Purchase Security Agreement for India

Purchase Security Agreement Template for India

A Purchase Security Agreement under Indian law is a crucial legal document that creates a security interest in favor of the seller or financier over assets being purchased. The agreement operates within the framework of Indian contract and security laws, particularly the Indian Contract Act, 1872, and the SARFAESI Act, 2002. It details the creation, perfection, and enforcement of security interests, specifying the collateral, payment terms, and enforcement mechanisms. The document includes comprehensive provisions for default scenarios, remedies, and compliance with Indian registration requirements, making it essential for secured purchase transactions in India.

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What is a Purchase Security Agreement?

The Purchase Security Agreement is a fundamental document in secured purchase transactions under Indian law, typically used when a buyer purchases assets but the seller or financier maintains a security interest until full payment is received. This agreement is essential in various commercial contexts, from equipment financing to large-scale asset purchases. It must comply with Indian security and contract laws, including the Indian Contract Act, 1872, and the SARFAESI Act, 2002, particularly regarding creation, perfection, and enforcement of security interests. The document outlines the specific assets serving as collateral, payment obligations, default scenarios, and enforcement mechanisms, while ensuring compliance with local registration requirements and regulatory frameworks. It provides protection to the secured party while allowing the purchaser to use the assets, making it a crucial tool in commercial transactions where deferred payment arrangements are involved.

What sections should be included in a Purchase Security Agreement?

1. Parties: Identifies the secured party (creditor) and the debtor, including their full legal names, addresses, and registration details

2. Background: Outlines the context of the purchase transaction and the intention to create a security interest

3. Definitions: Defines key terms used throughout the agreement, including 'Collateral', 'Secured Obligations', 'Event of Default', etc.

4. Grant of Security Interest: Core section establishing the security interest over the purchased assets

5. Description of Collateral: Detailed description of the assets subject to the security interest

6. Secured Obligations: Specifies the obligations secured by the agreement, including purchase price, interest, and other amounts

7. Representations and Warranties: Statements by the debtor regarding ownership, authority, and status of the collateral

8. Covenants: Ongoing obligations of the debtor regarding maintenance, insurance, and use of the collateral

9. Events of Default: Lists circumstances constituting default under the agreement

10. Enforcement Rights: Details the creditor's rights and remedies upon default

11. Registration and Perfection: Requirements for registering and perfecting the security interest

12. Governing Law and Jurisdiction: Specifies Indian law as governing law and relevant jurisdiction

13. Notices: Communication requirements and contact details for official notices

14. Execution: Signature blocks and execution formalities

What sections are optional to include in a Purchase Security Agreement?

1. Priority Arrangements: Required when there are multiple security interests or lenders involved, establishing priority rights

2. Insurance Requirements: Detailed insurance obligations when the collateral requires specific insurance coverage

3. Third Party Rights: Needed when third parties have interests in the collateral or agreement

4. Cross-Default Provisions: Include when the security agreement is part of a larger financing arrangement

5. Power of Attorney: Optional provision granting the secured party power to perfect or enforce the security interest

6. Further Assurance: Additional provisions for cooperation in perfecting or maintaining the security interest

7. Assignment and Transfer: Include if either party may need to assign their rights under the agreement

What schedules should be included in a Purchase Security Agreement?

1. Schedule 1 - Asset Schedule: Detailed list and description of all assets subject to the security interest

2. Schedule 2 - Purchase Terms: Details of the purchase transaction, including price, payment terms, and delivery

3. Schedule 3 - Form of Notice: Template for any required notices to third parties regarding the security interest

4. Schedule 4 - Insurance Requirements: Specific insurance requirements and minimum coverage levels

5. Schedule 5 - Registration Requirements: Details of required registrations and filings in various jurisdictions

6. Appendix A - Related Agreements: List and copies of related agreements referenced in the main agreement

7. Appendix B - Corporate Authorizations: Copies of corporate resolutions and authorizations for entering into the agreement

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

India

Publisher

Genie AI

Document Type

Security Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Manufacturing

Industrial Equipment

Automotive

Real Estate

Information Technology

Healthcare

Agriculture

Construction

Energy

Telecommunications

Transportation

Retail

Heavy Machinery

Infrastructure

Mining

Relevant Teams

Legal

Finance

Procurement

Risk Management

Compliance

Treasury

Commercial Operations

Credit Control

Corporate Secretarial

Asset Management

Business Development

Relevant Roles

Legal Counsel

Chief Financial Officer

Finance Director

Commercial Director

Risk Manager

Compliance Officer

Treasury Manager

Procurement Manager

Contract Manager

Security Trustee

Asset Manager

Credit Manager

Operations Director

Company Secretary

Business Development Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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