Built for Scheduled Commercial, Small Finance, and Cooperative Banks within our Banks Loan & NPA Legal Recovery Hub, this advocate-vetted recall template pairs an uncompounded RBI Penal-Charges Schedule A with explicit Section 126/128 invocation of Personal and Corporate Guarantees—eliminating borrower DRT accounting objections.
RBI Circular Compliant
Zero Compounding
Penal charges separate from principal
Contract Act Invocation
ss. 126, 128 & 129
No defective “CC” guarantor copy
Pre-OA Prerequisite
≥ &rupee;20L e-DRT Ready
Also fits O.37 Civil & Lok Adalat
Admissible Dispatch
Email + WA + RPAD
BSA 2023 s.63 & BBE Act s.2A/4
Regulatory Gap Analysis for Bank Legal Teams
Why Compounded Penal Interest Invalidates Bank Recall Notices
Across Indian Debts Recovery Tribunals (DRTs) and Commercial Courts, defaulting borrowers routinely stall admission of Section 19 Original Applications by attacking outdated bank loan recall templates downloaded from legacy legal portals such as Scribd or LawRato. Those legacy drafts carry two fatal flaws: they demand “compounded penal interest” folded into principal rests, and they treat Personal or Corporate Guarantors as passive “CC / Copy To” recipients rather than primary statutory addressees.
Under the Reserve Bank of India's Fair Lending Practice Directions on Penal Charges in Loan Accounts (Circular No. RBI/2023-24/53 DoR.MCS.REC.28/01.01.001/2023-24 dated August 18, 2023), banks and NBFCs are strictly prohibited from charging penalty in the form of “penal interest” added to the rate of interest, and strictly barred from capitalizing or compounding penal charges. Any recall notice demanding compounded penal interest hands borrower counsel an immediate preliminary objection on excess computation, delaying interim asset attachment and bank unpaid-dues recovery.
Equally dangerous is careless treatment of sureties. Under Sections 126, 128, and 129 of the Indian Contract Act, 1872, a Personal or Corporate Guarantor's liability under an “on-demand” continuing guarantee crystallizes only upon clear, unequivocal invocation and payment demand directly upon the guarantor. Our interactive draft workspace below fixes both defects cleanly in Word (.doc) and PDF formats.
Populate your bank branch, borrower, guarantor, and Core Banking ledger inputs below to generate an RBI-compliant Schedule A (zero penal compounding) with explicit Section 128 guarantee invocation. Export as formatted Word (.doc) or dispatch through empanelled counsel.
Bank Panel Advocate & Branch Draft Generator
Select Portfolio Scenario & Populate Uncapitalized Schedule A Figures
A. Bank, Facility & Principal Borrower
B. Explicit Guarantors (Contract Act s.126/128)
C. Schedule A (Zero Penal Compounding)
RBI Circular Compliant
Total Due: ₹42,50,000/-
Live Advocate-Vetted Notice Preview
Ready for Word (.doc) export, clipboard copy, or Bar Council advocate dispatch
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STATUTORY LOAN RECALL CUM GUARANTEE INVOCATION NOTICE
(RBI Fair Lending Practice on Penal Charges Compliant Format)
VIA SPEED POST RPAD / VERIFIED EMAIL / BUSINESS WHATSAPP
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Ref. No.: NICB/SARB/REC/2026-27/1842
Date : 14 November 2026
TO (JOINTLY AND SEVERALLY AS PRIMARY & CO-EXTENSIVE NOTICEES — NOT MERELY "CC"):
1. PRINCIPAL BORROWER:
M/s Apex Precision Components Pvt. Ltd.
Plot No. 42, MIDC Bhosari Industrial Area, Pune - 411026
2. PERSONAL GUARANTOR (Co-Extensive Liability u/s 128 Indian Contract Act, 1872):
Shri Vikramaditya S. Kulkarni (Managing Director & Personal Guarantor)
B-1104, Sahyadri Residency, Baner Road, Pune - 411045
3. CORPORATE GUARANTOR (CIN: U70109MH2016PTC284910):
M/s Sahyadri Holdings & Infrastructure Pvt. Ltd.
702, Regent Chambers, Nariman Point, Mumbai - 400021
UNDER INSTRUCTIONS FROM AND ON BEHALF OF OUR CLIENT:
National Industrial & Commercial Bank Ltd.
