3301

Form No. 5

Deed of covenant to Accompany

Statutory Mortgage of Ship 1
THIS DEED OF COVENANT is made the ... day of ... between AB & Co.
Ltd., a company registered under the Companies Act, 1956, and having
its registered office at ... (hereinafter called the Mortgagor) of the One
Part and Bank of ... a banking Corporation constituted under the Banking
Companies (Acquisition and Transfer of Undertaking) Act 1970 and having
its Head Office at ... (hereinafter called the Mortgagee) of the Other Part.
WHEREAS
1. The Mortgagor is the absolute and unencumbered owner of all the
shares of and in the ship by name ... and which is more particularly described in the Schedule hereunder written and is hereinafter referred to
as the said ship.
2. The Mortgagees have lent to the Mortgagor the sum of Rs... upon
having the same secured by a statutory mortgage of the said ship and
upon the terms hereinafter set out and the Mortgagor has executed a
statutory mortgage of the said ship bearing even date with this deed and
intended to be forthwith registered for securing the said sum of Rs... with
interest and any other sums which may be owing in accordance with the
terms of this deed.
3. This deed is supplemental to the said mortgage and to the security
thereby created.
NOW THIS DEED WITNESSETH AS FOLLOWS:
1. The Mortgagor doth hereby acknowledge that the Mortgagor owes to
the Mortgagees the principal sum of Rs... (hereinafter called the principal
sum) and hereby covenants with the Mortgagees as follows:
(a) To pay interest at the rate of ... per cent per annum on the principal sum or other the sum for the time being owing on the security of the
said recited mortgage (hereinafter called the statutory mortgage) in half
-yearly payments on the day ... and on the ... day of ... in every year and
such interest to be paid on those dates respectively;
(b) To repay the said principal amount by four instalments that is to
say, to pay a sum of Rs... at the end of the first year from the date hereof,
an equal sum of Rs... at the expiration of two years from the date hereof,
another sum of Rs... at the expiration of three years from the date hereof
and the balance of the principal sum on the expiration of four years from
the date hereof, each time to be deemed of the essence of the contract.
(c) In the event of default in payment of any instalment of interest or
the due date thereof as hereinbefore provided the Mortgagor will be liable
to pay and shall pay interest on such defaulted instalment of interest at
1

See Butterworth Form No. 2:5, Vol. 27, 4th Ed. This form is also followed in India.

3302

DEED OF COVENANT TO ACCOMPANY

STATUTORY MOR TGAGE OF SHIP

the rate as aforesaid from the date of default until payment as and way
of compound interest.
2. The statutory mortgage and the policies of insurance herein mentioned shall be held by the Mortgagees as security for the payment of all
monies for principal, interest or otherwise however (hereinafter referred
to as the Mortgagee debt) which may become due and payable under or
in respect of any of the provisions hereof.
3. The Mortgagor further covenants with the Mortgagees that throughout
the currency of this security and until all monies secured hereby and by
the statutory mortgage have been paid, the Mortgagor shall
(a) Insure and keep the said ship at all times insured to the extent of
her full market value (in the joint names of the Mortgagor and the Mortgagees) by policies to be approved by the Mortgagees against all such
risks as are from time to time required by the Mortgagees to be covered
by insurance with such insurance companies underwriters war risks or
other mutual insurance associations and through such brokers in India
as the Mortgagees shall from time to time approve in writing.
(b) Enter and keep the said ship at all times entered in respect of her
full value and tonnage in such Protection and Indemnity association in
India as the Mortgagees shall approve for all risks and liabilities for the
time being usually covered therein and to arrange for guarantees (if required) to be given to the satisfaction of such association;
(c) Punctually pay all such premia, calls, contributions or other sums
as may be payable by the Mortgagor in order so to insure and keep the
ship insured and entered and to produce all relevant receipts when so
required by the Mortgagees.
(d) Procure that the interest of the Mortgagees shall be duly endorsed
or noted upon all slips, cover notes, policies, certificates of entry or other
instruments of insurance issued in connection with such insurances or entry
and that each and every policy covered by these provisions shall contain
or have attached thereto a Loss Payable clause whereby any monies due
in respect of claims under the policy shall be payable to the Mortgagees
or in accordance with their directions;
(e) Procure that all such instruments of insurance shall be deposited
with the approved brokers and shall (if required) be delivered up by them
to the Mortgagees or their nominees and that the brokers shall give appropriate letters of undertaking stipulating that the brokers will hold all
such instruments for the benefit of the Mortgagees.
(f) At the request at any time of the Mortgagees, assign, endorse and
deliver to the Mortgagees the originals of all policies covered by these
provisions and all monies insured by or to become payable under such
policies or any of them and the full benefit thereof and to do all such
things and execute all such documents as shall create legal title in such
policies in the Mortgagees.
(g) Not do anything nor suffer anything to be done whereby any policy
or policies on the ship or any cover afforded by the rules of any Association in which the ship is entered may be or become void and in particular
shall not employ the ship or suffer the ship to be employed otherwise than

