POWERS AND FUNCTIONS OF THE CORPORATIONCentral

Section 26 of The Faridabad Development Corporation Act, 1956

(1)Notwithstanding anything contained in any other law, where a loan has been advanced to any person for the construction of a building or where a building has been transferred to any person, the amount due to the Corporation on account of the loan or transfer together with interest thereon shall be a first charge on the building so constructed or transferred.
(2)The Corporation may also take such further security as it may consider necessary for advancing any loan or for transferring any building.

Summary

When the Corporation advances a loan to a person to construct a building, the due amount is a first charge.
When the Corporation transfers a building to a person, the amount due is a first charge on that building.
The first charge covers the principal amount due together with any interest on it.
The Corporation can take additional security if it considers it necessary for loans or transfers.

Practical examples

1On June 15, 2027, Rajiv borrows 500,000 rupees from the Corporation to build a house in Faridabad. Under this law, the Corporation automatically holds a first charge on Rajiv's new house, meaning they have top priority claim over any other creditors.

2On September 10, 2028, the Corporation transfers ownership of a commercial workshop to Meera for 1,000,000 rupees to be paid in installments. To protect this debt, the Corporation takes a first charge on the workshop and also requires Meera to provide a personal bank guarantee as additional security.

FAQ

1. What does it mean for the Corporation to have a first charge on a building?

It means the Corporation has the highest priority claim on the building. If the building is sold or if the owner defaults, the Corporation's dues must be paid first before any other creditors can claim the money.

Test yourself

Q1.How do Section 26 and Section 29 of The Faridabad Development Corporation Act, 1956, interact when a debtor defaults on a loan given for building construction?

Q2.Under Section 26 of The Faridabad Development Corporation Act, 1956, what is the legal priority of the Corporation's claim on a building constructed with its loan?

Q3.Under Section 26 of The Faridabad Development Corporation Act, 1956, what specific components of the debt are secured by the first charge on a transferred building or building constructed with a loan?

Q4.Under Section 26 of The Faridabad Development Corporation Act, 1956, when is the Corporation permitted to ask a borrower for security other than the building itself?

Q5.Under Section 26 of The Faridabad Development Corporation Act, 1956, which of the following transactions triggers an automatic first charge on a building?

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