Hypothecation Deed - Template, Sample Form to Complete Pro · IN-law

DEED OF HYPOTHECATION

This Deed of Hypothecation (the "Deed") is made and executed on this ________ (the "Effective Date") at ________.

BY AND BETWEEN:

________, son/daughter of ________, aged ________ years, holding PAN ________ and Aadhaar No. ________, resident of ________ (hereinafter referred to as the "Borrower", which expression shall, unless excluded by or repugnant to the subject or context, be deemed to include his/her legal heirs, executors, administrators, successors and permitted assigns) of the ONE PART;

AND

________, son/daughter of ________, aged ________ years, holding PAN ________ and Aadhaar No. ________, resident of ________ (hereinafter referred to as the "Lender", which expression shall, unless excluded by or repugnant to the subject or context, be deemed to include his/her legal heirs, executors, administrators, successors and permitted assigns) of the SECOND PART.

The Borrower and the Lender are hereinafter individually referred to as a "Party" and collectively as the "Parties".

WHEREAS:

A. The Borrower is engaged in the business of:

________

B. The Borrower requires funds for the following purpose:

________

For the aforesaid purpose, the Borrower has requested the Lender to provide financial assistance of an amount of Rs. ________ (Rupees ________ only) (the "Loan"), and the Lender has agreed to grant the same under the terms of the loan agreement executed/to be executed on or about the date hereof (the "Loan Agreement") between the Parties, recording inter alia the terms and conditions of the Loan.

C. One of the terms of the grant of the Loan by the Lender is that the Secured Obligations (as defined hereunder) shall be secured, inter alia, by way of a first ranking exclusive charge by way of hypothecation over the Secured Property (as defined hereunder) in favour of the Lender.

D. The Lender has called upon the Borrower to hypothecate the Secured Property and to execute this Deed therefor, and the Borrower has agreed to do so by these presents.

NOW THEREFORE THIS DEED WITNESSETH AS FOLLOWS:

(1). DEFINITIONS

In these presents, unless there is anything in the subject or context inconsistent therewith, the capitalised terms listed below shall have the following meanings:

(a) "Applicable Law" shall mean all applicable statutes, enactments or acts of any legislative body in India, including the Indian Contract Act, 1872, the Transfer of Property Act, 1882, the Sale of Goods Act, 1930, the Indian Stamp Act, 1899 (and the applicable State stamp legislation), the Registration Act, 1908, the Companies Act, 2013 (to the extent applicable), and all laws, ordinances, rules, byelaws, regulations, notifications, guidelines, policies, directions, directives and orders of any Governmental Authority, together with any modifications or re-enactments thereof;

(b) "Asset Cover" shall mean the aggregate value of all the Secured Property which is to be maintained by the Borrower at ________ times the principal amount of the Loan, on an exclusive first ranking basis from the date of execution of this Deed until the Secured Obligations are duly discharged to the satisfaction of the Lender;

(c) "Business Day" shall mean a day, other than a Saturday, Sunday or a public holiday, on which banks are open for general business in ________, and "Business Days" shall be construed accordingly;

(d) "Event of Default" shall mean any of the events of default set out in the Loan Agreement, and shall include any breach by the Borrower of any of its obligations, covenants, representations or warranties under this Deed;

(e) "Finance Documents" shall mean the Loan Agreement, any Security Document and any other document designated as such by the Lender and the Borrower;

(f) "Governmental Authority" shall mean the President of India, the Government of India, the Governor and the Government of any State or Union Territory in India, any ministry or department thereof, any municipal or local government authority, the Reserve Bank of India, the Securities and Exchange Board of India, any authority or private body exercising powers conferred by Applicable Law, and any court, tribunal or other judicial or quasi-judicial body, and shall include, without limitation, any stock exchange and any regulatory body;

(g) "Loan" shall have the meaning assigned to such term in Recital B above;

(h) "Loan Agreement" shall have the meaning assigned to such term in Recital B above;

(i) "Receiver" shall mean any person appointed as a receiver for the enforcement of the Charge under the terms of this Deed;

(j) "Rs." or "Rupees" shall mean the Indian Rupee, the lawful currency of India;

