Bank loan against documents of title to goods

Bank loan against documents of title to goods are a usual and proper form of banking business. This is effected not by taking actuarial delivery of the goods but by deposit of the documents of title to the goods.

What is a documents of title to goods

 As per Section 2(4) of the sale of Goods act, 1930, a document of title to goods is “includes a bill of lading dock-warrant, warehouse keeper’s certificate, wharfingers certificate, railway receipt, warrant or order for the delivery of goods and any other document used in the ordinary course of business as proof of the possession or, control of goods or, authorizing or purporting to authorize, either by endorsement or by delivery, the possessor or the document to transfer or receive goods thereby represented.”

The essential requisites of documents for bank loan against documents of title to goods

  1. The possession of the instrument gives rise to the right either by virtue of law or trade usage, to possess the goods represented by the instrument.
  2. Goods represented by the instrument can be transferred by endorsement and/or delivery of the instrument.
  3. Such transferee of the instrument can take delivery of the goods in his own right.
  4. Documents of title to goods although appear to be negotiable because of the second requisite mentioned above, are really not negotiable. Negotiable instruments must have another feature, viz., the banafide transferee for value should not be affected by the defects in the title of the transferor. This attitude is lacking in the case of documents of title to goods although the goods represented by the instrument s can be easily transferred. Therefore, these instruments are referred to as quasi-negotiable. Examples of documents of title to goods are Bills of Lading. Dock Warrants, Warehouse-keeper’s certificates, Railway Receipts, Delivery Orders etc.

You May Like Also:

Leave a Reply

Your email address will not be published. Required fields are marked *