Hypothecation is a type of charge that created on

Key Topics • Lien • Pledge • Hypothecation • Mortgage • Assignment In Summary • Lien: Lien means the right to retain the goods of the borrower until the debts are repaid. • Pledge: Pledge is the bailment of goods as security for payment of a debt. Only movable goods can be pledged. • Hypothecation: Hypothecation creates on equitable charge on movable property without possession. However, the hypothecation deed provides that the banker will have the right to take the goods hypothecated in its possession if the the need arises. • Mortgage: A mortgage is a conveyance of an interest in property (land or any immovable property) for securing a debt. A legal mortgage is created by a registered deed and gives the mortgagee the right of sale in case of default of the borrower. • Assignment: Assignment is transfer of ownership from one person/authority to another person/authority. • Set-off: Set-off means the total or partial merging of a claim of one person against another in a counter claim by the latter against the former. 1.0 Lien Lien is the right of a creditor to retain the properties belonging to the debtor until debt due to him is repaid. Lien gives a person only a right to retain the possession of the goods and not the power to sell unless such a right is expressly conferred by statute or by custom or by usage. A banker’s lien is a general lien which is tantamount to an implied pledge. It confers upon the banker the right to sell the securities after serving reasonable noti...

The term “hypothecation” describes the transaction a person makes when he puts up an asset as collateral but still owns that asset. A common example of this is a mortgage. While a person still owns his house, he uses the house as collateral in order to secure the bank’s approval to take out a mortgage. To explore this concept, consider the following hypothecation definition. Definition of Hypothecation Noun • The act of putting up an asset as collateral so as to secure a loan, but without giving up ownership to that asset. Origin 1675-1685 Medieval Latin ( hypothēcātus) Hypothecation Agreement A hypothecation agreement is an agreement a person makes in order to secure a loan by putting up one of his The most common example of this is the act of securing a mortgage. While the borrower still technically owns his house, he agrees to use it as collateral to take out the mortgage. He does this with the understanding that, if he fails to pay, the bank can take his house as a form of payment, and so begins the Stock The stock market is another place where these agreements are common. Here, a broker will allow an investor to borrow money to buy stock, and the investor then puts up that stock as collateral. The investor is the true owner of the stock, but the broker can seize the stock if either the investor does not pay back the money, or the stock falls below a certain value. Rehypothecation Rehypothecation is a subsection of hypothecation, meaning that rehypothecation refers to ...

Dated 14th December, 2020 The people are always confused between Charge and Hypothecation which seems to be similar but in legal parlance holds two different grounds. For the simplification of these terms, this article will provide the legal background to both these terms and illustrates the usability of the same. Charge Charge is defined under Section 100 of the Transfer of Property Act, 1882. According to the said provision when a person by the means of the act of the parties or by operation of the law secures the immoveable property for the payment of money to the other party,the said act of security upon the property would be called as ‘Charge’ and would not be called as ‘Mortgage’. The provision of the Simple Mortgage would be equally applied to property secured as Charge. A Charge can be created against both immovable and movable property. But for the charge against the immoveable the charge can be created on the current or future property of the owner. For the creation of charge, the essential prerequisite that the charge can only be created upon the immoveable property only if the ownership lies in the hands of the person from whom the payment is due. There should be clear intention that the party wants to charge his/ her property. from whom the payment is due. The third condition provides that there should be clear intention for utilizing the property as a security for the payment of money. A Charge can be of two types Fixed Charge and Floating Charge. Charge whic...

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These terms are used for creating a charge on the assets which is given by the borrower to the lender as a security for any loan. Thus, one of these terms will be normally used whenever an individual or a business firm avails any loan and the bank keeps some assets as a security so that it will be able to sell the same in case that individual or the firm defaults in repayments. Define Pledge, Hypothecation and Mortgage. (1) Pledge is used when the lender (pledgee) takes actual possession of assets (i.e. certificates, goods). Such securities or goods are movable securities. In this case, the pledgee retains the possession of the goods until the pledgor (i.e. borrower) repays the entire debt amount. In case there is default by the borrower, the pledgee has a right to sell the goods in his possession and adjust its proceeds towards the amount due (i.e. principal and interest amount). Some examples of pledges are Gold /Jewelry Loans, Advance against goods,/stock, Advances against National Saving Certificates, etc. (2) Hypothecation is used for creating charges against the security of movable assets, but here the possession of the security remains with the borrower itself. Thus, in case of default by the borrower, the lender (i.e. to whom the goods/security has been hypothecated) will have to first take possession of the security and then sell the same. The best example of this type of arrangement is Car Loans. In this case, Car / Vehicle remains with the borrower but the same ...

The difference between pledge, hypothecation, lien, mortgage, and assignment lies in the security charge that can be created on any asset held by a lender against the money lent (usually called the collateral). The type of asset charge defines whether the agreement can be classified as a pledge, lien, or mortgage. Let us see in detail the difference between pledge vs hypothecation vs lien vs mortgage vs assignment. Table of Contents • • • • • • Pledge Pledge is commonly used for goods or securities such as gold, stocks, certificates, etc. The lender (pledgee) holds the actual possession of such securities until the borrower (pledger) has the borrowed amount with him. Once the borrowed amount has been returned, the securities are returned as well. If the pledger defaults on the loan amount, the pledgee can sell off the goods pledged to him as security in order to recover the principal and the interest amount. In this case risk of lending comparatively reduces because possession of assets is with the lender. Hypothecation Hypothecation is usually when the charge is on movable assets rather than having a charge on fixed assets. However, Under a lien, the lender gets the right to hold up a property or machinery used as collateral against funds borrowed. However, unless the contract states otherwise, the lender doesn’t have the right to sell the property or the asset if the borrower defaults on the loan. Examples of lien include rent receivable, unpaid fees, etc. It is a right ...

Charge denotes an impediment over the title of the property, i.e. when the charge is created on an asset, the asset is not allowed to be sold or transferred. Basically, there are three ways through which charge is created on the property, that are classified according to the movability of the asset, i.e. On movable property, the charge is created by way of pledge or hypothecation, whereas when the charge is created on an immovable asset, then it is known as Mortgage. The basic purpose of creating a charge is to gain financial assistance from the lending institution. There are many students, who juxtapose charge and mortgage, but they are different. The former is just a collateral, for the payment of the amount due, whereas the latter is the transfer of interest in the asset, as collateral. To know some more important difference between charge and mortgage, you need to check out the article given below. Content: Mortgage Vs Charge • • • • Comparison Chart Basis for Comparison Mortgage Charge Meaning Mortgage implies the transfer of ownership interest in a particular immovable asset. Charge refers to the security for securing the debt, by way of pledge, hypothecation and mortgage. Creation Mortgage is the result of the act of parties. Charge is created either by the operation of law or by the act of the parties concerned. Registration Must be registered under Transfer of Property Act, 1882. When the charge is a result of the act of parties, registration is compulsory otherwi...