MOVEABLE AND IMMOVABLE PROPERTY ACT OF THE KINGDOM OF BHUTAN, 1999, PART VII MISCELLANEOUS PROVISIONS

PART VII MISCELLANEOUS PROVISIONS

  1. No restriction on level of loan amount: – The value of a loan may exceed the value of the collateral pledged, or immovable property mortgaged in respect of the
  2. No restriction on value of the collateral which can be pledged: – There is no limit on the value of collateral or mortgaged property which a secured party or  mortgagee may keep in   its possession as collateral for a security interest or a
  3. Return of collateral: – Where property has been pledged as collateral or mortgaged and the property is in the possession of the secured party or mortgagee, as the case may be, then in the absence of an agreement providing otherwise, upon repayment of the loan and satisfaction of all other covenants, the property must be returned to the debtor or mortgagor, as the case may
  4. (1) Additional responsibilities of a mortgagee in possession: – Where a mortgagee is in possession of the immovable property which is the subject of the mortgage, then in the absence of default, and unless the mortgagee has exercised its power of sale or foreclosure under this Act, the mortgagee is not allowed to sell, donate, convey by way of gift, construct buildings, transform wet lands into dry lands, and in the case of reserved forests, harvest or burn timber, or otherwise engage in waste of the
  • Penalties for failure to fulfill obligations: – Where a mortgagee breaches the obligations imposed by this Section, the mortgagor is entitled to regain possession of the mortgaged property and the mortgagee shall be subject to a fine equal to the value of the damage caused by such breach.
  • Liability not effected: – Notwithstanding Subsection (2), the mortgagor remains liable for all obligations under the mortgage
  1. Payment of tax: – The registered holder of mortgaged property is responsible for all taxes on such property.
  2. Where owner of land not found: – If the rightful owner, or his successors and assigns of land which is subject of a mortgage cannot be located, then upon payment by the Government of all outstanding obligations under the mortgage, the land will be forfeit to the Government. If the owner, or his rightful successors or assigns subsequently make a claim on the land, the Government shall return the land to the claimant upon payment of all amounts disbursed by  the Government in satisfaction of the
  3. Where mortgaged property is lost to natural calamity: – In the event that immovable property which is subject to a mortgage agreement is damaged by fire, flood or other natural disaster then
  • the owner of the property cannot claim the value of the lost property from the mortgagee,
  • the mortgage liability shall be reduced by the amount of the loss, but only where the property was not insured, and
  • if the house which is the subject of the mortgage is the only immovable property owned by the mortgagor, then interest will cease to accrue on the obligations under   the mortgage agreement from the date of the
  1. Where debtor has absconded: – Where a debtor has absconded and has been declared an absconder by a Court of competent jurisdiction in Bhutan, then any property of the absconder which was the subject of a security agreement or mortgage, as the case may be, shall be forfeit to the Government upon payment by the Government to the secures party or mortgagee, of all amounts secured by the security interest or mortgage agreement. In the event that the Government so agrees, the secured party or mortgagee may exercise all rights provided for     in the agreement and under this
  2. Responsibility of guarantor when debtor absconds: – Where a debtor has absconded and been declared an absconder by a Court in Bhutan, and the obligation under the loan or mortgage agreement are guaranteed, then unless otherwise provided in the agreement guarantor shall be liable for all amounts outstanding under the loan or mortgage  agreement,   as the case may
  3. Absconders responsible for principal and interest: – Where a person has amounts outstanding under a loan or mortgage agreement and that person has absconded and been declared an absconder by a Court in Bhutan, then the person remains liable for all amounts outstanding under the loan or mortgage

In the event that the obligations of the absconder have been satisfied by the Government or    by a guarantor under Sections 110 or 111, then by subrogation, the Government or guarantor assumes all rights and obligations under the agreements which gave rise to such obligations.

The above is without prejudice to the rights and obligations of a secured party  under  a security agreement or a mortgagee under a mortgage agreement.

  1. Interest permitted where payment is by installment: – Where property, moveable or immovable, is sold and under the terms of the purchase agreement, the purchase price is to be paid in installments then interest on such installments will be chargeable as per the terms   of the
  2. Agreements which require debtor to work for secured party or mortgagee void: – Provisions of a loan or mortgage agreement which require the debtor or mortgagor to work for the secured party or mortgagee, as the case may be, are null and void. Where a person has been forced to work for a secured party or mortgagee in contravention of this Section, the  value of the labour performed will be assessed according to the maximum wage rate for such work is paid by the Government, and an amount equal to such value will be deducted from   the amounts outstanding under the loan or mortgage agreement, as the case may
  3. Extortion of property in satisfaction of debt not allowed: – Where a secured party or mortgagee extorts property from a debtor, then such property will be returned to the debtor and the amounts outstanding under the loan or mortgage agreement will be deducted and reduced by the value of the extorted property as determined by the Court, and the secured  party or mortgagee shall be subject to punishment in accordance with the laws of the
  4. Interest during imprisonment:- Where a person is a debtor under a loan or mortgage agreement and that person has been convicted of a crime and sentenced to prison, from the date on which the person is sentenced to the date of his release from prison, no interest shall  be payable or chargeable on the obligations outstanding at the time the debtor is sentenced, provided however, that it is established to the Court’s satisfaction that the mortgagor’s imprisonment has adversely affected the fulfillment of the obligations under the loan or mortgage agreement as the case may be. The prohibition on interest in this section is without prejudice to the remaining rights and obligations of the secured party or mortgagee as the    case may be, under the terms of the security agreement or mortgage
  5. Liability following death of a debtor: – Where a debtor has died and there remains outstanding obligation under a loan, security or mortgage agreement to which the deceased was a party, then the estate of the deceased is responsible for the
  6. Divorce: – Where property is the subject of a security or mortgage agreement, as the case may be, and such property is, or becomes subject to competing claims under a stay order of the Court in a divorcing proceeding, then such property shall be dealt with in accordance with the order of the
  7. Return of loan where loan was granted in kind: – Where a loan is granted in kind, then unless the loan agreement provides that the value of the goods when returned must be of a certain value, then the obligation to repay the loan shall be satisfied if the goods are returned in the same condition as they were in at the time the loan was granted, subject to reasonable wear and tear.
  8. Family members not liable: – Notwithstanding that a debtor has been sentenced to prison, declared an absconder or deceased, the family members of that debtor are not liable for the debts of the debtor unless they are signatories to the loan or mortgage agreement, or have signed a guarantee of the obligations. Where they are signatories to the loan or mortgage agreement or have guaranteed the obligations they are liable only to the extent specified in the
  9. Rights of secured party or mortgagee not prejudiced by imprisonment, absconding, or death but right of redemption extends to family members: – Where a debtor has been sentenced to prison, has been declared an absconder by a Court in Bhutan, or is deceased, then such fact is without prejudice to the rights and obligations of the secured party or mortgagee under the security or mortgage agreement, including the power of sale and the   right to foreclosure. However, the right of redemption provided for in this Act extends to the family of the debtor or mortgagor, as the case may
  10. Court may make orders providing relief to impecunious debtors: – Subject to any laws of Bhutan with specific application to bankruptcy, where a debtor is unable to pay his debts    as they are due and, then upon application by such person to the Court, the Court may make   an order declaring the person as being unable to satisfy his financial obligations and,
  • if the person is able to work, requiring the debtor to work for the secured party or the mortgagee, as the case may be, until the obligations under the loan or mortgage agreement are satisfied; or
  • if the person is unable to work, such other order as is just and equitable in the circumstances.