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anand das (service)     10 August 2011

Sub-lease & banking query

Lessor 'A' has given  two  acres of his own land on lease to a Lessee 'B' to set up industry. 'B' avails loan from a bank to set up his industry and thus  'B' mortgages his leasehold rights to the bank. ‘B’ wants to sub-lease one acre of land out of the said two acres of land to a sub-lessee ‘C’.

1. Is bank’s NOC  required to give one acre land on sub-lease basis to sub-lessee ‘C’ ?

2. Is it mandatory to vacate the charge on one acre of land to be given on sub-lease by the bank before giving it on sub-lease to ‘C’. ?

3. Is it legal/general practice to vacate charge by a bank in such cases or it is unwarranted?

pls guide



Learning

 7 Replies

LLB.ACS Gourav Khatri (COMPANY SECRETARY)     10 August 2011

1.       Is bank’s NOC  required to give one acre land on sub-lease basis to sub-lessee ‘C’ ?

 

Ans. Yes, very much required. The bank will conduct a due diligence and ascertain viability. In the term loan agreement so executed, an addendum shall be required to vary from the original agreement for inclusion of pari-passu charge.

 

2.       Is it mandatory to vacate the charge on one acre of land to be given on sub-lease by the bank before giving it on sub-lease to ‘C’. ?

 

Ans. Vacation of charge is not necessary but modification is permissible in way of creating pari-passu charge on the subject piece of land.

 

3. Is it legal/general practice to vacate charge by a bank in such cases or it is unwarranted?

                pls guide

               

Ans. Views are same as for above 2.

 

 Satyamev Jayate

 

anand das (service)     10 August 2011

Thank you friend for your reply but can you explain it in a simple words? The point is that Sub-lessee 'C' wants charge to be vacated by the bank on that one acre of land i.e. 'C' wants charge free land for his sub-lease . What to do ?

LLB.ACS Gourav Khatri (COMPANY SECRETARY)     10 August 2011

Land can't be charge free unless repaid in full. It can be charged jointly with the prospective lessee.

1 Like

RAJU O.F., (Advocate)     10 August 2011

It is the discretion of the bank to consider to release one acre of land from the mortgage of the leasehold property.  If the remaining one acre is found to be of suffficient value, to cover the loan dues, the bank may release such mortgage charge.

1 Like

anand das (service)     10 August 2011

1. So can getting a letter of ceding parri passu charge to the extent of creating sub-lease on the subject land shall be sufficient ?

2. Will this sub-lease have to be registered as a charge with ROC ?

anand das (service)     10 August 2011

1. What is the procedure of releasing mortgage or charge on one acre of property?

2. Any agreements are to be executed?

 


 

LLB.ACS Gourav Khatri (COMPANY SECRETARY)     10 August 2011

1.    So can getting a letter of ceding pari passu charge to the extent of creating sub-lease on the subject land shall be sufficient?

Surely, you need to get it and exchange it between the both lenders. You also need to modify the charge.

2.    Will this sub-lease have to be registered as a charge with ROC?

Yes. File e-Form 8 with the Registrar of Companies within 60 days of the date of modification.

3.    What is the procedure of releasing mortgage or charge on one acre of property?

No question of release arises, as it is a matter of modification of charge. In case you have redeemed entire loan you get an NOC issued by the lenders and that NOC is filed with ROC for satisfaction of charge through filing e-Form 17. But in your case only modification is taking place; thus only e-Form 8 can be filed.

4.    Any agreements are to be executed?

Yes. Also you need to check it with the existing agreement. There must be some condition of modification mentioned. Date of such addendum shall be treated as the date of modification of charge.

 

 


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