Students Bank Loans - Are students bound to pay instalments even if they do not get job after completing course?
Governments as well as banks promise huge loans to do expensive educational courses. This is good. Nothing bad about it. But bad part starts when student is unable to get any job even after successfully competing so called expensive course.
While granting loan, bank knew that the student has no assets and the student has no capacity to pay back loan if he does not get job.
Now can the Bank take duressive steps to force student or his guarantor to pay back loan?
Documents Which Bank Gets Signed from Student and his parents
1) Loan agreement: Which says that after course is over, within six months or as soon as student gets job, whichever is earlier, the student will start repaying loan.
2) Promissory notes are obtained from student and parents.
What happens when student gets no job after doing course?
Bank files Summary Suit for recovery of loan against student and parent who may have signed as guarantor.
If the student do not get job, from where will they be able to pay loan?
Can LAW give any relief? Are such summary suits maintainable?
In contract law, there is a principle of "Frustration of Contract".
While entering into contract, parties may have visualised certain future prospects. On that basis, they may have entered into a contract.. But subsequently, if some unforeseen circumstances happen because of which it is not possible for a party to perform his part of contract, then law can refuse to enforce this contract.
This concept is not much applied in real life cases.
1) But it is my view that once a plea of frustration of contract is raised, the summary suit may not be maintainable.
2) Because, the fact whether contract has become frustrated or not is a matter of evidence.
3) So long cause suit may be possible but Summary suit is not possible.
4) And Long causes suits take about 5 years, so by that time, student will get job and will settle the dues.
So, there is no doubt that student will have to pay. But the bank will have to go through LONG CAUSE SUIT , then it will have to obtain decree and then within 12 years, it will be open to bank to enforce decree against assets of student or his guarantor.
The Bank lawyers, will strongly oppose this argument and will say that Frustration of Contract principle applies only to Act of God or to Act of Some Law.. Yes... But the court will have to examine both side arguments and judges will probably find a way to help students against Banks... This is how I hope.
CAVEAT : As I said earlier, this concept of frustration of contract in such cases is not much used. It has to be first argued in court and then only we can say whether above argument made here is workable or not.
Haresh Raichura
27/6/13
- Haresh Raichura