Stressed Assets Recovery Branch (SARB), Nariman Point, Mumbai - 400021
ISSUED BY:
Adv. R. V. Deshmukh, Empanelled Bank Counsel
Enrolment / ID: MAH/4182/2014 (Bar Council of Maharashtra & Goa)
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SUBJECT: NOTICE OF RECALL & ACCELERATION OF WORKING CAPITAL CASH CREDIT (CC) & TERM LOAN
(A/C NO. 4098210004512 / TL-88412) AND FORMAL STATUTORY INVOCATION OF
GUARANTEE UNDER SECTIONS 126 & 128 OF THE INDIAN CONTRACT ACT, 1872
UPON THE PRINCIPAL BORROWER AND THE PERSONAL & CORPORATE GUARANTORS.
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Sir / Madam,
We act on instructions from and on behalf of National Industrial & Commercial Bank Ltd., Stressed Assets Recovery Branch (SARB), Nariman Point, Mumbai - 400021 (hereinafter referred to as "Our Client" / "the Bank") to serve upon Addressee No. 1 ("Principal Borrower") and Addressee Nos. 2 & 3 ("the Guarantor(s)") the present formal Statutory Recall and Guarantee Invocation Notice as follows:
1. SANCTION & SECURITY DOCUMENTATION:
Pursuant to Addressee No. 1's request, the Bank sanctioned Working Capital Cash Credit (CC) & Term Loan vide Sanction Letter dated 18 March 2024 for a sanctioned limit of Rs. 45,00,000/- under Loan Account No. 4098210004512 / TL-88412, carrying contractual interest at 10.65% p.a. (EBLR + 1.50%). Addressee No. 1 executed the Loan/Facility Agreement, Demand Promissory Note, and security documents securing repayment. Addressee No. 2 executed a Deed of Personal Continuing Guarantee dated 22 March 2024, and Addressee No. 3 executed a Deed of Corporate Continuing Guarantee dated 22 March 2024 backed by valid Board Resolution, both guaranteeing due repayment of all present and future outstandings under Sections 126, 127, 128, and 129 of the Indian Contract Act, 1872.
2. CONTINUOUS DEFAULT & RBI IRACP NPA CLASSIFICATION:
Addressee No. 1 failed to maintain financial discipline, committed continuous payment defaults commencing from 15 June 2026, and failed to regularize overdue principal and contractual interest despite repeated reminders. Consequently, in strict adherence to the Reserve Bank of India (RBI) Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning (IRACP), Loan Account No. 4098210004512 / TL-88412 was classified as a Non-Performing Asset (NPA) on 13 September 2026.
3. IMMEDIATE RECALL & ACCELERATION OF CREDIT FACILITY:
Upon occurrence of the aforesaid Events of Default and NPA classification, the Bank hereby exercises its contractual right to RECALL, CANCEL, AND ACCELERATE the entire credit facility forthwith. The entire principal, normal accrued contractual interest, and separately accounted uncapitalized penal charges have become immediately due and payable in lump sum.
4. EXPLICIT STATUTORY INVOCATION OF PERSONAL & CORPORATE GUARANTEE (NO "CC" DEFECT):
TAKE EXPRESS NOTICE that this communication constitutes a formal, unequivocal WRITTEN DEMAND AND INVOCATION OF THE CONTINUING GUARANTEE under Sections 126, 128, and 129 of the Indian Contract Act, 1872 against Addressee No. 2 and Addressee No. 3 jointly and severally. Under Section 128 of the Contract Act (and settled Supreme Court law in Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala, (2009) 9 SCC 478), your liability as Guarantor(s) is co-extensive with that of the Principal Borrower, and the Bank is under no legal obligation to exhaust remedies against the Borrower or secured assets before enforcing recovery against you. Per Syndicate Bank v. Channaveerappa Beleri, (2006) 11 SCC 509, this written demand expressly crystallizes the cause of action and limitation against each Guarantor.
5. SCHEDULE A — ITEMIZED CLAIM BREAKUP (AS ON 12 November 2026)
[Compliant with RBI Circular RBI/2023-24/53 DoR.MCS.REC.28/01.01.001/2023-24]
(A) Outstanding Principal Balance .................... Rs. 36,50,000/-
(B) Normal Contractual Interest Accrued ................ Rs. 4,64,300/-
(C) Uncapitalized Penal Charges (Non-Compounded) ....... Rs. 1,15,000/-
(D) GST on Penal Charges (@18%, if applicable) ......... Rs. 20,700/-
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TOTAL CRYSTALLIZED DEMAND DUE (A + B + C + D) .......... Rs. 42,50,000/-
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STATUTORY RBI PENAL-CHARGES DECLARATION: In strict compliance with the Reserve Bank of India Fair Lending Practice Directions on Penal Charges in Loan Accounts (Circular dated 18 August 2023), the amounts under Head (C) represent fixed/transparent Penal Charges treated strictly separately from interest rate structures. NO further interest has been levied, capitalized, or compounded upon Penal Charges under Head (C). Further normal contractual interest at 10.65% p.a. (EBLR + 1.50%) continues to accrue solely on the Outstanding Principal under Head (A) until actual realization.
