as the limits of our respective obligations permit, as sections 146 and 147 of the Act provide. A guarantor who pays more than their share may recover the excess from the other.
9.3 Under section 138 of the Act, the release by the Lender of one co-surety does not discharge the other, and the released co-surety remains answerable to the other co-surety for contribution.
10. The basis on which I give this guarantee
10.1 The Lender has not misrepresented to me, and has not kept silence about, any material circumstance within its knowledge concerning the Borrower's dealings with the Lender, including any amount presently overdue on this or any other facility of the Borrower with the Lender. This guarantee is given on that basis, and sections 142 and 143 of the Act apply.
10.2 I have made my own assessment of the Borrower's ability to repay. I am not relying on the Lender's credit appraisal of the Borrower, and the Lender has given me no assurance about it.
10.3 If the Lender has told me that another person will also join as guarantor for the Loan, this guarantee is given on that footing, and section 144 of the Act applies if that person does not join.
11. What I confirm about myself
11.1 I am of full age and sound mind and competent to contract.
11.2 I am not an undischarged insolvent, and no insolvency, bankruptcy or debt recovery proceeding is pending against me.
11.3 The particulars I have given about my name, parentage, address and PAN are true.
11.4 I am giving this guarantee voluntarily, and not under coercion, undue influence or misrepresentation by any person.
11.5 I understand that I may be required to pay the whole of the amount guaranteed out of my own assets and income, and I have satisfied myself that I am able to do so.
12. Revocation
12.1 I may revoke this guarantee as to future transactions by written notice to the Lender, as section 130 of the Act permits.
12.2 I understand, and it is expressly recorded, that such a revocation operates only for the future. It does not release me from liability for any amount already disbursed to or on account of the Borrower before the Lender receives my notice. Where the Loan has already been disbursed in full, there are no future transactions, and a notice under section 130 will not release me from anything.
12.3 Where any part of the Loan remains undisbursed on the date the Lender receives my notice, this guarantee will not extend to any amount disbursed after that date.
12.4 On my death, this guarantee stands revoked as to future transactions under section 131 of the Act. My estate remains liable for the Guaranteed Obligations outstanding as at the date of my death, to the extent of the assets in my estate. Nothing in this Deed is a contract to the contrary for the purposes of section 131.
13. Discharge
13.1 This Deed comes to an end when the Guaranteed Obligations have been paid in full.
13.2 Within 15 days of that happening, the Lender will issue to me a written discharge, naming me, referring to loan account __________, and confirming that I have no further liability as guarantor.
13.3 The Lender's obligation to release the Borrower's property documents on repayment or settlement of the Loan is governed by the Reserve Bank of India's circular dated 13 September 2023 on the release of movable and immovable property documents on repayment or settlement of personal loans, and nothing in this Deed affects that obligation.
14. This Deed and the other Loan Documents
14.1 This Deed and the Loan Documents are to be read together. If there is a conflict between this Deed and any other document as to the nature or the extent of my liability as guarantor, this Deed will prevail.
14.2 No change to this Deed is effective unless it is in writing and signed by me and by an authorised officer of the Lender.
14.3 A delay or failure by the Lender in exercising a right under this Deed is not a waiver of that right.
14.4 If any provision of this Deed is held to be invalid or unenforceable, the rest of the Deed continues in force.
15. Notices, and how delivery is proved
15.1 Notices to me are to be sent to __________, or by email to __________, or by SMS or WhatsApp to __________ for information only. A demand under clause 4 must be sent by post or by email, not by SMS alone.
15.2 Notices to the Lender are to be sent to the __________ branch at __________.
15.3 A notice under this Deed may be given (a) by hand, against an acknowledged copy bearing the date, the name and the signature of the person receiving it, (b) by registered post with acknowledgement due or by speed post with proof of delivery, or (c) by email to the address recorded in this Deed. A notice sent by registered post is treated as received on the seventh day after posting, unless it is returned undelivered.
15.4 I will inform the Lender in writing within 15 days of any change in my address, email address or mobile number, and the Lender will inform me of any change in the branch that holds the loan file.
16. Grievances and escalation
16.1 Any grievance I have about the conduct of the loan account, or about the Lender's compliance with this Deed, will first be taken up in writing with the __________ branch, quoting loan account __________, and I will keep the acknowledgement.
16.2 If the branch does not resolve it within 30 days, or the reply is unsatisfactory, I may escalate it in writing to the Lender's Principal Nodal Officer at the address published for that purpose.
16.3 Thereafter, __________.
16.4 This clause does not take away any right either party has to go to court or to a tribunal.
17. Governing law and jurisdiction
17.1 This Deed is governed by the laws of India.
17.2 The courts at __________ have jurisdiction over any dispute arising out of this Deed.
17.3 Clause 17.2 does not affect the jurisdiction of a Debts Recovery Tribunal where the Recovery of Debts and Bankruptcy Act, 1993 applies.
18. Stamp duty and costs
18.1 This Deed has been executed on stamp paper or an e-stamp certificate of the value required for an instrument of this kind in the State of __________.
18.2 Each party bears its own legal costs of this Deed.
19. Declaration by the Guarantor
I have read this Deed, or it has been read over and explained to me in a language I understand. I understand in particular that:
(a) I can be required to pay the whole of the Borrower's debt, out of my own money;
(b) the Lender can come to me without first going after the Borrower or the Property;
(c) this guarantee will appear on my credit report and will affect my own borrowing; and
(d) I cannot cancel this guarantee for amounts already lent.
I am signing with that understanding.
SCHEDULE — The Property
__________
Execution
IN WITNESS WHEREOF the Guarantor has signed this Deed at __________ on __________.
SIGNED AND DELIVERED by the Guarantor
(1) __________
PAN: __________
Signature: ______________________________
WITNESSES
Witness 1
Name: ______________________________
Address: ______________________________
Mobile: ____________________ PAN: ____________________
Signature: ______________________________
Witness 2
Name: ______________________________
Address: ______________________________
Mobile: ____________________ PAN: ____________________
Signature: ______________________________
ACCEPTED for and on behalf of __________
Name of authorised officer: ______________________________
Designation / Employee code: ______________________________
Branch: __________
Date: ____________________
Signature and branch seal: ______________________________
Borrower's Acknowledgement and Indemnity
This part is between the Borrower and the Guarantor. It is for the Guarantor's own records and does not require the Lender's agreement.
I/We, __________, the Borrower under loan account __________ with __________, confirm as follows:
1. I/We requested __________ to give the guarantee recorded above, and the Guarantor has done so at my/our request and for my/our benefit.
2. I/We will indemnify the Guarantor in full against every amount the Guarantor pays or becomes liable to pay to the Lender under that guarantee, together with interest from the date of payment and the Guarantor's reasonable legal costs. This is in addition to the implied promise to indemnify under section 145 of the Indian Contract Act, 1872.
3. I/We will pay every instalment on time, and will inform the Guarantor in writing within 7 days of any instalment being missed, of any notice received from the Lender about the account, and of any proposal to vary, top up or restructure the Loan.
4. If the Guarantor pays any amount to the Lender, the Guarantor stands in the Lender's place against me/us and against the Property to the extent of that payment.
Signed by the Borrower
__________
Signature: ______________________________
Date: ____________________ Place: ____________________