HYPOTHECATION LETTER OF TANGIBLE PROPERTY TO SECURE LOAN
In consideration of the Industrial Promotion and Investment Corporation Limited, a Government Company within the meaning of Companies Act, 1956 (amended in 2013) having its Registered Office at _________ (hereinafter called “the Corporation”) at the request of M/s ___________ a Private/Public Limited Company incorporated and registered under the Companies Act, 1956 ( amended in 2013) bearing Certificate of Incorporation No. ___________ having its Registered Office at ___________ hereinafter called “the Borrower” having agreed to lend and advance a sum of Rs. _____________ on the execution of these presents in such installments as the Corporation may think fit on the security of (a) an Equitable Mortgage of the Borrower’s property with all buildings and structures thereon and plant and fixed machinery situate at ___________ and (b) this Hypothecation of all tangible moveable property, furniture, fixtures, assets and other moveable assets described in general terms in the Schedule hereunder (hereinafter referred to the hypothecate assets”) as the Borrowers do hereby admit and acknowledge and to be secured by this Hypothecation of the hypothecated assets with the Corporation and in the manner and on the terms hereinafter contained.
IT IS HEREBY AGREED BY THE BORROWERS WITH THE CORPORATION AS UNDER:
1. The Borrowers covenant and agree to pay the sum of Rs. __________ to be hereafter advanced to the Corporation at its Regd. Office at ___________ in the manner mentioned in the Letters of Sanction dated ____________ and dated _________ addressed by the Corporation to the Borrowers setting out the terms of the said loan (hereinafter called “the Letters of Sanction”) together with interest as therein mentioned.
2. The Borrowers hereby pledge and hypothecate with the Corporation by way of First Charge all the plant, fixed and unfixed machinery, fixtures, implements, fittings and other installation, furniture, vehicles, type-writers and all other articles and thing fixed or lying on the said premises or any godowns of the Borrower or in the hands of any person as Mercantile Agent of the Borrowers or in the course of transit described in the general terms in the Schedule hereto (hereinafter called “the hypothecated assets”) which now or hereinafter from time to time during this security shall be brought in or be in or used about the premises utilised by the said Borrowers as security.
3. Balance due to the Corporation at any time or as recorded in the books of account of the Corporation of all moneys advanced by the Corporation to the Borrowers and for payment of all debts and liabilities due by the Borrowers to the Corporation thereunder. The expression “the Balance due to the Corporation” in this and the subsequent clause of this Agreement shall be taken to include the balance of the moneys from time to time due under the account of the Borrowers with the Corporation and also all interest thereon at the rate mentioned in the letters of sanction and the amount of all charges and expenses which the Corporation may have paid or incurred in any way in connection with the Hypothecated asset or the sale or disposal thereof.
4. That the Hypothecated assets shall be held as the Corporation’s exclusive property specially appropriated to this Security and the Borrowers will not, except with the consent in writing of the Corporation, create any mortgage, charge lien or encumbrance thereon affecting the same or any part thereof nor do anything which would prejudice this security.
5. The Borrowers shall permit the Corporation, its agents, servants and technical experts from time to time and at all times to enter upon any building or any premises where the Hypothecated assets or any spares or equipment thereof may be lying and to view, inspect and value the same and take inventories thereof to ensure the efficient working of the Hypothecated assets and to render to the Corporation and to their servants all facilities as may be required for any of the purposes aforesaid. The Borrowers shall carry out all the suggestions and directions that may be given by the Corporation in the behalf and shall bear and pay all fees expenses that may be incurred by the Corporation in connection with such inspection valuation and technical consultation and the carrying out of all such suggestions and directions and all such fees and expenses together with interest thereon at the rate of interest hereinafter specified shall be a charge on the Hypothecated assets for due payment of all the dues of the Corporation.
6. The Borrowers will purchase machinery as per the scheme approved by the Corporation and from suppliers to be approved by the Corporation in writing.
