Mortgage and Hypothecation
This query is : Resolved
12 March 2009
What is mortgage and how it differ from hypothecation? How is hypothecation differ from pledge?
12 March 2009
Mortgage is defined in section 58 of the Transfer of property Act,1882.It is the transfer of an interest in specific immovable property for the purpose of securing payment of money advanced by way of loan.
Hypothecation is not defined in law. In commercial parlance, it refers to the creation of an equitable charge which is created in favour of the lender by executing an agreement in respect of the movable securities of the borrower.
Pledge is defined in section 172 of the Indian Contract Act,1872. It is the bailment of goods as security for payment of a debt or performance of a promise.The ownership of the goods remains with the pledger while the lender gets certain defined interest in the goods.
Hypothecation is not defined in law. In commercial parlance, it refers to the creation of an equitable charge which is created in favour of the lender by executing an agreement in respect of the movable securities of the borrower.
Pledge is defined in section 172 of the Indian Contract Act,1872. It is the bailment of goods as security for payment of a debt or performance of a promise.The ownership of the goods remains with the pledger while the lender gets certain defined interest in the goods.
11 April 2009
Chakrapani has brought to fore the differences, I just wish to add that hypothecation stands defined in law for several years now.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act defines "Hypothecation means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance, and includes floating charge and crystallization into fixed charge on movable property.”
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act defines "Hypothecation means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance, and includes floating charge and crystallization into fixed charge on movable property.”
Message likes :
1 times
08 August 2011
Dear Mr. Chakrapani and Mr. Sachidanand,
Good responses above.
I was wondering if you could enlighten us, as to what kind of property is a 'bank account'? Can it be mortgaged?
Thanks.
Joy
Good responses above.
I was wondering if you could enlighten us, as to what kind of property is a 'bank account'? Can it be mortgaged?
Thanks.
Joy
09 August 2011
Transfer of Properties Act (TPA) does not define "immovable property". Case laws define it as a property that cannot be moved without damaging the earth on which it situates. Bank account, which is a debt ( I take it that it is a deposit account), it would seem, is not an immovable property. Since mortgage is defined as transfer of some interest in an immovable property, I would conclude that a bank account cannot be mortgaged.
10 August 2011
Then how would you explain a Hypothecation of Bank Accounts?
This is usual for working capital loan and export finance, debenture issue, and other such transactions, where the bank will insist that all receivables AS WELL AS the bank account, where the receivables are deposited, shall be hypothecated to the bank.
This is usual for working capital loan and export finance, debenture issue, and other such transactions, where the bank will insist that all receivables AS WELL AS the bank account, where the receivables are deposited, shall be hypothecated to the bank.
10 August 2011
As Chakrapani has descibed above, in Hypothecation one creates a charge over movable properties. Bank accounts are movable properties and therefor lend themselves to be hypothecated.
Some time back I had blogged about mortgage, pledge, and hypothecation at http://sachasingh.blogspot.com/2009/04/securities-collaterals-and-guarantees.html
You may find fuller explations there (teh blog post is in three parts the URL is of the first part dealing with pledge)
Some time back I had blogged about mortgage, pledge, and hypothecation at http://sachasingh.blogspot.com/2009/04/securities-collaterals-and-guarantees.html
You may find fuller explations there (teh blog post is in three parts the URL is of the first part dealing with pledge)
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Where to show the RCM on Rent paid to unregistered landlord
- Is Aadhar PAN linking required for opening bank account?
- Applicability
- CPC Processing IT Return for AY 2023-24 without recognizing the Taxation Option under New Regime
- Offsetting interest income against derivative trading losses
- RCM - commercial rent paid to URP under GST
- TDS NUMBER SURRENDER
- Legal heir raised refund , but refund issued to the closed account of deceased.
- Gst Sales of FY 2023-24
- GSTR-3B - Do I file nil when there is no sale but I've bought raw materials
- Whether still royalty
- 20% OF DEMAND PAYMENT IN APPEAL
- Issue of gst e invoice
- Interchangeable words in accounts
- Adjusted profit/Loss in the case of LLP and Pvt. Ltd.company
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
- Query for dubts
- Regarding Resignation by Auditor from Pvt. Ltd.
Trending Online Classes
-
Excel Mastery Program
CA Rishabh Pugalia
CAclubindia
