CHARGE Flashcards
INTERPRETATION OF CHARGE
Charge on an immovable property is created to secure payment of money.
says that where immovable property of a person is made security for the payment of money to another and the transaction is not a mortgage, it is said that a charge has been created.
In a charge, there is no transfer of any interest in favour of the charge-holder-but he is only entitled to recover his money from the property. In a charge, there is the creation of only a personal obligation, i.e., a right to payment out of the specified property.
Security for Payment of Money
It is necessary under section 100 that there must be a clear intention to make a particular property security for the repayment of a debt. Where the property is not intended to serve as a security there can be neither a mortgage nor a charge.
A charge does not involve transfer of the interest in the property subject thereto and arises from the circumstances that certain property, movable or immovable or any interest in such property, is indicated with certainly as the fund out of which a certain claim is to be met or satisfied, the fund so indicated being the security for the claim.
Property can be made security either by the act of parties or by operation of law. All that is necessary is that there must be a clear intention to give property as security for payment of money.
The main points of distinction between a mortgage and a charge are:—
(i) A mortgage is a security for the payment of a debt.
A charge is a security for the payment of money which may or may not be a debt.
(ii) A mortgage may be security for the performance of an engagement giving rise
to a pecuniary liability.
In the case of charge it is not so.
(iii) A mortgage involves transfer of an interest in some specific immovable property.
There is no transfer of interest in a charge in favour of a charge-holder. The charge-holder can satisfy his claim out of a particular property without transferring that property to him.
(iv) A mortgage can be created only by the act of parties.
A charge can be created either by the act of the parties or by operation of law.
(v) In a mortgage, there may be a covenant to pay.
In a charge, there can be no covenant to pay.
(vi) A mortgage gives rise to a right in rem.
A charge does not give rise to a right in rem (against the world). It is available only against those particular persons who are affected by the notice of the charge.
(vii) A mortgagee can follow his security into whatsoever hands it may go. A mortgagee can even follow a bona fide purchaser for value.
A charge-holder cannot follow his security.