6. STATUTORY PAYMENT DEMAND WITHIN 15 DAYS:
All Addressees (Borrower and Guarantor(s)) are hereby called upon, jointly and severally, to remit the total crystallized sum of Rs. 42,50,000/- together with pendente lite normal contractual interest on Principal until payment, within 15 (15) days from receipt of this Notice.
7. LEGAL CONSEQUENCES OF NON-COMPLIANCE & RESERVATION OF RIGHTS:
Should all or any of you fail to liquidate the recalled dues within 15 days, Our Client shall be constrained to initiate, at your entire risk as to costs and consequences:
a) Institute an Original Application (OA) under Section 19 of the Recovery of Debts and Bankruptcy (RDB) Act, 1993 before the jurisdictional Debts Recovery Tribunal (DRT) against the Borrower and all Guarantors jointly and severally, along with applications under Section 19(12)-(13) for attachment before judgment and disclosure of assets;
b) Initiate statutory personal insolvency proceedings against the Personal Guarantor under Section 95 read with Rule 7(1) Form B of the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal (NCLT), and Section 7 IBC action against the Corporate Borrower/Guarantor; and
c) Enforce secured assets without prejudice under Section 13(2) & Section 13(4) of the SARFAESI Act, 2002 (subject to statutory exclusion of agricultural land under Section 31(i)), alongside Section 138 NI Act / Section 25 Payment and Settlement Systems Act, 2007 remedies for dishonoured cheques/NACH mandates.
8. NEGATIVE LIEN, CREDIT BUREAU & ELECTRONIC EVIDENCE NOTICE:
Take further notice against alienating, encumbering, or creating third-party rights over hypothecated, mortgaged, or personal/corporate assets (which shall attract interim attachment injunctions and criminal breach of trust consequences). Upon default, this NPA recall and guarantee invocation status shall stand reported to CICs (TransUnion CIBIL, Experian, Equifax, CRIF High Mark) and NeSL Information Utility under the IBC framework. Certified Core Banking extracts under Section 2A and Section 4 of the Bankers' Books Evidence Act, 1891, alongside Section 63 Bharatiya Sakshya Adhiniyam (BSA), 2023 electronic service metadata, shall be tendered in evidence.
This Notice is issued strictly without prejudice to all other contractual, statutory, SARFAESI, civil, and criminal remedies available to Our Client under Indian law. A signed copy is retained in office records.
Yours faithfully,
Adv. R. V. Deshmukh, Empanelled Bank Counsel
MAH/4182/2014 (Bar Council of Maharashtra & Goa)
For and on behalf of National Industrial & Commercial Bank Ltd.
Need Panel Advocate Letterhead + Tri-Channel RPAD Proof?Test 1 live borrower/guarantor recall notice or upload a bulk CSV for branch/SARB dispatch.
Every demand notice recalling a credit facility before DRT or Civil Court must synchronize these six operative paragraphs with your underlying security documentation and bank loan default strategy.
Indian Contract Act s.10 & RDB Act s.19
1. Sanction Recital & Security Matrix
Specifies sanction letter date, sanctioned limit, contractual interest benchmark (EBLR/MCLR), hypothecation/mortgage deeds, and Demand Promissory Note.
RBI Master Circular on IRACP Norms
2. Event of Default & IRACP NPA Date
Records exact continuous default date and 90-day Non-Performing Asset classification date so SARFAESI and DRT pleadings align identically.
Contractual Default Acceleration Clause
3. Facility Recall & Acceleration
Revokes working capital / CC/OD limits immediately and accelerates all future term-loan installments into one crystallized demand.
Indian Contract Act ss.126, 128 & 129
4. Explicit s.126/128 Guarantee Invocation
Directly demands repayment from Personal and Corporate Guarantors jointly and severally, expressly invoking the continuing guarantee without requiring prior execution against the borrower.
