Legal Question in Banking Law in India

1) Pari passu charge means when more than one creditor has a charge like mortgage on the same property though created at different times, if they agree among themselves, their charge/mortgage will rank equal in enforcement.

2) For e.g. A Bank having a charge on 1.1.2007 and B Bank has a charge on the same property on 2/2/2008, normally A Bank has the priority. Only after satisfying the dues of A Bank, B bank can claim any surplus realised over and above the dues to A Bank.

3) But if both the banks agree that their charges are pari passu , they can have the share of the proceeds of the sale of the property in enforcement of their mortgages equally i.e. pro rata to their advances or outstandings depending upon the wording of the document under which the pari passu charge has been agreed among them.