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Borrower's undertaking invalid

The Supreme Court has ruled that a written undertaking given by a borrower that he would not dispose of his properties during the currency of the loan cannot be enforced, unless it is registered. Even if it is written on a stamped paper, the undertaking will not create a charge on the properties. In this case, Haryana Financial Corporation vs Gurcharan Singh, the proprietor of a steel manufacturing unit took a loan which it could not repay. The corporation sold his properties and appropriated the proceeds on the ground that the proprietor had given an undertaking that he would not dispose of his properties during the pendency of the loan. The proprietor moved the court and won. Dismissing the appeal of the corporation, the Supreme Court clarified there will be no charge on the properties, unless there is deposit of title deeds or an undertaking through a registered document.

 Article referred: http://www.business-standard.com/article/opinion/cancellation-of-licences-upheld-114011200829_1.html

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