RBI Circular DoR.MCS.REC.28/01.01.001/2023-24
5. Schedule A (Uncapitalized Penal Charges)
Separates (A) Principal, (B) Normal Contractual Interest, (C) Uncapitalized Penal Charges, and (D) GST, declaring zero compounding of penal charges.
RDB s.19(12)-(13), O.38 R.5 CPC & SARFAESI
6. Negative Lien & Multi-Forum Reservation
Restrains asset alienation, alerts CIBIL/NeSL reporting, and reserves e-DRT OA, NCLT s.95/s.7, Order XXXVII Civil Suit, s.138 NI Act, and s.25 PSS Act.
Complete pre-dispatch evidence indexing ensures unassailable proof of service and computation whether sending a single notice or managing bulk bank loan recall dispatches.
1. Sanction Letter, Loan Agreement & DPN
Establishes facility limit, acceleration covenant, and base contractual interest spread.
2. Continuing Guarantee Deeds & Board Resolutions
Proves Personal Guarantor consent and Corporate Guarantor authorization under Companies Act.
3. CBS Statement (Bankers' Books Act s.2A/4)
Certified printout demonstrating Principal, Normal Interest, and uncompounded Penal Charges.
4. Balance Confirmation / Revival Letters (s.18)
Extends limitation on older CC/OD limits before recall issuance.
5. CERSAI & ROC CHG-1 Charge Certificates
Confirms perfected priority before parallel SARFAESI s.13(2) or DRT attachment relief.
6. Tri-Channel RPAD + s.63 BSA Delivery Proof
Proves postal receipts, tracking POD, email headers, and WhatsApp read receipts in DRT.
Binding Judicial Authority
Supreme Court Precedents on Loan Recall & Guarantee Demands
(2006) 11 SCC 509Bank Creditor Mandate
On-Demand Continuing Guarantee Limitation Starts Only Upon Invocation
Syndicate Bank v. Channaveerappa Beleri & Ors. — Supreme Court of India
The Supreme Court held that where a guarantee agreement renders the guarantor liable 'on demand', a cause of action against the guarantor arises only when the creditor makes a formal written demand invoking the guarantee and the guarantor fails to pay — not automatically on the borrower's first EMI default.
Drafting Impact: Never mark Personal or Corporate Guarantors as mere 'CC' recipients on borrower recall notices. Name them directly as Noticees and demand payment under Section 128 to crystallize limitation cleanly.
(2009) 9 SCC 478Bank Creditor Mandate
Guarantor Liability Is Co-Extensive; Bank Need Not Exhaust Borrower First
Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala — Supreme Court
Reaffirming Bank of Bihar v. Damodar Prasad, the Court held that under Section 128 of the Indian Contract Act, 1872, the surety's liability is co-extensive with the principal debtor, and the creditor bank has complete discretion to enforce recovery directly against the guarantor alongside or prior to exhausting borrower remedies.
Drafting Impact: Empowers bank panel advocates to demand 100% of Schedule A dues directly from solvent guarantors in the very first recall notice and join them in DRT Section 19 OAs.
(2021) 9 SCC 321Bank Creditor Mandate
Corporate Insolvency Resolution Does Not Automatically Discharge Personal Guarantors
Lalit Kumar Jain v. Union of India & Ors. — Supreme Court of India
Upholding IBC Part III personal guarantor notifications, the Court ruled that sanctioning a corporate borrower's resolution plan or involuntary haircut under IBC does not ipso facto absolve personal guarantors of their co-extensive contractual liability under Section 128 Contract Act.
Drafting Impact: Serves as an essential warning clause inside bank recall notices: directors cannot shield personal assets behind corporate restructuring once their personal guarantee has been validly invoked.
Prohibition on Penal Interest Capitalization Reinforced by RBI Fair Lending Norms
Central Bank of India v. Ravindra & Ors. (Constitution Bench) & RBI DoR.MCS.REC.28
A five-judge Constitution Bench barred capitalization of penal interest onto principal. Building on that doctrine, RBI's Circular dated 18 August 2023 abolished 'penal interest' altogether in favour of fixed, transparent Penal Charges that cannot be compounded or added to the interest rate.
Drafting Impact: Replaces obsolete 2% compounded penal-interest recall formats with an itemized, non-compounded Schedule A that defeats borrower counter-objections at DRT admission.