DEED OF COVENANT TO ACCOMPANY

STATUTORY MOR TGAGE OF SHIP

3303

in accordance with the terms of such policies and cover (including any
warranties or trading limits therein) without first giving written notice to
the Mortgagees and obtaining the consent of the insurers concerned and
complying with such requirements as to payment of extra premium or
otherwise as the insurers may impose;
4. And the Mortgagor doth hereby further covenant with the Mortgagees
as follows:
(a) To keep the said ship registered as an Indian ship at any port of
registry in India and not to do or suffer to be done anything whereby such
registration may be forfeited or imperilled;
(b) Not to employ or permit the said ship to be employed in any illicit
trade or in carrying any illicit or prohibited goods;
(c) Not to enter into any demise or other charter whereby the Mortgagor surrenders possession of the ship nor into any time or consecutive
voyage charter on the said ship lasting or reasonably calculated to last
for longer than ... months;
(d) Not, without the previous written consent of the Mortgagees, to
sell, assign, mortgage, charge or otherwise incumber the ship or any share
therein or to agree so to do;
(e) To pay and discharge all debts and liabilities which may give rise
to maritime or possessory liens on the said ship or to claims enforceable
by actions in rem against the said ship or similar process so as to keep
her free from arrest or detention and in the event of arrest or detention of
the ship being threatened or effected, forthwith to notify the Mortgagees
thereof and to take all steps and make all payments necessary to obtain
the release of the said ship from such arrest or detention within the week
days from receiving notice thereof;
(f) To maintain the said ship in her present class and to keep her and
her machinery, auxiliaries and all equipment at all times in thoroughly good
and seaworthy condition and repair and in such condition as to make her
comply with the provisions of the Merchant Shipping Act, 1958 and of all
other Indian regulations and requirements of the law of the Government of
any country where the ship may trade and to renew and replace all parts
and equipment as and when they may become worn out, damaged or lost
by other of a similar nature and of atleast equal value;
(g) To permit the Mortgagees to inspect the condition of the ship at all
reasonable times and to give the Mortgagees sufficient notice whenever
practicable of drydockings, surveys and major repairs so as to enable the
Mortgagees surveyors to attend thereat and if so required to supply to
the Mortgagees copies of survey reports on the said ship;
5. And the Mortgagor doth further agree and undertake
(i) Not, without the prior consent in writing of the Mortgagees, to
make any major alteration to the structure or equipment of the
said ship;
(ii) To supply to the Mortgagees on request full information regarding
the said ship, her employment position and engagements, par ticulars of all towages and salvages and copies of all charters and
other contracts concerning the ship;

