Mortgage against loan
Vivek
(Querist) 18 June 2014
This query is : Resolved
Dear SIr,
Case : ABC Pvt Ltd. has given loan to another unrelated XYZ Pvt Ltd Co. for interest. In lieu thereof, XYZ Ltd. has given exclusive mortgage to ABC Ltd.
Query
a) Is Loan bad in law ?
b) Can mortgage deed be registered ?
If yes what is stamp duty to be paid ?
Devajyoti Barman
(Expert) 18 June 2014
Registration is not required if the same is done through Equitable Mortgage.Equitable Mortgage can happen on deposit of title deed only.
In all other case registration is mandatory.
Stamp duty differs from state to state.
Rajendra K Goyal
(Expert) 18 June 2014
Equitable mortgage does not need registration.
Stamp duty differ from state to state.
malipeddi jaggarao
(Expert) 18 June 2014
1. It is not bad in law. It is the loan extended to another company and this figure would appear against secured creditors in the assets side of the ABC Pvt.Ltd. company's balance sheet.
2. There are two ways for creating mortgage. One is legal mortgage in which case it has to be registered advolerum stamp duty. The one is equitable mortgage - generally financial institutions will take this type of mortgage the salient features are the title deeds are to be delivered to the mortgagee with an intention to secure the debt. There should be a debt. There should be delivery of title deeds. It is clear that the delivery is to secure the debt. Moreover this type of mortgage will not appear in the Encumbrance Certificate. There is inherent risk that the mortgagor may deal with the property by submitting certified copies of title deeds. Hence as far as concerned legal mortgage is the best option. Even in case of Equitable Mortgage also the creditor is required to submit a declaration and supposed to pay stamp duty (not advolerum) in many States nowadays. Hence I suggest you to go for legal mortgage.
3. Stamp duty advolerum - as per the schedule of the concerned State Stamp Duty Act. It differs from State to State.
R.K Nanda
(Expert) 18 June 2014
agree with experts.
Vivek
(Querist) 18 June 2014
Pls note neither of the 2 Pvt Co's are NBFC's or Financial Institution.
Does the position change if it is from Individual to a non -NBFC Pvt CO ?
Biswanath Roy
(Expert) 20 June 2014
Since it is a case of Private Limited Company so I THINK THAT THEY HAVE SUFFICIENT MONEY TO OBTAIN OPINION BY PAYING FEES. Hence, no reply.
T. Kalaiselvan, Advocate
(Expert) 21 June 2014
The opinions expressed by expert Mr. Barman are agreeable to me too.
An EM need not be registered since the title deeds are held in deposit by the lender.
