different types of securities

A bank provides financial to the people. The banker lends his money against securities. The securities are tangible assets. The loans against securities are called secured advances. The banker gets the right over the securities of the customer. A charge is created over the securities to provide financial. When charge or right is created, the loan becomes secure.

The following are the ways of creating charges/rights.

1.                 Banker lien.

2.                 Pledge.

3.                 Hypothecation.

4.                 Mortgage.

1.                 Banker lien:

Lien is the right of holding goods of the borrower until. The loan is repaid. The borrower remains the owner of the goods, but the passion is given to the lender. The agreement of the loan explains whether it relates to the particular debits or general debts.

In general lien the creditor has only the right of passion of the goods. He has no right to sell it, but the banker’s lien is not the same. The banker has the right to sell the goods after a proper notice. The banker is allowed to do so under section 171 of contract act 1872. The papers of money or goods with the bank are not for the purpose other than lien. The banker takes the passion lawfully.

2.                 Pledge:

Section 1972 of contract act 1872 defines pledge as bailment of goods as security for the payment of debts or performance of a promise. The borrower is called “pledge” and the lender/banker is called “pledge”. In case of pledge there should be a bailment of goods and the bailment should be on be-half of the debtor or be-half of intending debtor.

Section 148 of contract act 1872 defines bailment as “delivery of good from one person to another for same purpose upon the contract that the goods are returned back when the purpose is accomplished according to the instruction of the bailer”.

 The delivery of good is necessary for the actual or contract of bailment. The delivery may be actual or constructive. The constructive delivery is made when the bailee puts his lock on the doors of the go down store in the pledged goods or keys of the lock of the go down door are received. It is essential that the bailee should return the same goods to the bailer or disposed them according to his instructions.  

3.                 Hypothecation:

Doctor heart says that “hypothecation is legal transaction where the goods may be making available for adepts without transferring either the property of possession to the lender. It is clear that possession and ownership of goods remains to the borrower agrees to give the possession of the goods to the banker, whenever the banker requires doing so.

Hypothecation is possible when the transfer of possession is either inconvenient or impracticable. If the borrower offers “RAW METERIEL” OR “GOODS IN PROCESS” as a security, the transfer of possession will truck the functioning of the borrower business. The creditor posses the right of pledge under the hypothecation deed.

The possession of the banker under hypothecation is not safe as a pledge. If the borrower fails to give the possession of goods hypothecated, the bank can file a suit in the court of law for the recovery of the amount lend.

4.                 Mortgage:

Section 68 of transfer of property act 1882 define mortgage as “A mortgage is the transfer of an interest specific immoveable property for the purpose of security the payment of money advanced or to be advanced by way of loan”. The transfer is called “mortgage” the transfer is known as “mortgagee”. The agreement is treated as mortgage deed.