3304

DEED OF COVENANT TO ACCOMPANY

STATUTORY MOR TGAGE OF SHIP

(iii) To notify to the Mortgagees forthwith by letter or in case of urgency

by telegram (a) of any accident to the ship involving repairs, the
cost whereof is likely to exceed Rs... , (b) of any occurrence whereby
the ship has or is likely to become a total loss, (c) of any actual or
threatened arrest, detention, seizure, confiscation or requisition
of the ship (d) of any requirement of insurers classification society
or any competent authority which is not immediately carried out
and (e) of any petition or notice of meeting to consider any resolution to wind up the Mortgagor Company;
(iv) To manage the ship in a businesslike and efficient manner and
keep proper books of account in respect of the ship which shall be
available for inspection by the Mortgagees at all reasonable times;
(v) Punctually to pay all dues, charges, fees, rates, taxes, fines, penalties and other outgoings payable in respect of the ship and to
produce all relevant receipts when so required by the Mortgagees;
(vi) In the event of any requisition or seizure of the ship, by any author ity, forthwith to assign to the Mortgagees all rights (if any) which
the Mortgagor may have, to receive any payment or compensation
in respect of such requisitioning or seizure;
(vii) To keep a certified copy of these presents and of the statutory
mortgage on board the ship and to bring the contents thereof to
the notice of the master for the time being of the ship.
(viii) To permit the Mortgagees to exercise all their rights and remedies
under this deed and under the statutory mortgage and otherwise
howsoever and to pay to the Mortgagees on demand all monies
whatsoever which the Mortgagees may pay or become liable to pay
(including legal costs on a full indemnity and between attorney and
clients basis) in connection with the protection, maintenance and
enforcement of the security created by this deed and the statutory mortgage or the exercise of any of the aforesaid rights and
remedies and all such monies shall be added to and form part of
the principal sum and shall bear interest accordingly;
6. The Mortgagees shall, without prejudice to their other rights and
powers, be entitled (but not bound) at all times to take any such action
as they may think fit for the purpose of protecting the security created by
this deed and by the statutory mortgage and in particular (but without
prejudice to the generality of the foregoing),
(a) In the event of any failure by the Mortgagor to comply with any of
the provisions of this deed relating to insurance, to effect and maintain
such insurance of and relating to the said ship as the Mortgagees shall
think fit;
(b) In the event of the Mortgagor failing to carry out any repairs to the
said ship within ... weeks of being instructed in writing by the Mortgagees
to effect such repairs, to cause such repairs as they consider necessary
to be carried out;
(c) In the event of the Mortgagor failing to obtain the release of the
ship within ... days in accordance with sub-clause (e) of clause 4 hereof,

DEED OF COVENANT TO ACCOMPANY

STATUTORY MOR TGAGE OF SHIP

3305

to take all such steps and make all such payments as may be necessary
to obtain such release.
7. The Mortgagor shall indemnify the Mortgagees on demand against
all and any expenditure and liability incurred by the Mortgagees in and
about the protection of the security as aforesaid.
8. All monies secured by this deed and/or by the statutory mortgage
shall become immediately due and payable, without any demand, and the
security shall become enforceable if the Mortgagor has made default in any
of the following respects or if any of the following events should happen;
(i) If the Mortgagor does not pay any instalment of the principal
amount on the day stipulated herein in clause (1) sub-clause (b)
for payment of the same;
(ii) If the Mortgagor fails to pay any instalment of interest on the due
date thereof as provided in clause (1)(a) hereof.
(iii) If the Mortgagor does not observe or perform any of the covenants
or obligations contained herein or in the statutory mortgage;
(iv) If the said ship be lost, or substantially damaged in collision at
sea or otherwise or captured, seized, confiscated or requisitioned
for title;
(v) If a petition be filed or an order be made or an effective resolution
be passed for the compulsory or voluntary winding up otherwise
than for the purpose of reconstruction or amalgamation, of the
Mortgagor or if a receiver shall be appointed of the undertaking or
property of the Mortgagor or if the Mortgagor suspends payment
or cease to carry on business or make any special arrangement or
composition with its creditors.
9. When the security created by this deed and/or by the statutory mortgage shall become enforceable as herein provided, the Mortgagees without
prejudice to any statutory or common law remedies or powers which they
may possess, shall forthwith be entitled as and when they shall think fit
with or without notice to do all or any of the following :(a) To take possession of the ship;
(b) Either with or without taking possession of the ship, to take appropriate legal proceedings in a court of law including interim proceedings
for arrest of the ship and for appointment of a Receiver thereof and to
invite judgment for sale of the ship or any part thereof by public auction or private contract upon such terms as the court may think fit and
without being answerable for any loss occasioned by such sale or by any
postponement thereof;
(c) Upon any such sale as aforesaid to give a receipt for the purchase
money which shall effectually discharge the purchaser or persons paying
the same and the purchaser shall not be bound to see or inquire whether
the Mortgagees power of sale has arisen and shall not be concerned
with the manner of application of the proceeds of sale or be in any way
answerable therefor;
(d) After taking possession of the ship as aforesaid, to manage, insure,
maintain and repair the ship and to employ or lay up the ship for so long

