Distinction between Charge and Mortgage

Section 100 and 101 of the Transfer of Property Act deals with Charge. It arises when immovable property of one person is made a security for the repayment of money to another when it does not amount to a mortgage. A charge is very much similar to a simple mortgage.

Sections 58(a) of the TP Act deals with mortgage. It is a transfer of an interest in specific immovable property as security for the repayment of a debt.

The distinction between charge and mortgage is well explained in many decisions. One of such earlier decision on the point is reported in 1956 KLT SN 21 (C.No.51).

The main distinction between a charge and a mortgage is that in the case of a charge there is no transfer of interest in the property but only the creation of a right of payment out of the property while a mortgage amounts to a transfer of interest in the property. A charge cannot be enforced against the property in the possession of a person to whom it has been transferred for consideration and without notice of the charge while a mortgage can be enforced even against a transferee for consideration without notice of the mortgage.

Some other distinctions are as follows:

• Charge is by way of security for the payment of money which may or may not be a debt. Mortgage is by way of security for the payment of a debt.
• A charge is the result of act of parties or by operation of law while a mortgage is generally by act of parties.
• In case of a charge, it need not be registered. But in mortgage any sum beyond Rupees 100 is to be registered. There is also an exception in the case of mortgage by deposit of title deeds.
• There is no pecuniary liability in charge where there is such liability in mortgage.
• In charge there is no transfer of interest in property while in mortgage there is such transfer.
• In charge, purchase of property for value without notice can be raised as a defence. But such defence is not available in the case of a mortgage.
• A charge is a right in rem when a decree to that effect is obtained while mortgage is a right in rem.

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Haider Ajaz