Sanjeev Gupta (officer) 02 January 2016

Extension of charge by equitable mortgage

A person created registered mortgage in favour of bank as security to credit facilities. However, later on he applied for additional facilities and bank wants to extend charge for additional facilities against already mortgaged property. Please help whether bank can accept additional charge (extension of charge) by way of equitable mortgage or it has to compulsorily obtain simple (registered mortgage). Any judgment if referred on this issue will be of additional help.

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Dr Katta Venkata Rama Krishna (Retd Sr Director Govt of India/ Advocate) 03 January 2016

1) To extend charge for additiional credit limits on the same property already under EM, the EM has to be created again.

2) In some States, for Mortgage by way of Deposit of title deed done on 1st April 2013 and thereafter, if an agreement is executed (signed) between the Mortgagor and the Mortgagee, it has to be compulsory registered.

3) The main objective of this amendment is to safeguard the interests of banks and the society. And also with an objective of preventing fraudulent practices like availing loans from multiple banks on same property or disposing of the property which is already mortgaged.

4) Hence the charges as applicable in the respective State law are to be paid at the concerned Registrar even for EM. As such the banks are getting the charge recorded in the books of Registrar unlike in the past for EMs also.