2 Boroowing Against Property

8/12/2019 2 Boroowing Against Property

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Borrowing Against Property

Hypothecation

Pledge and Hypothecation

Mortgage


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Hypothecation

Hypothecation is not statutory creation but is product ortrade usage.

It is kind of pledge where the pledged goods remain in

the possession of pledger for his use.

Exp : Auto loan and car loans

Hypothecator holds goods as agent and not as owner

Goods are liable to be returned to Hypothecatee under

the circumstance stated in contract If hypothecator refuse other person can seek court help

in getting back the same

Hypothecatee grants right to use goods to Hypothecator


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Where the charge is by way of Hypothecation

creditor cannot directly seize the goods by

entering premises.

He has to do so either with the consent of the

borrower or through a court order.

The creditor does not have right to enter the

premises and lock and seal the same.

A hypothecatee is not in actual possession of

goods. He grants right to use to the borrower.


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Pledge and Hypothecation Pledge

Pledged goods are stored in godown under the lock

and under bank supervision

- Exp Gold loan, Loan against FD shares NSC

No withdrawal or addition is possible without bankpermission

- Some times bank takes constructive possession and

they are allowed to be kept without lock at the

premises of the borrower.

- Borrower is bound to submit regular returns to bank

indicating increase or decrease

- ExpLoan against stock or book debts


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Mortgage of Immovable property

Meaning

Transfer of an interest by pledging a property as

security against an advance as loan

It is transfer of limited interest of an immovableproperty as security against a loan

MortgagorTransferor

MortgageeTransferee

Mortgage deedBy which transfer effected


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Transfer of interest

Mortgagor transfer only interest in property not

ownership

Mortgage is only to secure the due payment of debt

In sale there is transfer of all rights attached toproperty

But in mortgage Mortgagor has several rights to

property such as possession, right to sell , right toenjoy.

Mortgagor transfer any one of right to mortgagee


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Kinds of Mortgages

Sec 58 of Transfer of Property Act 1882

recognizes following 5 mortgages.

1. Simple Mortgage

2. Usufructuary Mortgage

3. Mortgage by condition sale

4. English Mortgage5. Mortgage by deposit of title deeds


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Documents for Company Applying for

Loan

Copy of board resolution

AOABoard resolution subject to AOA Limits

Personal Guarantee of director

Board resolution for Acknowledgement of Debt

Borrowing LimitDirectors of Public company

cannot borrow in excess of paid up capital and free

reserves MOA and AOATo be examined by bank

Registration of charges ( Sec 125 of companies Act )


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Registration of charges

In case of all the companies some charges on their

assets have compulsorily to be registered with ROC

under section 125 of the Companies Act 1956

Some charges to be registered are- Charge on immovable property

- Charge on book debts

- Charge on movable property- Floating charge on undertaking and stock


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Effects of non registration of charge

Particulars of charge with copies of documents have

to be filed for registration within 30 days from the

date of creation of charge

Failure to register the chargescharge will be voidagainst liquidator any creditor of the company

In such case debt becomes unsecured and payable

immediately

Form 8, Form 10 and Form 17


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Hire Purchase Agreements

It is contractual agreement under which the owner lets

his goods on hire to the hirer and offers an option to

purchase the goods in accordance with terms of contract.

The goods are delivered by the owner to a person on acondition that the person receiving such goods should

pay the agreed amount in some timely installment

Property in goods transferred on payment of last

installment The person has right to terminate the agreement before

property passes on


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Elements of HP agreement

HirerPerson who acquire possession of

goods

OwnerA person who delivers possession of

goods under hire purchase agreement

HireSum payable periodically by hirer as per

HP agreement

Hire purchase priceTotal Sum payable by

Hirer under HP agreement


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Lease of Property

Lease of immovable property is a transfer of right of a right toenjoy the possession for a limited period of time

It can be oral or perpetuity

Right of possession is essential part of lease.

Sec 105 to 117 Transfer of Property Act 1882 deals with leaseof immovable property

Sec 105 A lease of an immovable property is a transfer of aright to enjoy such property made for certain time, express orimplied , or in perpetuity in consideration of a price paid or

promised or of money a share of crops, services of any otherthing of value to be rendered periodically or on specifiedoccasions to the transferor by transferee, who acceptstransfer of such terms.


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Elements of lease agreement

Parties - To be competent to enter into contract. A

person can not grant lease to himself

Subject Matter - Subject matter is Immovable

property governed by TP Act . Term Period - Date of commencement and

termination to be mentioned

Consideration or rent Procedure for lease - A lease of immovable property

more than 1 year to be registered


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Exchange / Gift

Sec 118 to 120 of TP Act deals with concept of

exchange

Exchange means the transfer of a thing for another

thing Exchange of one property for another

Property may be movable or immovable


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Exchange

Sec 118

When 2 person mutually transfer the

ownership of one thing for ownership of

another neither thing nor both the things

being money only, the transaction is called

exchange


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Gift A gift is the transfer of ownership of an existing movable

or immovable property voluntarily and gratuitously I e

without any consideration by the donor to the donee

To be valid gift donee acceptance of donee is essential

element.

The acceptance to be given during the life time of donor

Act recognizes gift between living person

Gift by will comes under Succession Act not TP Act

Gift of immovable property has to be through registered

deed signed by Donor and attested by 2 witnesses.

Sec 122 to 129 TP Act deals with Gift


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Sec 122 Defines Gift As follows

Transfer of certain existing movable or immovableproperty made voluntarily and without

consideration, by one person , called donor , toanother called donee and accepted by or behalf ofdonee.

Such acceptance must be made during the lifetime

of the donor. If donee dies before acceptance, thegift is void.

Minor cannot be the donor, but can be donee.

Property gifted must be in existence it cannot be forfuture property.

Gift should be made to ascertainable person not togeneral public.


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Elements of Gift

Two parties - Donor and donee. Donor should becompetent party

Intention to Donate

Tangible subject matter. TP Act does not deal withintangibles

No considerationIt should be without consideration

Free consentIt should not obtained from coercion,undue influence , fraud and misrepresentation

Acceptance by donee unconditionally

Delivery of gift property


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