Equitable mortgage followed by registered memorandum
Radhika Rangarajan
(Querist) 07 October 2011
This query is : Resolved
I have granted Trade Finance Cash Credit Account in my Bank Branch for Rs 40.00 lacs.We have created Equitable Mortgage by Deposit of Title Deeds followed by Registered Memorandum on the immovable property offered as security.We have taken EC reflecting the Bank Branch name as Mortgagee for the Cash Credit Limit Amount.
The customer has requested for adhoc limit of Rs 10.00 lacs to support seasonal sales against the same property.Our Higher authorities has sanctioned the amount prescribing extension of mortgage formalities.
The customer is prepared to pay the stamp duty on mortgage deed and enter into supplementary narration in Bank's Title Deed Register but not willing to execute Regd Memorandum as the stamp duty on Registered Memorandum is hiked in Tamilnadu.
What are the implications in not doing the Regd Memorandum on the adhoc limit of Rs 10.00 lacs?
Suppose if the Regd Memorandum also is done, what will be the position if the adhoc limit is closed.Whether the supplementary narration and Regd Memo on Rs 10.00 will get an annulled?
The party is eligible for adhoc sanction twice in a year.If we sanction second adhoc,has the party to execute one more Supplementary narration and Regd Memorandum and incur expenses for the second time.
If the Bank has not lifted the Regd Memorandum in the Books of Registrar done earlier for Rs 10 lacs, whether that can be treated as valid for the second adhoc limit in a year.
Radhika Rangarajan
Manager of a Nationalised Bank
malipeddi jaggarao
(Expert) 08 October 2011
If the customer is prepared for supplementary narration in Bank's Title Deed Register but not willing to execute Regd.Memorandum:
Ans: As far as Bank is concerned there is no difference as its mortgage charge is already registered for original limits. If you record supplementary narration in your books and not got it registered, it is a violation of stamp duty act. This is the implication.
b) If Regd.Memorandum duly stamped is executed, you will have get the release of liability to this extent recorded on the books of Sub-Registrar. It will not get annulled automatically unless the Bank files satisfaction to that extent.
c) If the Bank has not lifted the earlier memorandum for second adhoc limit, it can be treated as valid for the second adhoc limit.
The best solution is while sanctioning the adhoc limits, you can bring these facts in the proposal itself proposing a suitable affidavit by the party stating that he is willing to get the addl.limit regd.with the Registration authorities as when required by the Bank. You can waive registration as your debt is secured by regd.mortgage against the original limit and Bank will not release the mortgage unless the entire amount is repaid. But do not record any addl.limits in your Title Deeds Register as it may create problems for under stamping and violation of Stamp Duty Act.
However, though the sanction is within your delegated authority, I suggest you seek waiver of Regd.Mortgage as explained by your next higher authority in your own interest.
R.Ramachandran
(Expert) 08 October 2011
You are a nationalised bank. You may be having your own empanelled lawyer / legal adviser to advise you. It would be advisable for you to take the opinion from your own such sources.
Sailesh Kumar Shah
(Expert) 08 October 2011
It would be better to take advised of empanelled lawyer / legal adviser.
prabhakar singh
(Expert) 08 October 2011
And i know that you are not seeking opinion but only gathering.Nothing bad in my view even if you sanction without a fresh paper with an indemnity that the equatable property could be proceeded as secured against even this loan advance every time twice a year as per requirement.
J K Agrawal
(Expert) 08 October 2011
without registration of mortgage deed you loan is as good as unsecured loan.
You may impose a condition in second agreement that any payment by the borrower will first be credited in second loan and as such you can secure yourself a bit.
If you impose any burden over the property it will amount to mortgage and registration is must and stamp duty is payable.
Guest
(Expert) 09 October 2011
I agree with the opinion of Mr. Jaggarao.
Sri Vijayan.A
(Expert) 10 October 2011
Registration is not necessary in your case.
deposit of title deeds itself had created the mortgage, which has been registered and reflected in the EC.
This is enough to make evidence of mortgage.
The further registration does not make any new sense, because the same bank shall discharge the property until all its loans are cleared.
In light of the above, second registration is not at all needed.
RAJU O.F.,
(Expert) 13 October 2011
You may obtain the momorandum in stamp paper of adequate value, for extension of mortgage covering the adhoc limit. Registration of the said memorandum is not necessary, since it was already registered earlier.
Radhika Rangarajan
(Querist) 16 October 2011
Sirs,
Thank you all for giving me detailed views and sharing your erudition and experience.
The Bank's Law Department interprets in this matter that once the first adhoc limit is closed, the supplementary narration in title deeds register made for that purpose gets extinguished automatically.They feel that the Bank should lift the registration made at the Registration of assurances for the first adhoc limit.Subsequently if a second adhoc limit is sanctioned, fresh supplemental narration to be made in title deeds register and the same should be registered.This is the contention of Bank's Law Department.As field level Branch Managers we have to face stiff resistance from the customers, especially good regular and long standing customers with impeccable track record towards frequent registration and stamp expenses because of the steep hike announced by the state government in Tamilnadu. Is there a way out legally as per Transfer of Property Act,Stamp Act and Registration Act to help the customers with one time expenses?Whether one time Registration of adhoc limit will stand the test of LAW, if it is not lifted at the Registrar of Assurances?
Radhika Rangarajan
Manager of A Nationalised Bank
