LAST MINUTE REVISION OF LEGAL AND REGULATORY ASPECTS OF BANKING
Classification of Bills
Mortgage
A mortgage is the transfer of interest in specific immovable property, for the purpose of securing the payment of money advanced or to be advanced by way of loan, on existing of future debt or the performance of an engagement which may give rise to a pecuniary liability”
1. Simple Mortgage: Section 58(B)
It is combination of two mortgages:
- Inland Bills : Bills drawn or made in India and made payable in, or drawn upon any person resident in India. It may be made payable in a foreign country.
- Foreign Bills: Bills drawn outside India and made payable in or drawn upon any person resident in any country outside India / resident in India
- Demand Bills: Section 19 : It is an instrument payable on demand and no time for payment is specified therein. Demand Bill is otherwise called sight bill.
- Usance Bills: Bill Payable after sight : a bill payable otherwise than on demand. It specifies normally a time for payment of the value it represents.
- Clean Bills: is a bill of exchange drawn as per requirements of NI Act and is not supported by documents of title of goods.
- Documentary Bills: A bill of exchange accompanying documents of title of goods. These bills are drawn to claim price of goods supplied.
Mortgage
A mortgage is the transfer of interest in specific immovable property, for the purpose of securing the payment of money advanced or to be advanced by way of loan, on existing of future debt or the performance of an engagement which may give rise to a pecuniary liability”
1. Simple Mortgage: Section 58(B)
- The mortgagee has no power to sale without Court Intervention
- No right to get any payments out of the rents
- Not in possession of the property
- Registration is mandatory.
- The sale is ostensible and not real
- If the money is not paid on the agreed date, the ostensible sale will become absolute upon the mortgagor applying to the court and getting a decree in his favour.
- The mortgagee can sue for foreclosure, but not for sale of the property.
- There is no personal covenant for repayment of the debt and therefore bankers do not prefer this type of the mortgage.
- The mortgagee is put in possession of the mortgaged property. Here by possession means legal possession not a physical possession.
- The mortgagee has the right to received rents and profits accruing from the property.
- He mortgagee cannot sue the mortgagor for repayment of the debt., sale or foreclosure of the mortgaged property.
- If the mortgagor fails to bring a suit for redemption within 30 years, the mortgagee becomes absolute owner of the property.
- Banker do not prefer this form of mortgage for the following reasons
- There is no personal covenant to repay the debt.
- It will take very long time to recovery money through this process
- It provides personal covenant
- There is an absolute transfer of the property in favour of the mortgagee. Property shall be reconveyed to the mortgagor in the event of repayment of mortgage money.
- The mortgagee can sue the mortgagor for the recovery of the money.
- Where a person in any of the towns notified by the govt. concerned may, delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title deeds.
It is combination of two mortgages:
- Simple and usufructuary mortgage
- usufructuary mortgage accompanied by conditional sale