(k) "Secured Obligations" shall mean:

(I) all of the Borrower's obligations and liabilities under or in connection with any Finance Document and any other document pertaining to the Loan, including the repayment of the principal amount of, and payment of interest on, the Loan and all costs, charges, enforcement expenses and other amounts payable by the Borrower in respect of the Loan; and

(II) all monies due and payable to the Lender in terms of and pursuant to this Deed and the Loan Agreement, including any fees payable by the Borrower to the Lender;

(l) "Security" or "Charge" shall mean the security created by the Borrower in favour of the Lender under the terms of this Deed, being a first ranking exclusive charge by way of hypothecation over the Secured Property to the extent of ________ times the principal amount of the Loan, and shall include such other security as may be mutually agreed between the Parties;

(m) "Secured Property" shall have the meaning assigned to such term in Clause 7 below;

(n) "Security Documents" shall mean the security created or expressed to be created in favour of the Lender, and shall include this Deed, the Loan Agreement and any additional documents executed or to be executed by the Borrower for the creation of any security in relation to the Loan.

(2). INTERPRETATION

In this Deed, unless the context otherwise requires:

(a) words denoting the singular shall include the plural and vice versa;

(b) the pronouns "he", "she", "it" and their cognate variations are used interchangeably and shall be interpreted in accordance with the context;

(c) words denoting a person shall include an individual, corporation, company, partnership, trust or other entity;

(d) headings and bold typeface are inserted for convenience only and shall not affect the construction of this Deed;

(e) references to the word "include" or "including" shall be construed without limitation;

(f) recitals, schedules and annexures to this Deed shall form an integral part hereof;

(g) words and expressions used but not defined herein shall have the meanings assigned to them in the Loan Agreement.

(3) COVENANT TO REPAY

(a) In pursuance of the Loan Agreement and in consideration of the Lender having granted and/or agreed to grant the Loan to the Borrower for the purposes and subject to the terms and conditions set out in the Loan Agreement, the Borrower hereby covenants with the Lender that it shall repay the Secured Obligations to the Lender on the relevant due date(s).

(4) INTEREST

(a) Interest shall be payable by the Borrower on the Loan at the rate of ________% (________ percent) per annum, calculated and payable in the manner set out in the Loan Agreement. The rate of interest shall not be usurious and shall be in compliance with Applicable Law.

(5) REPAYMENT

(a) The Borrower shall repay the Loan on or before ________ (the "Maturity Date") together with interest and all other charges, fees, costs, expenses and other amounts due and payable under this Deed and the Finance Documents.

(6) PREPAYMENT

(a) The Borrower shall be permitted to prepay the principal amount of the Loan in accordance with the terms of the Loan Agreement.

(b) Any prepayment made by the Borrower shall be applied by the Lender in the following order:

(I) firstly, towards payment of accrued interest;

(II) secondly, towards any costs, expenses or fees accrued in relation to this Deed and the Finance Documents;

(III) thirdly, towards the principal amount of the Loan;

(IV) fourthly, as a prepayment towards future payments due in accordance with the Loan Agreement.

(7) CHARGE

(a) In consideration of the Lender having granted and/or agreed to grant the Loan to the Borrower and as continuing security for the payment and discharge of the Secured Obligations, the Borrower hereby hypothecates to the Lender, by way of a first ranking exclusive charge, all rights, title, interest, benefit, claims and demands of the Borrower in, to or in respect of the movable property and assets described as under:

________

(b) The details of the assets are more particularly described in Schedule-A annexed to this Deed (collectively, the "Secured Property"). TO HAVE AND TO HOLD all and singular the Secured Property, present and future, unto and to the use of the Lender, as continuing security for the Secured Obligations (the "Charge").

(c) The Borrower shall maintain a true and complete record of the Secured Property and forward the same to the Lender. Where required under Applicable Law, the Borrower shall undertake all measures necessary to file the requisite forms for the perfection of the Charge with the Registrar of Companies, the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) and/or any other authority, within 30 (thirty) calendar days from the date of creation of the Charge.

