Fixed and Floating Charges in Mauritius As Loan Facility Agreement

Fixed and Floating Charges in Mauritius as Loan Facility Agreement

By Siv Potayya

Wortels Lexus Law Firm

Some five years after theDutch left, the French under the Commandment of l’écuyer Guillaume Dufresne d’Arseland in the name of the King of France, took possession of Mauritius island on the 20 September 1715. In 1810, they left to ease the way for the British who occupied the island until 12 March 1968 when the latter became independent. In so doing, both have largely contributed towards the enrichment of the loan facility agreements and the governing legislations. Some confusion has however cropped up: the wayoverdue interest should be computed has still not been thrashed out by our Supreme Court.

The French colonialisation ended on or about 3 December 1810 and, when the British took over both parties signed the “Acte de Capitulation’ wherein it was specified that the British would preserve the existing laws, religion and customs.Previously, in or about 1805 the Code Napoleon already became effective in Mauritius as so it was in France and the contents thereof were required to be kept by the British.

In 1838, the first banks started their business in Mauritius and presumably all banking facilities were secured by security based on the British model as the latter was governing the country.

If the drafting of the “hypothèque’’ was made according to the Code Napoleon, the drafting of most of the debentures and other bank guarantees followed the British format according to the British legislations and the Country was subject to the provisions of Ordinances legislated in London.

On 12 March 1968, the island became independent and subsequently the Mauritian parliament took over all legislative process.

In 1969, Mauritius experienced for the first time a legislation dealing with fixed and floating charges headed the ‘’ Loans, charges and Privileges (Authorised Bodies) Act ‘’ wherein inter alia it was enacted that any authorised institution may capitalise any interest due should the duration of the loan exceed a period of three years”.

In 1971 the above legislation was amended and to be ultimately repealed in 1983 and the provisions thereof are now found under article 2202 and following of the Code Civil Mauricien (ex Code Napoleon). The provisions enabling the capitalisation of interest are now found under article 2202-6 of the Code with the same condition that the duration of the loan should exceed three years.

This practice of capitalisation is ongoing over years and years and no one dares asking how should it be capitalized?

All the institutions, so authorised under the Civil Code such as Banks and Insurance Companies do capitalise all interest due on a monthly basis. At times it is performed on credit cards on a daily basis.This has been going on since long whereby many debtors have found themselves in dire condition following the seizure and sale of their property given as collateral owed to nonpayment of their indebtedness in a timely manner.

The provisions of the aforesaid ‘’Acte de capitulation” would seem to have been overlooked.

Despite the undertaking given in 1810, there is one article in our civil code, borrowed from the Code Napoleon which is being overlooked and it explains how interest due should be computed.

There is one article under the Mauritian Civil Code which provides for the way in which capitalisation of interest should be performed.

The provision of article 1154 of our civil code stipulates that the interest may only be capitalised if it is of one year old and same is of public order.

The non observance of these provisions had led to great turmoil in the country.The procedures as laid down under the Sale by Levy Act are often resorted to by the creditors to sell houses or land given in guarantee before the Master’s Bar at the Supreme Court to recoup their monies.

In 2007 the Mauritian Parliament came forward with the Borrower Protection Act to regulate credit agreements for a sum not exceeding 2 million rupees and to providefor the establishment of the Office of the Commissioner for the Protection of Borrowers.

The objective has not been attained as the worm is still in the fruit and so far the provisions under article 1154 of the civil code are not complied with, injustice and unfairness will be for the benefit of the creditors who are acting in all impunity.