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MASTER COLLATERAL MANAGEMENT AGREEMENT
This Master Collateral Management Agreement is made and executed at Mumbai on this _______ day of ___________ 20 __
Between:
Mr._________________________________son of Mr ________________, an adult Indian Inhabitant
M/s._____________________ a Partnership Firm through its partner Mr. ___________________________,
M/s.______________________, a Company formed and registered under the provisions of the Companies Act, 1956 having its address at ___________________ ________________________________________________________________________________________________________________ Hereafter known as COLLATERAL MANAGER
(which expression shall unless be repugnant to the context or meaning thereof mean and include his heirs, legal representatives/successors/executors or Administrator)
(which expression shall unless it be repugnant to context or meaning thereof be deemed to mean and include the partners constituting the said firm, the survivors or survivors of them and executor, administrators or assign of the last surviving partner).
(which expression shall unless it be repugnant to the context or meaning thereof be deemed to mean and include its successors and assigns) of the First Part.
AND
_____________________ (Banking company) company Incorporated and Registered under Companies Act, 1956 [1 of 1956] and also a Banking Company under section 5(c) of the Banking Regulation Act, 1949 (10 of 1949) and having its Registered Office at __________________________________ and having its Corporate Office at _____________________________________ (hereinafter referred to as the “BANK” which expression shall, unless excluded by or repugnant to the context or meaning thereof be deemed to include its successors and assigns)
WHEREAS
(i) As a part of lending activities, BANK proposes to grant / sanction to its customers / constituents ( referred to as “Borrower(s)”) certain credit facility (ies) which are to be secured inter alia by a pledge of agricultural crops/goods/products (“hereafter referred to as commodities” for sake of brevity) as mentioned hereafter in the Agreement.
(ii) As a condition precedent for the grant of such facilities, the BANK shall require each such Borrower to deposit quantity and quality of commodities to be pledged (as per BANK’s requirements against such facilities) with BANK or such agent as may be directed by BANK.
(iii) The Borrower shall store the commodities proposed to be pledged in godowns / warehouses and / or demarcated areas of the godown / warehouse identified and accepted by BANK from time to time for the purpose (“Storage Area”). The Storage Areas may either be owned by a Borrower or by any other third party or by a COLLATERAL MANAGER or its agent recognized by BANK . In case of Storage Area owed by Borrower, necessary Lease Agreement (Rs.1/- Premium Lease rent) shall be executed by COLLATERAL MANAGER with the respective owner/lessee (“Owner”) of such Storage Area in a form and manner acceptable to BANK.
(iv) The BANK is concerned about the securities (pledged commodities) held by it through the COLLATERAL MANAGER and desires that there should be adequate supervision, monitoring & control of pledged commodities at the designated / demarcated Storage Areas.
(v) COLLATERAL MANAGER has good experience and expertise in the handling, overseeing / supervising, monitoring and storage of commodities and therefore the BANK has agreed to appoint COLLATERAL MANAGER to handle, oversee and monitor the storage of the commodities and provide integrated collateral management services to its branches across India at the Storage Areas for the benefit of the BANK and also for providing such other services including comprehensive risk management services relating to commodities as may be mutually agreed upon and COLLATERAL MANAGER has agreed and consented to its services to BANK on the terms and conditions mentioned hereinafter.
ARTICLE - I
APPOINTMENT OF COLLATERAL MANAGER
1.1 The BANK hereby exclusively appoints COLLATERAL MANAGER to receive, inspect and monitor the commodities at the Storage Areas and further provide and perform the integrated collateral management services to its branches as may be intimated/ directed from time to time through-out India.
1.2 The C OLLATERAL M ANAGER hereby accepts its appointment by the BANK and agrees to receive the commodities for storage and handling for the benefit of the BANK, and provide and perform integrated collateral management services to its branches as may be intimated from time to time.
ARTICLE II
PLEDGE AND WAREHOUSE
2.1 The BANK shall intimate to COLLATERAL MANAGER the location of the intended warehouse proposed to be used as the Storage Areas for storage of the commodities. The COLLATERAL MANAGER shall upon receipt of such intimation provide to Bank its warehouses and / or arrange any other Godown / warehouses in the said location readily available for storage purpose.
