Transfer of Property Act (TPA)
TPA Charges Section 100
Charges under Section 100: Definition, Essentials, Charges by Act of Parties and by Operation of Law, and the Contrast with a Mortgage
A charge is security without a transfer. Property is made answerable for the payment of money, but no interest in it passes to the person entitled. That single difference from a mortgage explains everything else about a charge: how it may arise, how it is enforced, and the one situation in which it simply disappears. The Act then borrows the machinery it needs, applying to a charge the provisions that apply to a simple mortgage, so far as they can be applied.
1. The Section
Section 100, TPA 'Where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.' |
2. The Essentials
- Immoveable property. A charge under the section is on immoveable property; securities over moveables take other forms.
- Of one person, in favour of another. A man cannot have a charge on his own property.
- Made security for the payment of money. The object must be to secure money. An obligation that does not sound in money, or a transaction that merely gives a right of preference without fastening on property, is not a charge.
- By act of parties or by operation of law. This is the widest feature of the section, and the point of difference from a mortgage, which can arise only by act of parties.
- The transaction must not amount to a mortgage. If an interest in the property has been transferred, the transaction is a mortgage and section 100 has nothing to do.
3. Charges Created by Act of Parties
Point | Position |
|---|---|
How it is created | By the agreement of the parties — typically a document by which the owner declares that specified property shall answer a debt, without transferring any interest in it |
Form | No particular form of words is needed. What must appear is an intention to make specified immoveable property answerable for the money |
Registration | A charge created by act of parties in a document relating to immoveable property of the value of ₹100 or more is compulsorily registrable, and an unregistered instrument will not create it |
Typical instances | A charge created in a partition deed or a family settlement for maintenance or for the payment of a share; a charge created by a deed of trust or by an agreement to secure a loan without a mortgage |
Distinguished from an agreement to pay out of a fund | A mere promise to pay from a particular source, or a direction to a debtor to pay out of money in his hands, does not create a charge on immoveable property |
4. Charges Arising by Operation of Law
Source | The charge |
|---|---|
Section 55(4)(b) | The unpaid seller's charge on the property in the buyer's hands for the unpaid purchase money with interest |
Section 55(6)(a) | The buyer's charge for purchase money paid in advance, with interest, and for earnest and costs, where he properly declines to accept delivery |
Section 95 | The redeeming co-mortgagor's charge on the shares of the other co-mortgagors for their proportion of the expenses |
A decree of court | Where a decree creates a charge on specified property — for maintenance, for a share, or for costs |
Statute | Charges created by revenue and municipal legislation for taxes and dues, where the statute so provides |
The personal law | A charge for maintenance where the instrument or a decree has fastened it on identified property |
Charges arising by operation of law are not created by any instrument, and so leave no trace on the register. That is precisely why the second paragraph of section 100 protects a purchaser who took for value without notice.
5. Mortgage and Charge Compared
Point | Mortgage | Charge |
|---|---|---|
What happens to the property | An interest in it is transferred to the mortgagee | No interest is transferred; the property is made security |
How it arises | By act of parties only | By act of parties or operation of law |
Rights created | A right in rem in the property, to the extent of the interest transferred | A right to have the money paid out of the property — in substance a right to proceed against it, and not an interest in it |
Enforcement | Foreclosure, sale or possession, according to the form | Sale, in the manner provided for a simple mortgage — section 100 |
Against a transferee for value without notice | Binds the property, subject to the rules of priority and notice | Not enforceable, save as otherwise expressly provided by law |
Formality | Section 59 — a registered and attested instrument where ₹100 or more is secured | A charge by act of parties in writing requires registration; one arising by operation of law requires nothing |
The relationship | Every mortgage secures money on property; not every security on property is a mortgage | A charge is what is left when the transaction secures money but transfers no interest |
6. The Two Exceptions in the Second Paragraph
- The trustee's charge on the trust property for expenses properly incurred in the execution of his trust is outside the section. It rests on the law of trusts, and is not subject to the machinery section 100 supplies.
- A transferee for consideration without notice takes free. No charge is enforceable against property in the hands of such a person — save as otherwise expressly provided by any law for the time being in force, which preserves statutory charges that are declared to bind purchasers.
7. Landmark Cases
📖 Dattatreya Shanker Mote v. Anand Chintaman Datar, (1974) 2 SCC 799 Held: The Court explained the difference between a mortgage and a charge. In a mortgage there is a transfer of an interest in specific immoveable property; a charge creates no interest in the property, though it creates a right of payment out of the property specified. A charge may arise by act of parties or by operation of law, and the provisions applicable to a simple mortgage apply to it so far as they can. Ratio: A charge secures without transferring; the absence of any transfer of interest is what separates it from a mortgage. |
📖 Chunchun Jha v. Ebadat Ali, AIR 1954 SC 345 Held: Whether a transaction creates a mortgage or something else is a question of the intention of the parties, gathered from the instrument read as a whole and the surrounding circumstances, and not from the labels used. Ratio: The label the parties give a transaction does not decide whether it is a mortgage or a charge. |
8. Related Topics and Provisions
- Enforcement of a Charge, and the Bona Fide Transferee Without Notice — the companion note
- Mortgage — Definition and Essentials, Section 58 — the transfer of an interest
- Mortgage Compared with a Charge, Pledge, Lien, Sale and Lease
- Sections 55(4)(b) and 55(6)(a), TPA — the statutory charges of seller and buyer
- Section 95, TPA — the redeeming co-mortgagor's charge
- Notice under Section 3 — on which the second paragraph of section 100 turns