India: Security Interests Over Moveable Assets

Security interests over movable property can be created by way of mortgage, pledge, hypothecation, lien and charge. However, mortgage is usually a method of creating security interest over immovable properties, and its only in certain specified cases that it is coupled with a mortgage on moveable properties thereon. This article provides a brief introduction to some of the more commonly used security interests for moveable properties (being pledge, hypothecation, lien and charge).

A.    What are the various types of security interests which can be created over moveable assets?

  • Pledge: A 'pledge' is a bailment of goods as security for payment of a debt or performance of a promise in terms of the Indian Contract Act, 1872 ("Contract Act"). The goods so pledged are returned, upon payment of the debt or performance of the promise.
  • Hypothecation: Hypothecation on the other hand, is defined under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes a floating charge and crystallisation of such charge into a fixed charge on movable property.  In case of failure by the owners of the hypothecated property to repay the debt within the stipulated time, the creditor would have the option to recover its dues by way of sale of the hypothecated property.
  • Charge: A charge is generally understood as a right created by the borrower on its assets in favour of the lender extending financial assistance to the borrower. A charge may be in the nature of a "fixed" or "floating" charge. A fixed charge may be created on ascertainable property (present or future), and a floating charge may be created on assets, present or in future, whether they are ascertainable or not. A floating charge becomes fixed on assets which are in existence upon occurrence of stipulated events, such as failure to repay the debt.
  • Lien: A Lien can be in the form of a particular or general lien. As per Section 170 of the Contract Act a bailee of goods, has particular lien over it, where the bailee has rendered any service involving exercise of labour or skill in respect of goods bailed. Such bailee (in the absence of a contract to the contrary) can retain such goods unless he receives due remuneration for the services rendered. Section 171 of the Contract Act, confers a general lien in favour of bankers, factors, wharfingers, attorneys and policy brokers. No other person enjoys a general lien, unless conferred by express contract. A general lien is the right to retain the property of another for a general balance of accounts, unlike a particular lien which is a right to retain the property only for a charge on account of labour or skill employed or expenses incurred in this regard1. The sections in the Contract Act for liens are not exhaustive, and there is nothing preventing the parties from granting a right of lien (general or particular) over assets of another person in terms of an express contract, to the another person to whom a debt is owed, as security for such debt.

B.    Which factors which may affect one's choice of security interests?

  • Pledge and Hypothecation are typically the most common form of security interests used in relation to moveable assets. In case of hypothecation, the possession of the security remains with the borrower, while in case of pledge the pledgee takes control of the assets.
  • Pledge, can therefore, be a preferred mode of creation of security interests, in cases where the moveable property is intended to be transferred to the possession (by physical or constructive delivery) of the security holder (say in case of shares, where the shares are pledged and original share certificates are delivered to the possession of the security holder). Hypothecation, on the other hand can be made for both moveable assets presently existing, but those which might be subsequently acquired and brought (such as cash balances, book debts, receivables, revenues, stock, plant and machinery, equipment etc.). Hypothecation, is therefore, usually relied upon when future assets are also being secured and/or where the borrower requires possession of such moveable assets for business activities. 
  • Lien, as generally understood, usually provides the lien holder to retain the goods until payment is made for monies owed and not the power of sale or disposition of goods in case of default (unlike the case of pledge or hypothecation). Accordingly, parties prefer to typically secure their interests over moveable assets by way of pledge and/or hypothecation, depending on the nature of the moveable assets being secured.

C.    What additional requirements should be kept in mind?

  • Requirement of paying stamp duty: The instrument creating any security interests over the moveable assets would need to be adequately stamped as per the stamp laws applicable to the state where the document is executed. We may add that non-payment of stamp duty or payment of inadequate stamp duty renders the document inadmissible in evidence in courts. It can also lead to imposition of a penalty; prosecution and impoundment of the document, if there was an intent to evade stamp duty.
  • Requirement of registration with local authorities: The Indian Registration Act, 1908 requires certain instruments to be mandatorily registered. However, the instruments relating to creation of interests over movable property need not be registered compulsorily and registration of such documents is at the option of the parties. That being said, the persons (in whose favour such security interests are created) prefer having such instruments registered with the applicable sub-registrars.
  • Registration with the Registrar of Companies: As per Section 77 of Companies Act, 2013 ("CA 13"), in case of creation of charges ('charge' in this context is wide enough to include all the aforementioned types of security interest) over assets of Indian companies, the said charges are required to be registered (by filing of a prescribed form) with the Registrar of Companies within thirty (30) days of creation of such charge. The company is also required to maintain a register of charges recording the details of the charge(s) created on its assets. If the company fails to register the charge as specified above, then CA 13 also allows the charge holders to apply directly to the Registrar of Companies for registration of the said charge.


O.N.G.C. Ltd. v O.L. of Ambica Mills Co. Ltd. and 11 Ors.; [2006] 132 CompCas 606 (Guj).

LexCounsel provides this e-update on a complimentary basis solely for informational purposes. It is not intended to constitute, and should not be taken as, legal advice, or a communication intended to solicit or establish any attorney-client relationship between LexCounsel and the reader(s). LexCounsel shall not have any obligations or liabilities towards any acts or omission of any reader(s) consequent to any information contained in this e-newsletter. The readers are advised to consult competent professionals in their own judgment before acting on the basis of any information provided hereby.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions