We are discussing what is dock warrant? Dock warrant is a document that is virtually a certificate from the dock company that certain goods which are described therein are in their possession which they agree to deliver to any person specified by the owner.
What is dock warrant?
In other words, the goods are held at the disposal of the depositor. Such documents, like the bill of lading, are transferable by endorsement and delivery and require to be stamped.
But again, like the bill of lading, the title of the transfer is subject to the defects in the title of the transferor himself. Therefore, bankers should accept such documents only from persons having honesty and integrity. Goods should be properly insured. Invoices must be kept on record.
What is warehouse receipt or warehouse keeper’s certificates
A Warehouse-keeper’s Certificate/Receipt is a document issued by a warehouse-keeper certifying that he holds certain goods described in the certificate and awaits instructions for their disposal form the person to whom to certificate is addressed. This kind of document must be distinguished from a delivery order.
It is simply a receipt through the Sale of Goods Act, 1930 includes warehouse receipt in the definition of documents of title to goods.
Unless otherwise provided, a warehouse receipt is transferable by endorsement and entities the lawful holder thereof to receive the goods specified therein on the same terms and conditions as the original depositor would have been entitled to.
However, it does not possess the attributes of free negotiability.
The banker should, therefore, be very careful in accepting such receipts or certificates as security. The banker should in fact arrange to have to certificate issued in his own name.
The genuineness of the warehouse receipt must be verified. The invoices relating to the goods covered by the warehouse receipt must be kept on the bank’s record.
Further, the banker should always carry out a periodical inspection of the goods advanced against to ensure that they are properly stored, and their quality and quantity are as stated. An insurance policy against fire and theft should also be insisted upon.
Precautions to be taken by the banker
- A Warehouse receipt is not a negotiable instrument under the Negotiable Instruments Act and, hence, the transferee (i.e., banker) cannot acquire title better than that of the transferor. In case the receipt is a stolen one or the endorsement thereon is a forged one, the banker will have no protection. The banker should, therefore, satisfy himself as to the title of the holder or the transferor. Some bankers usually confine such advances to the original depositors of the goods or the first endorsee or transferee only.
- The Warehouse Receipt should be pledged with the bank with a memorandum of the pledge.
- The banker should ensure that the Warehouse Receipt is genuine. The signatures of the warehousemen and the endorser, if any, should also be confirmed.
- On the Warehouse Receipt being pledged the banker should immediately intimate the warehouse-keeper about the lodgment of Warehouse Receipt with them as security against a loan. A request should be made to him to acknowledge receipt of the intimation. The warehouse-keeper should also be instructed not to deliver the goods to the depositor unless the warehouse Receipt duly discharged by the banker is produced.
- The intending borrower should be entitled to receive goods in his own name. It will be appropriate to have the following declarations signed by the borrower.
- The goods evidenced by the receipt are had absolute property.
- He will not take delivery of goods by furnishing indemnity bonds without payment of the bank’s loan.
- He will continue to pay all dues to the warehouse-keeper for his charges.
- The goods evidenced by the receipt should be fully covered by insurance. The premium will be payable by the borrower and the policy may be taken jointly in the name of the borrower and the bank.
- A proper margin must be kept.
- The banker should periodically inspect the goods to ensure proper storage and condition.
- The banker should release the receipt on payment of the debt. If in the meantime a part of the goods is to be released to the customer, the banker should issue a delivery order.
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