What is the meaning of Pari-Passu Charge?

What is the meaning of Pari-Passu Charge?

Most of the large borrowers are financed by multiple banks in a consortium or under Joint Lending Arrangement (JLA). Each bank that participates in the joint lending program takes the share of the certain percentage of total amount of finance under uniform terms and conditions including the rate of interest. The loan program of multiple banks will be under common loan documentation and common asset classification for the combined limits sanctioned by them. For this purpose, participating banks enter into an inter-se agreement which allows these banks to hold common security against their advances.  The borrowing company executes the common loan agreements, hypothecation deeds, mortgage deeds and other similar documents for the combined limits sanctioned by the participating banks under consortium/ JLA. The leader bank (usually the bank which takes up the largest share of the limits deemed to be the leader of the consortium/JLA) will hold the common documentation executed by the borrowing company. This type of charge created through common documents on behalf of multiple banks is called Pari-Passu charge. Law requires such charges on assets of the company to be registered at ROC within 30 days from the date of creation of charge or such extended time permitted by the ROC.

The Pari-Passu Charge provides an equivalent right to the share of specified assets of a borrowing company to all the lenders under the arrangements. In the event of default of repayment from the borrower the joint lenders may decide to dispose-off the security held by them in order to recover their dues. The realization proceeds of the assets disposed-off would be shared among joint lenders in proportion to the balances outstanding in their accounts.

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Effects of non-registration of charge
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Difference between first charge and second charge
Meaning of fixed charge, floating charge, and crystallization of charge

After delay in filing of registration of the charge: Condonation route

(2) Comments

  1. M karthik

    Sir im a central govt employee and wish to take the govt HB Advance..but im falling short of another 15 lakhs ...so can i avail a loan from any banks for the same property on pari passu charge? Do banks provide HB loan On pari passu charge? If so, which bank, sir?

    1. Surendra NaikSurendra Naik - Post author

      First of all find out whether such provision is there in HB advances and the department is ready to offer pari-passu charge on the house building. Normally banks do not go for joint lending in case of housing loans. However, you may try if your department is agreeable and undertake to deduct and pay bank's loan installment from your salary and also for pari passu charge on the property. You may approach the branch manager of a bank only after collecting full details from your office,

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