7. The Borrowers shall pay the rates, taxes, outgoings and other charges payable to any authority for the maintenance and upkeep of the Hypothecated assets or the place where it is stored and shall keep the same free from any distress.
i. The Borrowers shall at all times during the continuance of this security and froth time to time insure the Hypothecated assets and keep in insured against loss or damage by fire, riot, civil commotions, strikes comprehensive or any other risks as may at any time or from time to time be required by the Corporation or by law in the joint names of the Corporation and the Borrower with insurance Company/Companies previously determined in writing by the Corporation to the extent of the full market value thereof and punctually pay the premium due for such insurance and that the cover notes or the insurance Policy/Policies Certificates shall be deposited by the Borrowers with the Corporation may be deemed necessary by the Corporation in its absolute discretion and debit the premium and other charges to the account maintained by the Corporation.
ii. In the event of loss, destruction by fire or otherwise or damage to the Hypothecated assets or any of them or any part thereof the Corporation shall be entitled to recover and receive all moneys payable in respect of the insurance. In the event of the Corporation not receiving the amount payable in respect of the insurance either wholly or partly for any reason whatsoever the Borrowers shall be bound to pay forthwith the balance due to the Corporation on demand.
iii. All sums of money recovered or received under the last preceding sub-clause may at the option of the Corporation be applied towards the liquidation and satisfaction of the balance due to the Corporation and if any surplus shall remain in the hands of the Corporation after such application thereof as aforesaid such surplus shall remain at the disposal of the Borrowers but if the sum or sums of money realised from the insurance be sufficient to cover the balance due to the Corporation as aforesaid, the Borrowers agree forthwith to repay to the Corporation to deficiency on demand.
iv. The Corporation shall be entitled to adjust, settle, compromise or refer to arbitration any dispute between the Insurance Company/Companies and the Borrowers arising under or in connection with the Insurance Policy/Policies and such adjustment, settlement, compromise and any award made on such arbitration shall be valid and binding on the Borrowers.
v. The Borrowers shall not at any time raise any question that a larger sum might or ought to have been received under such settlement, compromise or award as the case may be entitled to dispute its liability for the balance remaining due to the Corporation as the same shall be valid and binding on the Borrowers.
9. That Borrowers shall make and furnish to the Corporation all statements and returns of the cost and market value of the Hypothecated assets and produce such evidence in support thereof as the Corporation may from time to time require and shall maintain in favour of the Corporation a margin of at least _________ (Per cent) of the written down value. The said margin shall be calculated on the cost price or open market value of the Hypothecated asset as fixed by the Corporation from time to time and shall be maintained by the Borrowers by such payment by the Borrowers immediately on the market value for the time being of the Hypothecated assets becoming less than the aggregate of the balance due to the Corporation plus amount of the margin as calculated above. In the event of default in repayment of principal on the amount of default for the defaulted period. The interest will be calculated with half yearly, rest on the last days of June and December and shall become payable within six days in the next succeeding month. In the event of default in payment of interest on the due dates compound interest at the rate of 2% over and above the normal rate shall be payable on the amount of interest due and not paid for the period of default. Further the Company undertake to pay the revised rate of interest as and when the rate of interest shall be revised upward by the corporation from time to time during the subsistence of the loan.
10. You/Company shall pay interest @ _______ p. a., subject to such variation in the rate of interest as may be decided upon by the Corporation and communicated from time to time during the subsistence of the loan. You shall also pay penal interest @ ______p.a.
11. That on demand by the Corporation the Borrowers shall pay to Corporation the Balance due to the Corporation at the foot of the account together with all further charges and expenses (if any) to the date of payment provided that nothing herein contained shall be deemed to prevent the Corporation from demanding payment of the interest for the time being due at the above mentioned rate without at the same time demanding payment of the balance due to the Corporation exclusive of such interest. Provided further that all interest which shall for the time being accrue due on the said principal sum or any part thereof and which shall for the time being remain unpaid and all other moneys which become payable hereunder shall in case the same be not paid on the days on which become due carry interest at the same rate aforesaid computed from the respective time of such due dates upon the taking of compound interest with rests, taken or made monthly on the days herein above provided for payment of interest and all such compound interest shall be charged on the Hypothecated assets provided that this provision shall not be deemed to authorise the Borrowers to allow any interest or other moneys as hereunder written to fall in arrears unless permitted so to do by the Corporation and this provision shall also not be deemed to authorise the Borrowers not to pay interest every 6 months and not to pay such other moneys as aforesaid or the right of the Corporation to take any legal proceedings or other action under these present provided that the Borrowers shall have the option to repay in whole or in part any of the instalments of principal amount hereunder written before their respective due dates.
