INDIA Law and Practice Contributed by: Divyanshu Pandey, Utsav Johri, Sucheta Bhattacharya and Nishal Makharia, JSA Advocates & Solicitors
5. Guarantees and Security 5.1 Assets and Forms of Security The following assets are typically provided as security in private credit transactions. • Security over immovable property, such as land and buildings, is taken in the form of a mortgage. The most common forms of mort - gage are an English mortgage (a registered mortgage), a simple mortgage (a registered mortgage) and an equitable mortgage (a mortgage created by depositing the title deeds). • Security over shares and other securities is typically created by way of a pledge. Pledges on securities are created pursuant to a pledge agreement. • Movable property such as receivables, plant and machinery and stock, cash deposits and bank accounts is usually secured by way of hypothecation. Hypothecation is a charge over any movable property, existing or future, created by a borrower in favour of a creditor. Such security is created in terms of a deed of hypothecation. The following perfection requirements apply to the creation of security. • Registration under the Indian Registration Act, 1908 (Registration Act): any mortgage of immovable property, other than an equi - table mortgage created by way of deposit of title deeds of the mortgaged property, is required to be registered in accordance with the Registration Act within four months of the execution of the mortgage deed. Where the mortgage is an equitable mortgage of immov - able property, registration requirements will depend on the state where the immovable property is situated.
• Registration with Central Registry of Secu - ritisation Asset Reconstruction and Security Interest (CERSAI): a mortgage and hypoth - ecation are also registered with CERSAI. This registration must be done by the lender or the security trustee. • Filing with the Registrar of Companies (ROC): a mortgage, lien, charge, pledge, hypotheca - tion or any other security interest created by an Indian company over its assets located in India or abroad is required to be registered with the relevant registrar of companies. The ROC issues a certificate of charge upon com - pletion of such registration. A charge is not taken into account by the liquidator or any creditor of the company unless it is registered with the ROC and a certificate of registration of the charge is issued by the ROC. • Filing with information utilities: details of any mortgage, lien, charge, pledge, hypotheca - tion or any other security interest created by an Indian company over its assets located in India or abroad is required to be filed with the relevant information utility in accordance with the Insolvency and Bankruptcy Board of India (Information Utility) Regulations, 2017. • Other formalities: depending on the asset provided as security (such as intellectual property, ships and aircraft), further registra - tion or filings with the relevant government authority may be required. Please also note the following additional require - ments that may apply to creation and perfection of security. • Registration and filing fees: these vary according to the type of security and are pay - able at the time of registration. Some Indian states have a fixed registration fee, while oth - ers have a percentage-based fee. This varies based on the location of the property.
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