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Jayanta Bandyopadhyay   17 March 2025

First and second charge on same asset basket

Based on inter-creditor agreements , two lenders are creating a first charge and a second charge on the same assets on the assets of a borrower. In a term loan, lenders have a first charge and a second charge is created. In the context of working capital, the Based on inter-creditor agreements , two lenders are creating a first charge and a second charge on the same assets on the assets of a borrower. In a term loan, lenders have a first charge and a second charge is created. In the context of working capital, the arrangement is reversed, where the working capital lender has a first charge, and the term loan lender has a second charge. The concept of pari passu is applied, where both lenders share the charge equally without priority. My query is that if the borrower fails completely and then how the same asset basket will be divided between two lenders, having intermittent first/second charge for working capital loan and opposite charges for term loan. Kindly guide.



 2 Replies

vaibhav jain (none)     17 March 2025

The Creditor who has the first charge according to the agreement will be entitled for redemption as for the second creditor, he will have right after first creditor. Another question that requires consideration are both these creditors secured creditors? The problem will require complete set of facts as to what is stated in agreement. Thank you.

kavksatyanarayana (subregistrar/supdt.(retired))     17 March 2025

The agreements shall be verified to form an opinion.  Consult a local advocate.


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