Sub-lease & banking query

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

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 ?

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

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. 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 ?

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

2. Any agreements are to be executed?

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.