Equitable mortgage

This query is : Resolved 

17 January 2012

I am a banker. With me a borrower has borrowed Rs.40 crore as term loan in 2010 and created first charge by deposit of title deed on its land. Now he has been sanctioned another term loan of Rs.11 cores and 14 crores working capital which is secured by first charge and second charge respectively on the same property. In our stamp stamp duty on MOE is 0.25% or maximum 5 lakh. Now for this additional facility to create mortgage how much stamp duty is payable. Borrower is insisting that stamp duty only on 11 crore that is first charge basis Rs.2.75 lakh basis is payable. while our view is it will attract stamp duty on entire additional assistance sanction i.e 25 crore and Rs.5 lakh is payable. Pl clarify

ajay sethiOnline (Expert)
17 January 2012

submit document for adjudiction to settle the controversory, in the event borrower refuses to pay stamp duty as per your calculation if tomorrow borrower defaults then if you file recovery proceedings before DRT the borrower will take defenbce that document is under stamped

Nadeem QureshiOnline (Expert)
17 January 2012

Dear querist
Mr. sethi is right

V R SHROFF (Expert)
17 January 2012

Sethi's advise very practical and true, no dispute later on.

Raj Kumar MakkadOnline (Expert)
18 January 2012

I endorse the views of sethi.

Devajyoti BarmanOnline (Expert)
18 January 2012

No, he will have to pay for stamp duty on both the charges.
What is the location of the Bank as state Acts may differ on this account.

R.Ramachandran (Expert)
18 January 2012

I have a fundamental doubt here.
Equitable Mortgage means simply depositing the title deeds of the property in question with the banker.
This does not require any registration.
When there is no registration involved, where is the question of any Stamp Duty.
Further more, now a days, such equitable mortgages have to be registered with the Authority created under the SARFAESI Act.

malipeddi jaggaraoOnline (Expert)
18 January 2012

I agree with the views of Mr.Sethi. Adjudication is the best way to resolve the confusion.

Mr.Ramachandran Sir, nowadays many State Governments are collecting stamp duty even though the title is deposited with the bank/financial institutions for creating the mortgage. The Memorandum (abridged one) is to be registered with the concerned registering authorities but not the entire mortgage deed as in case of legal mortgage. for this purpose the stamp duty is separate and lesser. Banks and Financial institutions are also benefited so that their charge will appear in the encumbrance certificate whereas in case of equitable mortgage without registration of Memorandum, the charge does not appear in the EC.

Deepak Nair (Expert)
18 January 2012

I too endorse the views of Mr.Sethi. Go for adjudication.

Surendra Gupta (Expert)
18 January 2012

I endorse the views of Shri R Ramachandran. In case of simple equitable mortgage (by deposit of title deeds), no registration is required

Shashikant Patil (Expert)
19 January 2012

First loan Rs 40 crores and additional loan Rs 11 & 14 crores respectively (total 75 crores)on same land. Whatever he borrows but cannot escape from paying a stamp duty. It is better to adjudicate and for this purpose only land market value will not be considered but also the structure and machinery standing on it will be taken in to account.

Dr Anil Kumar Singh (Expert)
19 January 2012

I agree with the experts. Go for adjudication and it will save your interests also for future.

RAJU O.F., (Expert)
19 January 2012

An individual cannot create equitable mortgage by deposit of title deeds, it is only available to banks. If you are a responsible officer of the commercial bank, please refer the subject matter to your panel legal advisor rather than to get opinions casually.

Advocate. Arunagiri (Expert)
19 January 2012

Even individuals can create EM by deposit of title deeds, it is not the exclusive rights of the banks.

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