(d) During the term of this Deed, the Borrower shall maintain the value of the Secured Property at least equivalent to the amount borrowed together with accrued interest. In the event the value of the Secured Property falls below the accrued balance amount, the Borrower shall add such additional assets as security and forthwith inform the Lender of the same.

(8) USE OF THE SECURED PROPERTY

(a) The Borrower hereby declares that the Secured Property shall at all times be the absolute property of the Borrower and shall be at the sole disposal of the Borrower in accordance with the Finance Documents, and subject to the Charge created and/or to be created hereunder, shall be free from any charge, trust, pledge, lien, claim or encumbrance created after the execution of this Deed, until the Secured Obligations are duly discharged to the satisfaction of the Lender.

(b) The Borrower shall not create any charge, mortgage, lien or other encumbrance upon or over the Secured Property or any part thereof, except in favour of the Lender, nor suffer any such charge, mortgage, lien, encumbrance, attachment or distress to affect the same or any part thereof.

(c) Rights of the Borrower to the Secured Property:

(I) Notwithstanding anything contained hereinabove, so long as no Event of Default has occurred and is continuing, and subject to the Borrower maintaining the stipulated Asset Cover, the Borrower shall be entitled to hold and enjoy the Secured Property and to deal with the same in the ordinary course of business in such manner as the Borrower may deem fit, including to sell, call in, collect, convert, replace, substitute, exchange, deal with or exercise any right in respect of all or any of the Secured Property on such terms and for such consideration as the Borrower may deem fit.

(II) Any assets so added shall constitute and shall always be deemed to constitute a part of the Secured Property and deemed to form part of Schedule-A.

(III) The Borrower shall take all steps necessary to update the records with the revised list of assets and provide the same to the Lender, and shall cause the perfection of such updated security, including filing the necessary forms for recording the modification of the Charge with the applicable authority, within 30 (thirty) calendar days of such modification.

(IV) Upon the occurrence of any Event of Default, the Charge shall become enforceable, and the Lender shall be entitled to realise or enforce the Charge over the Secured Property or any part thereof in accordance with the terms of this Deed and Applicable Law.

(9) INFORMATION

(a) The Borrower shall submit a periodic report consisting of an updated Schedule constituting the Secured Property, sufficient to maintain the Asset Cover (the "Hypothecated Asset Report"), at intervals of ________.

(b) Upon the creation of the Charge, the Borrower shall, within 15 (fifteen) calendar days from the date of creation of the Charge, and subsequently on a quarterly basis (unless otherwise specified), furnish to the Lender a statement, signed by the Borrower or its authorised signatory, certifying:

(I) the value of the assets under the Secured Property;

(II) that the Borrower is maintaining the Asset Cover in accordance with the provisions of this Deed;

(III) that the assets constituting the Secured Property have not been charged or hypothecated in favour of any other party except the Lender and are free from any encumbrances;

(hereinafter referred to as the "Secured Property Certificate");

(IV) provided that the said statement may, where required by the Lender, be supported by a certificate of an independent chartered accountant of the Borrower on a quarterly basis.

(c) The Borrower shall, whenever required by the Lender, give full particulars of the Secured Property, and shall furnish and verify all statements, reports, certificates and information as reasonably required by the Lender, and make, furnish and execute all necessary documents to give effect to the Charge.

(d) The Lender or its nominees shall, with reasonable prior written notice, be entitled at all times to inspect and take particulars of all or any part of the Secured Property and the records maintained in respect thereof.

(10) COSTS AND EXPENSES

(a) The Borrower shall, on demand, pay to the Lender and/or reimburse the Lender for all costs, charges, expenses (including legal fees), stamp duty, registration charges, taxes and other levies incurred or to be incurred by the Lender in connection with the negotiation, preparation, execution, registration, perfection, administration, preservation, protection, modification and enforcement of this Deed and the Security created hereunder, together with interest thereon at the rate applicable to the Loan from the date of such payment until the date of reimbursement by the Borrower.

(b) All such costs, charges and expenses, until reimbursed by the Borrower, shall form part of the Secured Obligations and shall be secured by the Charge created under this Deed.

