Types of Charges on Securities & Mortgages in Banking: 25 Revision Flashcards

Hypothecation is defined under Section 2(1)(n) of the SARFAESI Act, 2002, as a charge upon movable property without delivery of possession to the creditor.

CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest) is a centralized database designed to record security interests created on properties.

A Mortgage under Section 58 of the Transfer of Property Act (TPA), 1882, is the transfer of an interest in specific immovable property to secure the payment of a loan or debt.

An Equitable Mortgage (Mortgage by Deposit of Title Deeds) under Section 58(f) of the TPA is created simply by delivering property documents to a creditor in specified towns with the intent to secure a debt.

A Pledge (or Pawn) under Section 172 of the Indian Contract Act is the bailment (delivery) of movable goods as security for the payment of a debt or the performance of a promise.

Assignment under Section 130 of the TPA is the transfer of a right to recover a debt or a beneficial interest in movable property (an Actionable Claim) from one person to another.

A Banker's General Lien under Section 171 of the Indian Contract Act is the right of a bank to retain the goods and securities of a customer, which come into the bank's hands in the ordinary course of business, until the general balance of the customer's account is cleared.

The Right of Set-Off is a banker's right to combine two or more accounts of the same customer to arrive at the net balance due between the bank and the customer.

An Anomalous Mortgage is defined under Section 58(g) of the TPA as a residual or "catch-all" category of mortgage that does not neatly fit into any of the five other specific statutory mortgage types.

The general rule of law is Nemo dat quod non habet (no one can give what they do not have).

In corporate financing, a Floating Charge is a dynamic security interest created over a fluctuating class of assets (like inventory or raw materials) rather than specific, static property.

An English Mortgage is defined under Section 58(e) of the TPA as a mortgage where three conditions are met: personal liability to repay on a specific date, absolute transfer of the property to the lender, and a legal agreement to re-transfer it once the debt is cleared.

A Puisne Mortgage (pronounced 'puny') is a secondary mortgage.

Under Section 100 of the Transfer of Property Act (TPA), where immovable property is made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a Charge on the property.

Satisfaction of Charge refers to the formal legal process of discharging a security interest on a centralized registry once the borrower has completely repaid the underlying loan.

By the borrower submitting an electronic pledge creation request through their Depository Participant (DP), which mathematically "locks" the shares in the depository system.

Factoring under the Factoring Regulation Act, 2011, is a financial transaction where a business sells its invoices (accounts receivable/actionable claims) to a third party (a factor/bank) at a discount to unlock immediate cash flow.

A Negative Lien is not an actual legal lien or charge under the Transfer of Property Act or Contract Act; rather, it is a negative covenant (a contractual promise) made by the borrower to the lending bank.

The Equity of Redemption under Section 60 of the TPA is the fundamental, inalienable right of a borrower to get their property back once they have paid off the mortgage debt.

An Unpaid Seller's Lien (Section 47 of the Sale of Goods Act, 1930) is the right to retain physical possession of goods already sold to a buyer until the price is paid, serving as a non-banking statutory charge on movables.

Under Section 131 of the TPA, while an assignment of an actionable claim is valid between the assignor and assignee via a written instrument alone, the debtor requires an Express Notice in Writing to be bound by it.

Under Section 3 of the TPA, an Actionable Claim is purely an unsecured debt or a beneficial interest in movable property not in the claimant's possession, which the civil courts recognize as affording grounds for relief.

A Contract of Guarantee (Section 126) is a contract to perform the promise, or discharge the liability, of a third person in case of his default.

A Pari Passu Charge (Latin for "on equal footing") is a security arrangement where multiple lenders share the same collateral, and their rights to realize the asset rank equally, without any preference or priority based on the date of charge creation.

A Sub-Mortgage is a derivative security interest where the original lender (the mortgagee) mortgages their own rights in the collateral to another person or institution to secure a loan for themselves.