Adam Frankel
General Counsel · Technology & AI
15+ years as General Counsel to technology, cloud & AI companies
Agreement to Hypothecate Goods to Secure Fixed Loan (India) by OLL
Open Legal LibraryUpdated 19 Oct 2026
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Agreement to Hypothecate Goods to Secure Fixed Loan
The Manager, …………..….………….Bank,
…………..….…………. …………..….………….
Sir, In consideration of your Bank advancing to me/us on loan the sum of Rs…………..….………….
I/We hereby agree to hypothecate and hold under lien to the Bank as security for the repayment as per Schedule hereto of the principal amount of the loan and payment of interest on demand at…………..…% per annum subject to a maximum of…………..….% per annum above Bank Rate.
The goods so to be held by me/us under lien to the Bank I/We declare to be my/our absolute property, and to be stored in my/our godowns at………..….………….
I/We hereby agree to furnish you at the close of business on the last day of each English calendar month so long as any money remains due in respect of the said loan with a full and correct statement of particulars of all goods so held under lien to the Bank, with the market value thereof respectively on that day. All goods from time to time held by me/us under lien to the Bank in terms of this agreement shall be keptseparate and apart from all other goods in my/our possession, and no moneys shall be borrowed by me/us from any company, firm or person on the security of such goods stored in the same godown in a way that such other goods may be mixed with the goods held under lien to the Bank nor shall I/We do any other act by means of which the Bank’s lien on the goods so held shall be in any way impaired or affected. It is understood that I/We are at liberty, from time to time in the ordinary course of business, to sell all or any of the goods from time to time held under lien to the Bank under this agreement provided that no such sale shall reduce the value of the goods held under lien below the amount of my/our said debt to the Bank plus the margin of…………..…. per cent.
This is a preview. The full template is free on GitLaw.
This document is a formal agreement where a borrower pledges specific goods as collateral (hypothecation) to secure a fixed loan from a bank. It outlines the borrower's obligations to maintain insurance, provide monthly inventory statements, and allows the bank to take possession or sell the goods if the loan is not repaid.
About this template
What is this template?
This document is a security agreement where a borrower grants a lien over movable goods while keeping physical possession of them. It is not a pledge where the lender takes physical custody, nor is it a simple unsecured promissory note. It specifically includes powers for the bank to enter godowns to inspect and take possession of goods upon default.
When should you use it?
Use this when a business needs to borrow funds against its inventory or raw materials while continuing to sell that stock in its daily operations. If the lender is to take physical possession of the goods immediately, use a Pledge Agreement instead.
What's inside
| Clause | Name | What it does |
|---|---|---|
| First Paragraph | Hypothecation and Security | The borrower pledges goods as security for a loan of a specific Rupee amount plus interest at a defined percentage above Bank Rate. |
| Third Paragraph | Reporting and Inspection | The borrower must provide a correct statement of goods on the last day of each English calendar month to the Bank Manager. |
| Fourth Paragraph | Maintenance of Margin | Sales in the ordinary course of business are permitted provided the value of remaining goods does not fall below the debt plus a specific margin. |
| Sixth Paragraph | Power of Sale | The Bank is empowered to take possession and exercise rights of a pawnee under the Indian Contract Act if the loan is not repaid. |
| Eighth Paragraph | Insurance | The borrower must insure goods against fire to their full value and deposit the policies with the Bank on demand. |
| Ninth Paragraph | Cross-Liability | The lien extends to any other sums for which the borrower may become indebted to the bank on any other account. |
Who it's for
- a borrower in India pledging stock-in-trade as security for a fixed-sum bank loan
- a bank manager documenting a hypothecation charge over movable goods stored in a borrower's godown
- an Indian company director authorizing a lien over corporate property to secure credit facilities
How long it runs and how it's signed
How long
Runs for a fixed period
Stated duration
[stated in Schedule of instalments]
Signed by
Managing Director
Witness
Not required
Notarisation
Not required
Also needed
affix company seal; payment of applicable stamp duty
Law it's drafted under
Refers to
Indian Contract Act
Jurisdiction
India
Document info
MS Word. Document created on Fri Jul 17th, 2026. Last updated on Mon Oct 19th, 2026.
This document is public
Licensed under CC BY 4.0 (Attribution).
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