An Azerbaijani court has ruled that the existence of an unpaid loan, by itself, does not justify automatically restricting a guarantor’s right to dispose of property. A bank seeking a temporary restriction must show a concrete risk that a future judgment could not otherwise be enforced.
The Shirvan Commercial Court reached that conclusion when it rejected a bank’s request to prohibit the sale or transfer of two cars owned by a guarantor. The Shirvan Court of Appeal upheld the ruling, according to reports published on Oct. 28.
Bank Did Not Prove Cars Were at Risk of Sale
Case materials showed that a bank established a credit line with a limit of 500,000 manats and disbursed 30,000 manats to the borrower for 18 months at an annual interest rate of 22%. A separate individual signed a guaranty agreement securing the borrower’s obligation.
The borrower’s outstanding debt stood at 29,764.93 manats, according to a statement submitted by the bank. The bank said it intended to file a debt-collection lawsuit and asked the court in advance to prevent the guarantor from selling or otherwise transferring the two vehicles.
The court found that the bank had not produced specific evidence showing that the guarantor was preparing to sell the cars, transfer them to third parties, conceal the property or take another step that could obstruct enforcement of a future judgment.
What the Ruling Means
The court said an interim measure cannot be used after a loan is issued to expand the security arrangements supporting the credit agreement. As a professional lender, the bank had an opportunity to assess the borrower’s ability to pay, the credit risk and the available forms of security when it made the loan.
The decision does not cancel the debt or release the guarantor from the guaranty agreement. The courts considered only whether there were procedural grounds for a temporary restriction on the property, not the merits of a future collection claim or the final extent of the guarantor’s liability.
Sources: Vesti Baku; Banker.az; Azerbaijan’s Civil Procedure Code.