12. The Corporation and their officers and agents shall be entitled in default of payment of the moneys and/or instalments due to the Corporation or in case of any contingency or emergency arising which in the opinion of the Corporation would make it necessary for the Corporation to take possession of the Hypothecated assets to enter upon premises where the Hypothecated assets shall be living and to break upon outer doors and to take possession or recover and receive the same and the Corporation shall be entitled to appoint any officer or officers of the Corporation as receivers of the Hypothecated assets with power to do all things as fully and effectually as the Borrowers could do and/or sell together or in loss either by public auction or private contract or otherwise dispose of or deal with all or any part of the Hypothecated assets with liberty to buy in at any sale by auction and to remind any contract for sale without being answerable for any loss or diminution in price and without being bound to exercise any of such power of being liable for any loss in exercise of such power to give effectual receipts and discharges for the purchase money and to do all other acts and things for completing the sale as the Corporation shall think proper and to apply the net sale proceeds of such sales in or towards liquidation of the balance due to the Corporation and the Borrowers hereby agree to accept the Corporation’s statement of realisation and to pay any shortfall or deficiency therein show PROVIDED HOWEVER the Corporation shall be entitled to charge and retain as part of the costs, charges and expenses incurred in connection herein such commission at the Corporation shall at its sole discretion fix and shall not be liable to account for the same to the Borrowers. Such commission shall be in addition to any brokerage or outgoing payable in respect of such sale. If the sale proceeds are not sufficient to pay the amount of such commission the Borrowers shall pay the same forthwith to the Corporation on demand.
13. That if the sum realised by such sale be insufficient to cover the balance then due to the Corporation, the Corporation shall be at liberty to sue the Borrowers for the balance thereof and nothing herein contained shall be deemed to negative quality or otherwise prejudice the right of the Corporation to recover from the Borrowers notwithstanding that all or any of the said Hypothecated assets or any part thereof not being realised.
14. That if the Corporation shall take possession of the Hypothecated assets whether under clause 11 thereof or otherwise howsoever or shall appoint a Receiver thereof neither the Corporation nor the Receiver shall be responsible, notwithstanding anything to the contrary in Section 152 of the Indian Contract Act, for any loss or deterioration or damage to the Hypothecated assets whether by theft, fire, rain, flood, earthquake, lighting or any other case whatsoever.
15. Nothing herein contained shall prejudice or affect any general or special lien to which the Corporation shall by law or otherwise be entitled to operate to prejudice its and remedies in respect of any present or future security, guarantee obligation for any indebtedness or liability of the Borrowers to the Corporation.
16. The Borrowers agree accept as conclusive proof of the correctness of any sum claimed to be due, from them to the Corporation under the agreement, a statement of account made out from the books of the Corporation and signed by the Account/and/or other duly authorised officers of the Corporation without the production of any other voucher, document or paper.
17. The Borrowers hereby declare that all hypothecation assets are the absolute property of the Borrowers at sole disposal of the Borrowers and free from any prior charge or encumbrance and that the Borrowers have not done or knowingly suffered or been party or privy to anything whereby are in anywise prevented from hypothecating the said assets in manner aforesaid and that the Borrowers will do and execute at their costs all such acts things for further and more particularly assuring the Hypothecated asset to the Corporation as shall be required by Corporation.
18. That the Borrowers shall keep proper books of accounts of their business and shall have them at all time duly posted and shall permit the Corporation or any person appointed for that purpose by it to examine such books all responsible times and make such copies of or extracts therefrom as the Corporation may think fit. The Borrowers shall also have their accounts audited at least once a year by a duly qualified auditor and shall submit a copy of the audited accounts to the Corporation within six months from the closing of each yearly account.
19. In case the Borrowers shall not utilize the Hypothecated asset for the purpose for which the loan is granted in terms of the Letters of Sanction such a default shall be treated as a breach of terms and conditions hereof.