2.2 Upon the intimation by the BANK of any warehouse proposed to be used as a Storage Area other than its warehouse, the COLLATERAL MANAGER shall inspect the said Storage Area for its suitability of use as a storage area for the commodities and on being satisfied, the COLLATERAL MANAGER shall certify the same to BANK in form of “Certificate of Worthiness”. Upon receipt by the BANK of a Certificate of Worthiness, the BANK shall ensure that the respective Owner executes a suitable lease/sub-lease for the Storage Area in favor of COLLATERAL MANAGER permitting COLLATERAL MANAGER sole and unfettered access (lock & key possession) of the Storage Area as well as for permitting use of the Storage Area for storage of the commodities. Such lease/sub-lease shall be executed at the cost and expense of the Borrower..
2.3 In the event that after an inspection of a Storage Area other than its warehouse, COLLATERAL MANAGER is of the opinion that the Storage Area is not suitable for the storage of the commodities, it shall forthwith inform the BANK in writing of such unsuitability with reasons along with a detailed list of the deficiencies found by COLLATERAL MANAGER (“Failure Certificate”). Upon the receipt by the BANK of a Failure Certificate from COLLATERAL MANAGER, the BANK shall either have the deficiencies detailed in the Failure Certificate remedied / removed / rectified by the respective owner or shall identify alternative location(s) for use as a Storage Area.
2.4 In the event that the deficiencies of a Storage Area as detailed in a Failure Certificate shall be remedied, COLLATERAL MANAGER shall re-inspect the Storage Area in question and shall, upon completion of the abovementioned inspection, either issue a Certificate of Worthiness or a Failure Certificate as the case may be.
2.5 In the event that any alternative location(s) as set forth in Article 2.3 above shall be intimated to the BANK for use as a Storage Area(s), COLLATERAL MANAGER shall inspect such alternative location(s) and either issue to the BANK a Certificate of Worthiness or a Failure Certificate as the case may be giving reasons therefore.
2.6 If after the issue of a Certificate of Worthiness, a Storage Area shall become inadequate or is likely to become inadequate area for the storage of the commodities or shall otherwise become unavailable for any reason whatsoever, COLLATERAL MANAGER will promptly notify the BANK and thereafter the BANK shall arrange alternative warehouse(s)/godown(s) for use as Storage Area(s) and intimate the same to the COLLATERAL MANAGER. Such alternative warehouse(s)/godown(s) may be only used for storage of the commodities after COLLATERAL MANAGER shall have issued a Certificate of Worthiness in this regard.
2.7 Apart from its employees, agents, servants, representatives or contractors, COLLATERAL MANAGER shall not admit any other persons in the storage area unless directed by the BANK
2.8 COLLATERAL MANAGER shall permit the BANK’s authorized representatives or agents to conduct such inspections, verifications and checks on the quality, quantity and weight of part or all of the commodities as the BANK deems necessary in its absolute discretion. The cost of all such inspections and checks shall be as per terms negotiated at the time of the appointment of the COLLATERAL MANAGER.
2.9 The COLLATERAL MANAGER shall on behalf of the BANK, receive delivery of the commodities (proposed to be pledged) from Borrower at Storage Area.
2.10 The COLLATERAL MANAGER shall mark in its books the commodities pledged in favour of BANK and delivered by a Borrower in accordance with the provisions of Article 2.9 above and shall release such pledged commodities only upon the receipt by of appropriate instructions from the BANK. COLLATERAL MANAGER shall, prior to such release of the pledged commodities, verify BANK’s instructions and duly compare the signature of the Authorised Signatories from the list of BANK’s authorised official and specimen signatures provided by BANK from time to time.
ARTICLE - III
SERVICES
3.1 In addition and without prejudice to any other duties and obligations as mentioned herein above, COLLATERAL MANAGER shall also render the services specified in Appendix I to the present MASTER COLLATERAL MANAGEMENT AGREEMENT.
ARTICLE - IV
UNDERTAKINGS, WARRANTIES,
REPRESENTATIONS AND COVENANTS
4.1 Good Industry Practice
The COLLATERAL MANAGER agrees, undertakes, warrants and covenants that it shall at all times, control and manage the commodities at the designated Storage Area(s) and provide the services outlined in Appendix I as per good industry practice and shall diligently and faithfully provide its services in accordance with the best practice followed in provisioning services and shall use its best endeavors to improve the goodwill of BANK in the service area in accordance with the Business rules, which are subject to change from time to time.
"Good Industry Practice" for the purpose of this MASTER COLLATERAL MANAGEMENT AGREEMENT means the exercise of degree of skill, diligence and prudence which is expected from a highly skilled, experienced and well recognized and reputed service provider and COLLATERAL MANAGER engaged in the same type of undertaking as service provider and COLLATERAL MANAGER under similar circumstances and acting generally in accordance with the prevailing laws, rules, regulations, codes and industry standards.