(11) RELEASE OF SECURITY

(a) When the Secured Obligations are duly discharged to the satisfaction of the Lender, the Lender shall, at the request and cost of the Borrower, and upon the Borrower submitting proof of having discharged the Secured Obligations to the reasonable satisfaction of the Lender, release and discharge the Charge and execute such deeds and documents and do all such acts and things as may be necessary for the purpose, including satisfaction of the charge with the relevant authorities.

(b) The Charge created by the Borrower is in addition to and independent of any other security interest, right or remedy now or at any time hereafter held by or available to the Lender. The Charge shall neither be merged in, nor in any way exclude, prejudice or be affected by, any other security interest, right of recourse or other right whatsoever (or the invalidity thereof) which the Lender may now or at any time hereafter hold or have in respect of the Secured Obligations.

(c) The powers conferred by this Deed on the Lender and any Receiver appointed hereunder are cumulative, without prejudice to their respective powers under Applicable Law and/or the Loan Agreement, and may be exercised as often as the Lender or the Receiver thinks appropriate. The powers of the Lender and the Receiver shall in no circumstances be suspended, waived or otherwise prejudiced by anything other than an express waiver or variation in writing by the Lender.

(12) REPRESENTATIONS, WARRANTIES AND COVENANTS

The Borrower hereby represents, warrants and covenants to the Lender as follows:

(a) the Borrower is absolutely entitled to the Secured Property;

(b) the Secured Property and every part thereof is, and will at all times be, the absolute property of the Borrower, at the sole disposal of the Borrower, and is not subject to any lien, hypothecation, charge or other encumbrance (except the Charge created by this Deed), and as to future properties, the same shall likewise be the unencumbered, absolute and disposable property of the Borrower;

(c) the assets constituting the Secured Property shall satisfy and continue to satisfy, at all times until repayment of the Secured Obligations, the selection criteria set out as follows:

________

(d) the Borrower shall not, during the continuance of these presents and the Security hereby created, create any further charge or encumbrance over the Secured Property until the Secured Obligations are duly discharged to the satisfaction of the Lender;

(e) this Deed has been duly and validly executed and delivered by the Borrower and constitutes legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with its terms;

(f) notwithstanding anything to the contrary stated in this Deed or in any other Finance Document, the Borrower shall take all necessary actions and cause the Security (including as and when Schedule-A is modified or updated upon addition/substitution/replacement of assets) to be perfected by making the necessary filings and registrations with the applicable authority, as required under Applicable Law;

(g) the Borrower shall submit proof of such perfection of the Security to the Lender within the prescribed period;

(h) the execution, delivery and performance by the Borrower of this Deed and the acts and transactions contemplated hereby do not and will not, with or without the giving of notice or lapse of time or both, violate, conflict with, require any consent under or result in a breach of or default under:

(I) any Applicable Law to which the Borrower is subject;

(II) any order, judgment or decree applicable to the Borrower;

(III) any term, condition, covenant, undertaking, agreement or other instrument to which the Borrower is a party or by which the Borrower is bound;

(i) all information set forth in this Deed and other related deeds and documents, and all information furnished by the Borrower to the Lender, is true and correct and is not, and shall not be, misleading whether by reason of omission to state a material fact or otherwise;

(j) the Borrower or any person acting on behalf of the Borrower shall not do any act or abstain from doing any act that would diminish, alter or adversely impact the rights of the Lender hereby conferred;

(k) the Borrower shall, at all times during the continuance of these presents, duly and punctually pay any imposts, duties, taxes, premiums and outgoings lawfully payable in respect of the Secured Property, and shall prevent any part of the Secured Property from becoming charged with the payment of any such imposts, duties or taxes;

(l) if at any time during the subsistence of this Deed the Lender is of the opinion that the Security has become inadequate to secure the Secured Obligations, then upon notice to that effect by the Lender providing the calculation of such inadequacy, the Borrower shall furnish such additional security as may be acceptable to the Lender in respect of such inadequacy;

(m) the Borrower covenants to perfect the Charge created under this Deed within 30 (thirty) calendar days from the date of execution of these presents;

(n) the Borrower shall bear and pay the stamp duty on this Deed and all costs and charges (including penalties, if any) incurred in connection with the stamping and registration of these presents, and if any such amounts are paid by the Lender, the Borrower shall forthwith reimburse the Lender together with accrued interest thereon, and until such reimbursement such amounts shall form part of the Secured Obligations.

