Security

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ROHIT Ku Goyal (Querist)
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19 July 2015 hi A company borrowed loan from B Bank over the assets and shared the charge first pari passu charge movable fixed assets of the company .after tht A company had borrowed the loan from C bank over the same assets against pari passu charge movable fixed assets of the company... B Banks observed tht his security is diluted ..how is bank security diluted

Arjun Menon

Arjun Menon (Expert)
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21 July 2015 Your query seems a bit bleak. Firstly if the Company (for brevity"A") has borrowed a Loan from Bank (for brevity "B"), I would presume that A and B would have executed an Agreement evidencing the registration of charge over such assets. In the aftermath, I would also presume that B would have registered the charge with the ROC.

Now,coming to the second part of your query, wherein you have borrowed again from C against the Assets on which B already has a first charge, and further you are stating the second charge ranks pari-passu with the existing charge, you cannot create a pari-passu charge without receiving an NOC from B.

As for the charge being diluted, it is apparent. Hypothetically, consider your land is valued at 5Cr and you are borrowing 3 CR Loan by mortgaging such land. In the event if your are borrowing again from another lender with whom again you execute an Instrument creating a Charge, which ranks pari-passu with the existing charge, then in such an event, the mortgaged property is apportioned between two lendors. Thereby diluting the value of security of the first lendor.

In my experience, the second lendor gets a second charge over such asset.

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