20. The Borrowers shall furnish and verify all statements, reports, returns, certificates and information from time to time as required by the Corporation and give and execute any necessary documents required to give effect to this security. The Borrowers shall also give all information and assistance and furnish all such reports as may be required by the Corporation or any person appointed by it in relation to the business of the Borrowers or their accounting and other arrangement or regarding the loan advanced to Borrowers and the use made of such loan and the Corporation shall without any question or objection by the Borrowers be entitled to furnish to the Industrial Development Bank of India all such information and reports as may have been obtained by the Corporation either from the Borrowers or otherwise howsoever. It is however hereby provided, agreed and declared that the Borrowers shall if necessary execute a fresh and proper Letter of Hypothecation the said Hypothecated asset in favour of the Industrial Development Bank of India on the analogous terms and conditions in these presents contained, at the costs of the Borrowers all such acts, deeds and things as the Corporation may require for in connection therewith.
21. Nothing herein contained shall operate or be deemed to prejudice the rights or remedies of the Corporation in respect of any present or future securities guarantees, obligations or decree for any outer indebtedness or liability of the Borrowers to the Corporation.
22. The agreement shall operate as continuing security for the balance due to the Corporation from time to time and all other monies due by the Borrowers to the Corporation as aforesaid.
23. Pending seizure by the Corporation the hypothecated assets and any documents any money received by the Borrowers from any insurance company shall be held as the Corporation’s exclusive property specifically appropriated to this security.
24. The Borrowers hereby covenant with the Corporation as follows:
a. That the Borrowers have good right to hypothecate and charge the hypothecated asset by way of first charge as aforesaid and declare that the same is and shall be free from. any other claim either by way of mortgage, lien, pledge, charge, hypothecation or otherwise and as to future machinery the same shall be the absolute and unencumbered property of the Borrowers with full power of disposition.
b. That during the subsistence of these presents of Borrowers will not create without the Corporation’s prior written consent any other term debt nor any mortgage, pledge, hypothecation, charge, lien or encumbrance in respect of hypothecated assets or any of them or any part thereof in and manner whatsoever (whether by way of specific mortgage or charge or floating charge or otherwise) in favour of any person, firm or company other than the Corporation or otherwise deal with the hypothecated asset or any part thereof except in the regular course of business and only until notice is received from the Corporation of their intention to enforce. This agreement by realization of the security herein and will not permit or suffer to be done any act, deed matter, thing, which may adversely affect of in any way prejudice the security and/or the rights of the Corporation herein.
c. That all the agreements, terms and conditions contained in the Corporation’s Letters of Sanction, dated ________ and dated ________ addressed to the Borrowers and not specially set out herein shall deemed to be a part of these presents as if they were incorporated and formed part of these presents and shall be duly paid, observed and performed by the Borrowers.
d. To utilise the said sum of Rs. __________ for the purpose set out in the Letters of Sanction and for no other purposes.
e. To bring in the balance amount as may be required to complete the scheme as envisaged.
f. Not to give or let on hire and/or utilise the hypothecated assets during the currency of these presents for illegal purposes.
g. To maintain the hypothecated assets in good working condition.
h. To execute on demand by the Corporation such further documents as may be required by the Corporation to vest the hypothecated assets in the Corporation to render the same readily realisable by the Corporation at any time.
i. The Borrowers shall not make any alteration in or the hypothecated assets in the ordinary course of repairs without permission of the Corporation and shall not remove or change or allow to be removed.
j. The Borrowers shall keep the Corporation notified of the address where the hypothecated assets are from time to time kept and every change of the said address shall be intimated to the Corporation within 24 hours (exclusive of Sundays and holidays) before the same is made.
k. The Borrowers shall notify the Corporation of any accident, loss or damage to the hypothecated assets or any accident, loss or damage involving a third party as soon as it shall occur.
l. The Borrowers shall alone be responsible for any breaches of law committed by them as their employees and for all claims made by third parties in respect of loss or damage caused by the hypothecated assets and shall keep the Corporation indemnified against all claims and demands made against it in respect of any such breach of loss or damage.
25. The Borrowers shall indemnify absolutely unconditionally and fully and at all times indemnified saved defended and harmless the Corporation against all claims demands rights actions proceedings of whatsoever kind or nature made taken filed by any person or party and against all and any losses damages costs charges expenses and liability of any kind or nature whatsoever which the Corporation may suffer sustain incur or be exposed to in respect of or relating to the hypothecated assets.
