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The documentation applicable for particular type of advances are either given in the Advance Manual of a particular bank or in the circular for specific type of advances, however, the main framework for documentation is as per the advances manual of the particular bank.

From the experience of the bank audits my views on basics of documentation are enumerated as follows.

The following documents are applicable for all type of advances:

1. Acceptance of the sanction letter which contains the terms and conditions for sanction of a particular advance.

2. Demand Promissory Note which required a borrower to undertake that he is liable to repay the amount mentioned in the promissory note on demand by a lender which is bank.

3. Hypothecation Agreement which represents the goods, items, movable  and/or immovable hypothecated to the bank (Pledge) and in case of default or non repayments of any of the amount by the borrower the lender bank can recover the amount by way of sale of hypotactic goods, items etc. This documents is generally taken for primary security like stocks, book-debts, Vehicle etc.

4. Mortgage of the Assets which represents the dues can be recovered by way of sale of mortgage of the assets which represents the collateral and/or additional security given by the borrower to the bank. Mortagages are executed for the immovable property like land, flat fixed assets etc. There are two type of mortgages Equitable mortgage, and registered mortgage. Equitable  (simple) mortgage is simpler way of holding the original title deeds of the property by the bank and noting of the fact of mortgage in the mortgage register in presence of both the borrower and lender by the bank. A registered mortgage is where the mortgage deed should be registered with the registration authority.

5. Guarantor agreements to be executed by the guarantor of the borrower to undertake his liability in case the borrower fails to honour the commitments of repayment of the bank dues.

6. Access letter/Agreement in case the hypoticated goods are stored at rented godowns or with the processors other than the premises of the borrower.

7. AOD i.e. Acknowledgement of debts to be given by the borrower for the continuance of the documents executed.

8. Original tile deeds, Share certificate and record of lien noting by the  authorities for the borrowing of the bank and an undertaking not to allow the sale till the bank liability is not repaid. The specific requirements of the documentation applicable for the particular type of  entity are as under:

In case of  Pvt. Ltd Co:

1. True extract of the resolution passed in the board meeting regarding, Acceptance of terms and conditions of the sanction. That the borrowing is within the limits and are permissible under the clauses of Particulars of the Association. To authorize the director to execute the documents for the said sanction. To affix the company's common seal on the documents executed.

2. Creation of  the Charge on the company's assets with the ROC to the extent of total borrowings. Charge Registration certificate.

3 Certified copy of  Memorandum & Articles of Association.

4. Certificate of Incorporation.

In case of Partnership firms:

1. The partnership registration certificate with the registrar of the firms.

2. Partnership deed duly authenticated.

3. LLP documents.

In case of HUF:

1. The list of coparceners.

2. Coparceners liability agreements.

CA Satish Badve 


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