(13) MAINTENANCE OF ASSET COVER

(a) The Borrower shall at all times ensure that the Asset Cover is maintained in terms of this Deed, i.e. the value of the Secured Property shall be equivalent to ________ times the principal amount of the Loan, on an exclusive basis.

(b) In the event the value of the Secured Property diminishes and the Borrower is unable to maintain the Asset Cover, the Borrower shall, immediately and no later than the furnishing of the immediately succeeding Hypothecated Asset Report, ensure that the value of the Secured Property equals or exceeds the Asset Cover by providing additional or new security (by way of hypothecation) over other similar assets sufficient to maintain the Asset Cover, and shall promptly notify the Lender in writing of the creation of such additional or new security, including the description of such assets.

(c) Pursuant to the occurrence of any such event, the Borrower shall cause the perfection of such updated security, including filing the necessary forms for recording the modification of the Charge with the applicable authority, within 30 (thirty) calendar days of such modification and until the Maturity Date.

(d) The Borrower shall, on and from the date hereof until the Secured Obligations are duly discharged to the satisfaction of the Lender, ensure that the required Asset Cover is maintained. The value of the Secured Property for this purpose (both for initial and subsequent valuations) shall be the amount reflected as the value thereof in the books of account of the Borrower.

(e) Any additional or new security so provided under this Clause shall constitute and shall always be deemed to constitute a part of the Secured Property and shall be deemed to form part of Schedule-A without any further amendment or modification being required to this Deed.

(14) INSURANCE

(a) The hypothecated goods/assets shall be kept at the Borrower's risk and expense in good condition and fully insured against fire and/or such other risks as the Lender may require. Copies of the insurance documents shall be submitted to the Lender within 7 (seven) days from the date of a request by the Lender.

(b) If the Borrower fails to effect such insurance, the Lender may, without being obliged to do so, insure the hypothecated goods/assets against fire and such other risks in the name of the Lender or in the Borrower's name with the Lender's interest noted therein, and debit the premium and other charges to the Borrower, which amounts shall form part of the Secured Obligations.

(15) ENFORCEMENT OF THE SECURITY

(a) On the occurrence of an Event of Default, the Lender shall be entitled to:

(I) issue a notice to the Borrower for invoking the Charge, stating that an Event of Default has occurred and that the Lender shall enforce the Charge if the Borrower does not discharge the outstanding Secured Obligations within the cure period (if any) provided in the Loan Agreement for the respective Event of Default;

(II) after the expiry of the applicable cure period, if the Borrower has failed to make payment of the Secured Obligations, and subject to Applicable Law:

(A) declare that all or part of the Secured Obligations be immediately due and payable, whereupon they shall become immediately due and payable;

(B) accelerate the repayment of the Loan;

(C) take possession of, seize, recover, receive, appoint a Receiver of, sell (by public auction or private treaty), realise, transfer or otherwise dispose of the Secured Property or any part thereof, and appropriate the proceeds towards the Secured Obligations;

(D) exercise any other right that the Lender may have under the Finance Documents or under Applicable Law; and

(E) take all such other action expressly or impliedly permitted under this Deed or under Applicable Law.

(b) All monies realised from the Secured Property shall be utilised by the Lender, subject to Applicable Law, towards payment of the Secured Obligations, and any surplus shall be returned by the Lender to the Borrower.

(c) The Borrower confirms and acknowledges that the Lender shall not be affected or bound by any notice, express or implied, of the right, title or claim of any person to the monies realised upon enforcement of the Charge, and the Lender shall be entitled to appropriate the same in accordance with the provisions of this Deed and the Loan Agreement.

(16) FURTHER ASSURANCES

The Borrower agrees and undertakes to execute such other deeds or documents and to perform such other acts as may be required by the Lender to further perfect, protect and/or enforce the Charge created hereunder.