26. The Borrowers hereby agree to pay on demand all costs, charges and expenses (the legal costs between attorney and client) that may be incurred or suffered by the Corporation in the negotiations executions of carrying into effect or in enforcing of this Agreement in relation to the exercise of any power or sale or any other power herein contained or in relation to any deed act matter or thing arising out of this Agreement or of and incidental thereto together with interest thereon at the rate of per annum.
27. Any notice to be given by the Corporation to Borrowers shall be deemed to have been duly given if despatched by post or manual delivery addressed to the Borrowers as his / their office address even though returned undelivered on account of refusal by Borrowers and every such notice shall be deemed to have been received by the Borrowers on the expiration of the normal period occupied in transit by post from the time at which it was put into the post.
28. Notwithstanding anything contained herein the Borrowers hereby covenant that in accordance with the provisions of Section 29 of the State Financial Corporations Act (hereinafter called ‘the Act’) the Corporation may by notice require the Borrowers forthwith to discharge in full their liability to the Corporation in the following events merely:
a. If it appears to the Board of Directors of the Corporation that false or misleading information in any material particular was given in the application made by the Borrowers to the Corporation for the loan hereby secured, or
b. If the Borrowers shall make any default in any of the terms and conditions set out hereinabove.
c. If there is any responsible apprehension that the Borrowers are unable to pay debts or proceedings are taken for his/ their or any of his/their adjudication as insolvent, or
d. If for any reason it is necessary in the opinion of the Board of Directors of the Corporation to protect the interest of the _________
2. Over and above the other rights and power of the Corporation conferred on it by the said Section 30 of the Act and without prejudice to such rights and powers, the Corporation shall have the right by notice in writing to require the Borrowers forthwith to discharge in full his/their liabilities to the Corporation hereunder in the following cases and in any such case the whole of the amount then remaining payable to the Corporation shall at the opinion of the Corporation become payable to the Corporation as if the time for payment thereof had expired and the Corporation shall be entitled to exercise all its rights and remedies hereunder namely:
a. If default shall be committed by the Borrowers or any of them in the observance or performance of and of the covenants conditions or provisions of These presents, or of the Letters of Sanction, or
b. if execution or distress is levied against the whole or any part of the hypothecated assets, or
c. if a Receiver is appointed or the hypothecated assets or any part thereof, or
d. if the Borrowers shall enter into any arrangement or composition with their creditors commit any act or default which shall render them liable to be adjudicated insolvent, or
e. if the Borrowers cease or threaten to cease to carry on their business, or
f. if any circumstances shall occur which shall prejudice or imperil or depreciate or if likely to prejudice or impair or imperil or depreciate the security of the Corporation, or
g. if any circumstances or event shall occur which would or is in the opinion of the Corporation likely to be prejudicial or adversely affect in any manner the capacity of the Borrowers to repay the loan to the Corporation:
PROVIDED FURTHER that the decision of the Corporation as to whether any of the aforesaid events or circumstances has occurred shall be final, conclusive and binding on the Borrowers and thus entitling the Corporation to file a petition in the appropriate Court for adequate relief under Section 31 of the Act or to take action under Section 29 of the Act.
IN WITNESS WHEREOF the said Borrowers has/have set his/their hands and seals at the _____________ day of ________ 20___. The common seal of the Borrowers has been hereto affixed in the manner hereinafter mentioned the day of ___________ 20____.
THE SCHEDULE ABOVE OFFERED TO:
All, tangible movable property, plant fixed or otherwise machinery fixtures, fittings, electric and other installation, and all other articles fixed lying on the premises at or in the godowns of the Borrowers or in the custody of any person who are Mercantile Agents of the Borrowers or in the course of transit including all movable assets which may hereinafter be brought stored or be laying or upon the said premises of the Borrowers which includes the following machineries.
THIS INDENTURE made on ____________ day of _________ 20____ between _______________ s/o _________________ ( e.g. A.) etc. (Borrower) of the ONE PART
___________________________ s/o ( e.g. B.) etc. (Lender) of the OTHER PART.
WHEREAS the Borrower is the sole and absolute owner of the messuages and hereditaments known as _____________ Tea Estate mentioned and described in the schedule hereunder written and is growing and manufacturing tea therein.
