A guide to Pari Passu Charge

Presented By
Md. Asadur Rahman
VP
Central Credit Administration Division, CHO, UCB PLC
• The pari passu charge means, having proportionate charge/ rights over the common asset
on which pari pasu charge is created.
• “Pari Passu” charge enforced when borrower company goes into dissolution(wind up), the
assets over which the charge has been created , will be distributed in proportion to the
creditor’s (lender’s) respective holdings.
• In case of consortium lending /bilateral lending, Pari Passu charge are usually created with
RJSC&F, through deed of Hypothecation over fixed and Floating assets of the company.
• The Pari Passu Charge can also be applied over Land & Building through registered
Mortgage after obtaining NOC from previous mortgagee .
Note: As per New sec 53D have been inserted by act no.XXVI of 2004, (with effect from 1st
July 2005) , Section 53 D is as follows
53D. Immovable property under Mortgage not to be Transferred:- No Immovable property
under Reg. Mortgage shall be re-mortgage or sold without the written consent of Mortgagee ,
and any re-mortgage or sale made, otherwise shall be void.
Pari Passu charge can be established in either way.
1. With a common deed ( Reg. Mortgage/ Hypothecation) :-
In this case, every lender with a collaboration , prepare a common deed mentioning their details of
security & lending position an submit it for registration ( with RJSC or SRO). After registration the
Pari Passu Charge is created.
In case of enhancement of limit or inclusion of new member a modification of deed is to be processed
with the consent of all Landers. Through this single deed charge is modified.
If we collect a search report from RJSC &F we will see all Landers name are enlisted as a common
chargee.
This process is very time consuming as every lenders are to individually check and confirm the
common deeds for ultimate charge creation.
2. With a Pari Passu security sharing Agreement :-

This is another way of creating Pari Passu charge over common security which is backed by an agreement.
This process is applied when a customer wants to borrow money from a new lender against the same assets
which has already charged with related office like RJSC & F /Sub reg Office.

In this situation existing lenders who already have a registered charge , come into the agreement with a new
lender who will individually create charge over the same assets with the written NOC from existing lender.

In the agreement all lenders include their loan & Security details along with the amount of charge creation
in the agreement and sign the common deed. This is called Pari Passu security sharing Agreement.

This agreement needs not to be file with the concerning authority.

Through this process every lender have their individual charge with RJSC &F and mortgage properties
through NOC .
All original deeds & Documents must be kept as per Agreement as an acknowledgement.
Major Documents in syndicate finance
1) Common Terms & agency Agreements (Signed by all Lender ) .
2) Facility agreements (Signed by all Lender )
3) Letter of Hypothecation & RJSC&F Certificate (signed by Lead partner )
4) NIGPA
5) Security sharing agreement (Signed by all Lender )
6)Account agreement (Escrow)
7) Letter of Mandate
8) Satisfaction certificate
9) Others agreements (as per Sanction/agreements )