(17) SEVERABILITY

Every provision contained in this Deed shall be severable and distinct from every other such provision, and if at any time any one or more of such provisions is or becomes invalid, illegal or unenforceable in any respect under any law, it shall be deemed modified to the minimum extent necessary to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. If such modification is not possible, the relevant provision (or part thereof) shall be deemed deleted.

(18) WAIVER

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(19) DISPUTE RESOLUTION

(a) Any dispute, difference or claim arising out of or in connection with this Deed shall, as far as possible, be settled amicably between the Parties.

(b) Failing such amicable settlement, the dispute shall be referred to and finally resolved by arbitration by a sole arbitrator to be appointed mutually by the Parties, in accordance with the Arbitration and Conciliation Act, 1996 (as amended). The seat and venue of arbitration shall be ________, and the proceedings shall be conducted in the English language. The arbitral award shall be final and binding upon the Parties.

(c) Subject to the arbitration provision above, the courts at ________ shall have exclusive jurisdiction over any matter arising out of or in connection with this Deed.

(20) NOTICES

(a) All notices, requests, consents, approvals and other communications required or permitted under this Deed shall be in writing and shall be deemed duly given when delivered by hand, by registered post (acknowledgement due), by recognised courier or by electronic mail to the address specified below.

(b) In the case of the Borrower:

Attention: ________

Address: ________

Email: ________

(c) In the case of the Lender:

Attention: ________

Address: ________

Email: ________

Either Party may change its address for notification purposes by giving the other Party 10 (ten) days' prior written notice of the new address and the date on which it becomes effective.

(21) GOVERNING LAW

This Deed and all matters arising out of or in connection with it shall be governed by and construed in accordance with the laws of India.

(22) ENTIRE AGREEMENT

This Deed, together with the Loan Agreement dated ________ between the Parties, constitutes the entire agreement and understanding of the Parties with respect to the subject matter hereof and supersedes all prior negotiations, correspondence, agreements, understandings, duties or obligations between the Parties with respect to the subject matter hereof.

(23) AMENDMENTS

Any change, alteration, amendment or modification to this Deed must be in writing and signed by the authorised representatives of both Parties.

(24) INDEPENDENT PARTIES

Nothing contained or implied in this Deed creates a joint venture or partnership between the Parties or makes one Party the agent or legal representative of the other for any purpose.

(25) ASSIGNMENT

The Borrower shall not assign or transfer any of its rights or obligations under this Deed without the prior written consent of the Lender. The Lender may assign or transfer its rights and obligations under this Deed in accordance with the Loan Agreement and Applicable Law.

(26) POWER OF ATTORNEY

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(a) execute and do all acts, deeds and things which the Borrower is authorised to execute and do under the covenants and provisions herein contained;

(b) generally use the name of the Borrower in the exercise of all or any of the powers conferred by these presents or by Applicable Law on the Lender or any Receiver appointed by the Lender; and

(c) execute on behalf of the Borrower such documents and deeds as may be necessary to give effect to the provisions of this Deed and for the preservation, enforcement and realisation of the Security created hereby.

The Borrower ratifies and confirms, and agrees to ratify and confirm, any deed, instrument, act or thing which such attorney or substitute may lawfully execute or do in exercise of the foregoing powers.

(27) COUNTERPARTS

This Deed may be executed in any number of counterparts, and all counterparts together shall constitute one and the same instrument.

(28) INCONSISTENCIES

In case of any ambiguity, inconsistency or difference between this Deed and any other Finance Document, in so far as such inconsistency relates to matters concerning the creation of, dealing with and/or enforcement of the Security, the provisions of this Deed shall prevail.

IN WITNESS WHEREOF, the Parties hereto have executed this Deed on the day, month and year first hereinabove written.

_____________________

SIGNED AND DELIVERED by the Borrower

________

_____________________

SIGNED AND DELIVERED by the Lender

________

WITNESS-1

Name: ________

Govt. ID Name & No.: ________

Address: ________

Signature:

WITNESS-2

Name: ________

Govt. ID Name & No.: ________

Address: ________

Signature:

SCHEDULE-A

DESCRIPTION OF THE SECURED PROPERTY

________