The Promissory Note and Security Agreement is a sophisticated financial instrument used in Indian lending transactions where both a formal promise to pay and collateral security are required. This document is particularly useful in situations where lenders need additional security beyond a simple promise to pay, commonly used in business loans, asset financing, and structured lending arrangements. The document must comply with multiple Indian laws including the Negotiable Instruments Act, 1881, the SARFAESI Act, 2002, and the Indian Contract Act, 1872. It typically includes comprehensive details about the loan amount, interest rates, payment schedules, collateral description, and enforcement mechanisms. The security component makes it more robust than a standard promissory note, providing lenders with specific rights over identified assets in case of default.
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1. Parties: Identification of the maker (borrower) and the payee (lender) with complete details as required under Indian law
2. Background: Brief context of the loan arrangement and security being provided
3. Definitions: Key terms used throughout the agreement, including definition of secured obligations, collateral, and enforcement events
4. Promise to Pay: Unconditional promise to pay a specific sum with clear payment terms, interest rate, and maturity date as required by the Negotiable Instruments Act
5. Grant of Security Interest: Description of the security interest being created and the assets being pledged as collateral
6. Description of Secured Obligations: Detailed description of the obligations being secured, including principal, interest, and other charges
7. Representations and Warranties: Maker's declarations regarding ownership and right to pledge collateral
8. Covenants: Ongoing obligations of the maker regarding maintenance and protection of collateral
9. Events of Default: Circumstances that trigger default and enforcement rights
10. Enforcement Rights: Payee's rights and remedies upon default, compliant with SARFAESI Act where applicable
11. Governing Law and Jurisdiction: Specification of Indian law as governing law and jurisdiction for disputes
1. Additional Security Provisions: Used when multiple assets or complex security arrangements are involved
2. Insurance Requirements: Required when the collateral needs specific insurance coverage
3. Guarantor Provisions: Included when a third party is guaranteeing the promissory note
4. Cross-Default Provisions: Used when the note is part of a larger financing arrangement
5. Assignment and Transfer: Included when the note needs to be transferable or assignable
6. Additional Representations: Required for specific types of collateral or complex security arrangements
1. Schedule A - Collateral Description: Detailed description of all assets pledged as security
2. Schedule B - Payment Schedule: Amortization schedule or payment terms if installment payments are involved
3. Schedule C - Existing Encumbrances: List of any existing liens or encumbrances on the collateral
4. Appendix 1 - Form of Notice: Standard form for notices under the agreement
5. Appendix 2 - Security Perfection Requirements: List of filings and registrations required to perfect the security interest
6. Appendix 3 - Specimen Signatures: Signatures of authorized signatories for both parties
Relevant legal definitions
Agreement
Business Day
Collateral
Default Interest Rate
Event of Default
Enforcement Action
Interest Payment Date
Interest Period
Interest Rate
Loan Amount
Maturity Date
Maker
Outstanding Amount
Payee
Payment Date
Permitted Encumbrances
Principal Amount
Secured Obligations
Security
Security Documents
Security Interest
Security Period
Secured Parties
Transaction Documents
Default Notice
Enforcement Notice
Guarantor
Insolvency Event
Material Adverse Effect
Permitted Disposal
Repayment Schedule
Representatives
Standard Interest Rate
Working Day
Business Day
Collateral
Default Interest Rate
Event of Default
Enforcement Action
Interest Payment Date
Interest Period
Interest Rate
Loan Amount
Maturity Date
Maker
Outstanding Amount
Payee
Payment Date
Permitted Encumbrances
Principal Amount
Secured Obligations
Security
Security Documents
Security Interest
Security Period
Secured Parties
Transaction Documents
Default Notice
Enforcement Notice
Guarantor
Insolvency Event
Material Adverse Effect
Permitted Disposal
Repayment Schedule
Representatives
Standard Interest Rate
Working Day
Clauses
Payments
Interest
Security Creation
Default
Enforcement
Representations and Warranties
Covenants
Assignment
Notices
Governing Law
Jurisdiction
Amendment
Severability
Indemnification
Costs and Expenses
Waiver
Force Majeure
Confidentiality
Further Assurance
Entire Agreement
Counterparts
Registration
Insurance
Security Perfection
Remedies
Transfer Rights
Stamp Duty
Acceleration
Interest
Security Creation
Default
Enforcement
Representations and Warranties
Covenants
Assignment
Notices
Governing Law
Jurisdiction
Amendment
Severability
Indemnification
Costs and Expenses
Waiver
Force Majeure
Confidentiality
Further Assurance
Entire Agreement
Counterparts
Registration
Insurance
Security Perfection
Remedies
Transfer Rights
Stamp Duty
Acceleration
Relevant Industries
Banking and Financial Services
Real Estate
Manufacturing
Agriculture
Infrastructure
Small and Medium Enterprises
Retail
Technology
Healthcare
Education
Relevant Teams
Legal
Finance
Credit
Risk Management
Compliance
Treasury
Collections
Business Development
Account Management
Corporate Secretarial
Relevant Roles
Chief Financial Officer
Finance Manager
Legal Counsel
Credit Manager
Risk Manager
Loan Officer
Corporate Treasurer
Financial Controller
Compliance Officer
Security Trustee
Collections Manager
Business Development Manager
Account Manager
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