3306

DEED OF COVENANT TO ACCOMPANY

STATUTORY MOR TGAGE OF SHIP

and in such manner as they may think fit and to do all acts and things
incidental thereto and to enter into such arrangements respecting the ship
or the working thereof in all respects as if the Mortgagees were the owners
of the ship and without being answerable for any loss thereby incurred.
10. All expenses, payments and disbursements incurred or paid by the
Mortgagees in and about the exercise of any of their powers herein contained
shall be payable by the Mortgagor to the Mortgagees on demand, failing
which the same shall form part of the Mortgage debt and the Mortgagor
shall indemnify the Mortgagees against all losses and liabilities which the
Mortgagees may incur in the exercise of such powers.
11. The Mortgagees shall hold the monies received by them on the total
loss of the ship or on the sale of the ship or any part thereof or by way of
payment or compensation for any requisitioning or seizure of the ship upon
trust, in the first place, to pay or retain all costs and expenses incurred
in connection with such loss or sale or the obtaining of such payment or
compensation or in or about the execution of the powers conferred upon
them by this deed and shall apply the balance first in or towards payment
of all unsatisfied interest owing to the Mortgagees hereunder, secondly,
in or towards payment of the principal sum, thirdly, in or towards payment of all other monies then owing or which will thereafter become owing
hereunder and fourthly, shall pay the surplus if any to the Mortgagor.
12. Any monies received by the Mortgagees upon any insurance effected by the Mortgagor pursuant to this deed other than for a total loss
as aforesaid shall so long as the security has not become enforceable under clause 8 hereof be paid over by the Mortgagees to the Mortgagor and
shall be applied by the Mortgagees in making good any loss or damage
in respect of which such insurance monies were received.
13. The Mortgagees covenant with the Mortgagor as follows :(i) Not to exercise their powers of enforcement of the security created
by this deed and by the statutory mortgage until or unless the
Mortgagor has made default in observance of any of the covenants
or agreements or any of the events shall happen which are specified in clause 8 hereof;
(ii) That upon payment of all monies secured by the said Mortgage and
payable hereunder shall become enforceable and upon payment of
all costs, charges and expenses and the discharge of all liabilities
of the Mortgagees in relation to the said ship they will discharge
the statutory mortgage and re-transfer or reassign to the Mortgagor
all such policies, certificates of entry and other documents relating
to the ship as may remain in their possession.
14. No delay in exercising or omission by the Mortgagees to exercise
any right or power vested in them under this deed or the said statutory
mortgage, shall impair such right or power and shall not be construed as
a waiver of or as an acquiescence in any default by the Mortgagor and in
the event of the Mortgagees on any occasion agreeing to waive any such
right or power such waiver shall not in any way prejudice or affect the
right of the Mortgagees afterwards to act strictly in accordance with the
powers conferred upon them under this deed or the statutory mortgage.

DEED OF COVENANT TO ACCOMPANY

STATUTORY MOR TGAGE OF SHIP

3307

15. The statutory mortgage and this deed shall be additional to any
other security which may now or hereafter be given to the Mortgagees by
the Mortgagor and section 61 of the Transfer of Property Act, 1882 shall
have no application hereto.
16. The statutory mortgage and this deed shall be construed in accordance with and be governed by the Indian Law.
IN WITNESS WHEREOF the parties hereto have put their respective
hands the day and year first hereinabove written.
THE SCHEDULE ABOVE REFERRED TO:
The Common seal of the withinnamed
Mortgagor Company M/s A B & Co.

Ltd., is hereto affixed pursuant to
the resolution of the Board of

Directors dated ... in the presence
of Mr... the Managing Director
and countersigned by Mr... Director/
Secretary duly authorised in that
behalf and who in token thereof have
put their signatures opposite in the
presence of ...

)
)
)
)
)
)
)
)
)
)
)

1.
2.
Signed for & on behalf of the

withinnamed Mortgagees Bank of...

by the General Manager Mr...

duly authorised in that behalf

in the presence of

)
)
)
)
)

Stamp duty : This document will attract stamp duty as on a Bond under Article
15 of the Indian Stamp Act if it is attested. (See s. 2(5)(b) of the Act.) or a corresponding
Article under the State Acts.
Registration : This agreement need not be registered under the Registration Act
but it will have to be registered under the Companies Act 1956 with the Registrar of Companies if it is supplemental to the Deed of Mortgage which is required to be so registered
in case of a Limited Company.
Stamp Duty, eStamping & Registration : See the Indian Stamp Act, 1899 (2 of
1899), Rates of Stamp Duty in various States, eStamping and Compulsorily & Optionally Registrable Documents under the Registration Act, 1908 (16 of 1908) in respective
later Part/Chapters on Stamp Duty, eStamping & Registration of Deeds & Documents.
Registration of Charges under Companies Act : See eForms, eFiling & MCA-21,
etc., under the Companies Act, 1956 (1 of 1956) and the Companies (Central Governments) General Rules and Forms, 1956 in respective earlier Part/Chapter on Company
Documents.