Illustrative Schedule A Computation
Worked Ledger: &rupee;42.50 Lakh SME Cash-Credit Recall Schedule
Suppose an SME borrower's ₹45.00 Lakh Cash Credit & Term Loan slips to NPA after 90 DPD. Under legacy templates, charging 2% compounded penal interest turns the ledger into a single disputed lump sum. Below is the clean RBI-compliant bifurcation ready for DRT Section 19 filing against the defaulting borrower and guarantors:
Schedule A Head
Statutory / RBI Rule
Amount (INR)
(A) Principal Outstanding
Net sanctioned drawdown less recoveries
&rupee;36,50,000
(B) Normal Contractual Interest
10.65% p.a. simple/contractual accrual on (A)
&rupee;4,64,300
(C) Uncapitalized Penal Charges
RBI DoR.MCS.REC.28 — Zero compounding
&rupee;1,15,000
(D) GST @18% on Penal Charges
Separated indirect tax row
&rupee;20,700
Total Recalled Demand
Joint & Several u/s 128 Contract Act
&rupee;42,50,000
Empanelled Advocate Dispatch & CSV Batch Engine
Institutional Dispatch: Test 1 Notice or Upload NPA CSV
Track 1 • Self-Serve Single NPA Test
Dispatch 1 Live Recall & Guarantee Notice (&rupee;999)
Have panel counsel review your bifurcated Schedule A figures, issue the statutory Loan Recall cum Section 128 Guarantee Invocation Notice on Bar Council letterhead, and serve Borrower & Guarantors via Email, WhatsApp, and Speed Post RPAD.
10 to 10,000+ Recalls? Upload NPA CSV via Representees Desk
Automate quarter-end loan recall & guarantor invocation batches across Zonal Offices, SARBs, SAMBs, Small Finance Banks, and Cooperative Banks. Map principal, normal interest, and separate penal charges directly from Core Banking exports.
✓ Segregated branch/circle sender profiles in Representees workspace
✓ Parallel addressee generation for Borrower + up to 4 Guarantors
FAQs: Bank Loan Recall & Guarantee Invocation Notice Format
Why do outdated loan recall templates from Scribd or LawRato fail in DRT?
Most public templates still demand 'compounded penal interest' added monthly onto principal, which directly violates the RBI Fair Lending Practice Directions on Penal Charges in Loan Accounts (Circular dated 18 August 2023) and the Constitution Bench ruling in Central Bank of India v. Ravindra. Borrowers exploit this defect in DRT Section 19 proceedings to challenge account statements and stall recovery.
Why is marking Personal or Corporate Guarantors as 'CC / Copy To' legally defective?
Under Syndicate Bank v. Channaveerappa Beleri (2006) 11 SCC 509, an on-demand continuing guarantee under Sections 126–129 of the Indian Contract Act is triggered only by an explicit written demand upon the guarantor. Sending a mere courtesy copy ('CC') addressed only to the borrower risks arguments that no statutory invocation was made for DRT or IBC Section 95 Form B proceedings.
How must Schedule A bifurcate overdue amounts under RBI Penal Charges rules?
Schedule A in a bank recall notice should display four distinct rows as of the ledger cut-off date: (A) Outstanding Principal Balance, (B) Normal Contractual Interest Accrued at the sanctioned rate, (C) Uncapitalized Penal Charges computed separately without compounding, and (D) Applicable 18% GST on Penal Charges or lawful out-of-pocket costs.
What cure period should banks grant in a pre-DRT loan recall cum guarantee invocation notice?
Scheduled commercial banks, Small Finance Banks, and Cooperative Banks typically grant 7 to 15 days from receipt depending on the facility agreement and asset-siphoning risk. A 15-day demand window establishes undisputed commercial reasonableness before filing an e-DRT Section 19 OA or Commercial Summary Suit.
Can this notice be used for loans below the ₹20 Lakh DRT pecuniary limit?
Yes. While RDB Act Section 1(4) reserves DRT jurisdiction for debts of ₹20 Lakh and above, the same recall cum Section 128 guarantee invocation structure serves as the foundational pre-litigation demand before Commercial Summary Suits (Order XXXVII CPC), Pre-Institution Mediation (s.12A), Pre-Litigation Lok Adalat, or neutral Arbitration.
How should banks dispatch recall notices to prevent borrower denial of service?
Banks should execute synchronized Tri-Channel dispatch: Speed Post with Acknowledgement Due (Speed Post RPAD) to registered, factory, and residential addresses under Section 27 of the General Clauses Act, combined with verified Email and Business WhatsApp bearing a Section 63 Bharatiya Sakshya Adhiniyam (BSA), 2023 certificate.
