Charge Creation based on Sanction letter of a Bank

[Ramaswami Mohan]

Dear Learned friends,

a very basic doubt, can members clarify if charge can be created or modified based on sanction letter from bank ?

what is the consequence for such charge creation by filing F 8.?

regards

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CS. R.  Mohan
Mobile: 9908814677

[Ajay Kumar]

Sir,

Instrument creating / modifying Charge is mandatory attachment.

Though, F8 is STP but

The Consequences / liability will fall on the part of Directors / Professional signing the Form.

or  The bank can also raise an objection stating to rectify it again by adding Instrument creating Charge.

Experts views are solicited.

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Regards

Ajay Kumar

[Ramaswami Mohan]

thanks for ur quick reply.

 

i suppose the same will hold good when the credit limits are renewed or when they are restructured.

 

members please share ur views.

 

have there been any reviews and refilling experienced by my fellow professionals, due to the absence of charge creation documents like hypothecation deed or EM deed ?.

Regards,

Mohan

[K. Sankara Subramanian]

Dear Sir

A Sanction Letter won't contain much details as that of a written Agreement which stipulates extensive details of securities covered, conditions to be fulfilled for utilizing the limits, insuring the securities, conditions as to interest payment, pre-closure guarantee of promoters, event of default, additional/ penal interest etc., and in case of any dispute it would be a hurdle to Bank as S.125 stipulates unless prescribed particulars are filed a charge would be void against the creditor. This would be the consequence.

However the same Section contains the word "...together with the instrument, if any..." which purports that instrument is not mandatory.

It is better to attach, if on the date of filing Form 8, if there is any instrument subsists.

On Wed, Jan 22, 2014 at 3:50 PM, Ramaswami Mohan <hkr....@gmail.com> wrote:

[Manoj Singh Bisht]

Sanction letter does not create a charge over assets of the Company. It is just an approval. Loan Amount is not disbursed on the basis of sanction letter. If it is disbursed, it is a big loophole in process followed by the said Bank. The Bank can not sell off the property of the Company based on such sanction letter.

 

Hypothecation deed and other such kind of deeds and instruments which are signed by both the parties i.e. the Company and Bank, are instruments creating charge over the assets and therefore to be filed via Form 8.

 

I hope this suffice.

 

Regards

Manoj

[Ramaswami Mohan]

thanks a lot for all ur replies,

regards,

Mohan

[Madhur Bain]

Dear Mr. Mohan

The registration of charge is under STP. Form 8 is a document where both bank and the company are signatories, thus if as per famous saying "Jab Miyaan Biwi Raaji to Kya karega Kaaji".....so till the time the going is good...no problem at all .....but the views of my learnered friends are very important as a Good Corporate Governance Practice and for any legality later..

The call is on you.

Thanks and Regards

CS Madhur Bain Singh

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[Ramaswami Mohan]

very right said Mr. Madhur Bain Singh