(a) Corporate Standing
It is a limited liability company duly organized, validly existing and in good standing under the laws of India and is qualified to do business in all jurisdictions.
(b) No violation of law: litigation
The formation and performance of Collate r al Manager is in accordance with the law of the country and that COLLATERAL MANAGER is not prevented or any way legally disentitled to enter into present MASTER COLLATERAL MANAGEMENT AGREEMENT . There is no pending litigation by or against any governmental or regulatory authority, which, if adversely determined, could reasonably be expected to have a material adverse effect on the financial condition, operations, prospects or business of the COLLATERAL MANAGER or its ability to perform the obligations under this MASTER COLLATERAL MANAGEMENT AGREEMENT .
(c) No Breach
Neither the execution and delivery of this MASTER COLLATERAL MANAGEMENT AGREEMENT, nor the consummation of the transactions herein contemplated or compliance of any terms and provisions hereof, will conflict with or result in a breach of any applicable laws or regulation, or any order, writ, injunction or decree of any court, or any agreement or instrument or arrangement to which COLLATERAL MANAGER is a party.
(d) Corporate Action
The COLLATERAL MANAGER has all necessary power and authority to execute, deliver and perform its obligations under this MASTER COLLATERAL MANAGEMENT AGREEMENT ; and that this MASTER COLLATERAL MANAGEMENT AGREE-MENT has been duly and validly executed and delivered by COLLATERAL MANAGER and constitutes legal, valid and binding obligations of COLLATERAL MANAGER enforceable in accordance with its terms.
(e) Necessary skills and expertise
The COLLATERAL MANAGER possess necessary skills, knowledge, experience, expertise, required capital net worth, adequate and competent personnel, systems, equipment and procedures and capability to duly perform its obligations in accordance with the terms of this MASTER COLLATERAL MANAGEMENT AGREEMENT .
4.2 Other representations and warranties
The COLLATERAL MANAGER further represents and warrants and covenants that:
(a) They possess proper infrastructure, manpower and equipment(s) to render the services outlined in Appendix I;
(b) They possess necessary facilities for accurate and efficient weighing, sampling, inspection and grading of commodities;
(c) They possess efficient personnel with knowledge of generally accepted storage practices and weighing, sampling, inspection and grading procedures;
(d) Its scales and grading equipment are maintained and calibrated regularly and is in accordance with the prescribed standards under applicable law;
(e) They have sound system for maintaining a market information, for keeping the BANK well informed about price movements and other significant market developments.
(f) They shall immediately notify the BANK in writing of the occurrence of any event which may result in or which may give reason to believe that there is a necessity to change the Storage Area for protection and preservation of the commodities.
ARTICLE - V
WAREHOUSE RECEIPT
5.1 Upon the receipt of any commodities in Storage Area, COLLATERAL MANAGER shall along with Owner of such Storage Area (or such other person as may be designated by the Owner for this purpose as may be applicable) cause random inspection of the commodities to determine the type, quantity and weight of such commodities. On the completion of the inspection and verification process, the COLLATERAL MANAGER shall issue an appropriate storage / warehouse receipt to the concerned Borrower which shall be substantially in the form attached hereto as Appendix III (“Warehouse Receipt”) (or such other form as may be mutually agreed between COLLATERAL MANAGER and the BANK) evidencing the physical delivery and deposit of such commodities at the designated Storage Area and the Owner of the warehouse / godown shall countersign all Warehouse Receipts issued by COLLATERAL MANAGER (in the format as mentioned herein above.) The Liability of the warehouse / godown owner shall be 100% in case of any loss is caused to the physical Commodity in the storage area.
5.2 In case of any dispute or difference raised by Borrower, the Warehouse Owner and COLLATERAL MANAGER shall be referred the same to BANK for resolution and settlement, on parameters relating to any commodities received at storage areas.
5.3 In situations where commodities are stored at warehouse owed by the COLLATERAL MANAGER or its Franchisee or Agents, COLLATERAL MANAGER shall issue Warehouse Receipt and in all other cases, they shall issue Storage Receipt. The change in nomenclature will not have any legal implications and the COLLATERAL MANAGER shall be bound by the same duties, liabilities, obligations and responsibilities as in the case of Warehouse Receipt and would be performing the same functions.