AND WHERAS the Lender has agreed to lend and advance to the Borrower the sum of Rs. . . . . . on and subject to the stipulations and conditions hereinafter contained and secured in manner hereinafter appearing.
NOW THIS INDENTURE WITNESSETH that in pursuance of the said agreement and in consideration of the sum of Rs. ________ by the Lender paid to the Borrower on or before the execution of these presents (receipt clause) he the Borrower hereby charges and hypothecates the entire tea crop already grown and manufactured or in course of manufacture or to be grown and manufactured at the said _________ Tea Estate during the year _________ as security for the due payment of the said sum of Rs. ___________ and the commission, interests, costs, charges and expenses hereinafter mentioned subject to the condition that such charge and hypothecation shall be void and of no effect if the said sum of Rs. . ____________ and the said commission and all interests, costs, charges and expenses hereinafter mentioned are paid and/or satisfied pursuant to the covenants and conditions hereinafter contained.
AND IT IS HEREBY AGREED AND DECLARED
1. That the Borrower shall and will pay to the Lender at ________ the said sum of Rs. _________ and also the commission hereinafter mentioned with interest thereon at the rate of _________ per cent per annum payable half yearly on the 30th day of June and 31st day of December with half yearly rests in the account;
2. AND that the Borrower shall henceforth hold all tea already grown and manufactured or in course of manufacture or to be grown and manufactured at the said _________ Tea Estate during the year ________ as trustee for the sole use and benefit of the Lender.
3. AND that the Borrower shall and will consign the said tea to the Lender at _________ directly the same is manufacture and at the same time send to the lender the Railway Receipts in respect thereof and also send to the Lender every week a report of all tea manufactured at the said messuages and hereditaments and of all tea so consigned to the Lender as aforesaid;
4. AND that the Lender shall be entitled to sell the tea so consigned as aforesaid through brokers nominated by the Borrower with the prior approval of the Lender on such brokers agreeing to carry out the orders and directions of the Lender and undertaking to pay to the Lender the sale proceeds of the tea sold through them and if such brokers shall fail or neglect to carry out the orders and directions of the Lender then in such manner as the Lender shall in his absolute discretion think fit and proper in which case the Lender shall be entitled to realize the sale proceeds from the purchaser or any other broker or brokers and the same when realized shall be placed to the credit of the Borrower
PROVIDED HOWEVER that the Lender shall not be held responsible for any loss or damage that may be sustained by reason of the failure, neglect or default of any brokers, purchasers or other persons connected with or employed for the sale of the tea so consigned as aforesaid;
5. AND that should the Borrower fail or neglect to grow and manufacture tea at the said Tea Estate or to consign to the Lender the tea directly it is manufactured there and becomes fit for sale, or should the brokers to be nominated by the Borrower as aforesaid shall make default in performing and observing any order or direction of the Lender or any of the conditions of their employment, or should the Lender for any reason consider it necessary to take actual possession of the said tea crop in order to protect the Lender’s interest in the same, then the Lender and any person or persons authorized by him in that behalf may enter upon the said __________ Tea Estate and take possession of the tea produced and manufactured or in course of manufacture therein and also the tea crop hereby hypothecated and may also stop the tea in transit or otherwise recover the same from any person or persons in possession thereof and may sell the same either by public auction or by private treaty;
6. AND that the Borrower shall and will pay to the Lender a commission of _________per cent on the gross sale proceeds of all tea sold and also all costs, charges and expenses as between attorney and client that may be incurred by the Lender in procuring or enforcing the due fulfillment of the stipulations and conditions herein.
7. AND that after deducting the commission and costs aforesaid from the said sale proceeds the balance thereof shall be credited towards reduction of the said sum of Rs. ________ and shall carry interest at the rate of _______ up to the date of payment;
8. AND that the account shall be adjusted and closed on the _______________________ and all sums which may be found due thereon from the Borrower to the Lender shall be payable with interest thereon as hereinbefore provided and shall form a charge on the said ________ Tea Estate;
9. AND lastly that the Lender shall be at liberty during the subsistence of these presents to inspect the said ________ Tea Estate and the growing and manufacturing of tea therein at the cost and expense of the Borrower on not more than two occasions.
THE SCHEDULE ABOVE REFERRED TO
(Describe the property)
IN WITNESS etc.