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C H A R G E

INTRODUCTION
Charge is a dealing whereby the registered
proprietor of an alienated land or a lease
conveys it as a security for the repayment of a
loan, an annuity or any other periodical
payment, to another.
The proprietor of the land or the lease is
known as the ‘Chargor’ and the person to
whom the property is conveyed or in whose
favour the charge has been effected is known
as ‘Chargee’.
s. 5 defines a charge as registered charge.
Eventhough !C only recogni"es registered
charge but unregistered charge is also
recogni"ed.
#here a chargor holds an instrument of
charge in statutory forms but fails to register
it, the law regards him as an e$uitable
chargee and may seek remedy in e$uity or
contract u%s. &'( )*+ !C.Thus if parties had
signed an agreement then remedy in contract,
if no agreement then remedy in e$uity.
DIFFERENCE BETWEEN CHARGE AND
MORTGAGE
Charge:
),+ -nly gives a right to payment out of a
property w%out transferring the land
)&+ Chargee ac$uires an interest in the
land but not title%ownership
)*+ .emedy is upon chargee / statutory
remedy under !C for sale of land or
chargee take possession of the land in
default.
Mortgage:
),+ transfer of an estate or interest to
another person
)&+ 0ortgagee ac$uire ownership
)*+ .emedy is upon mortgagor based
under e$uity i.e. e$uitable redemption
BBMB v Doric Developmet
)a charge is govern by detail statutory
provision of !C but 0ortgage at common
law+
IN!TRUMENT! FOR REGI!TRATION
s.&1&
2orm ,(3 for the purpose of securing
payment of principle sum
2orm ,(4 for securing the payment of an
annuity or other periodic sum.
Ta "ee v E#$it% Fiace Corp&
5 wrongly used 2,(3 instead of 2orm
,(4.6eld that although wrong dforms used to
effect the charge )by refering to s. (& of
7ntepretation 3ct+ it was heldthat the deviation
was not substantial as the used of the form
,(3 did not mislead the 8.
EFFECT OF REGI!TRATION
'& ()*
7t e9pressly states that every charge created
under !C shall effect upon registration so as
to render the land or lease in $uestion liable
as security.
'& *+)
0anner how instrument to be registered and
time from which the registration effective.
:pon .egistration of legal Charge it has the
following effects;
)a+ title%ownership of the property does not
vest in the chargee
)b+ chargee will ac$uire interest in the land
or over the lease
)c+ charge does not involve the transfer of
title or ownership of property as such
may create any number of legal
charges)if not prohibited by the earlier
charges+
)d+ The first registered charge will have
the priority over all later charge unless
there has been a change in priority due
to mutual agreement )consent+ through
consolidation )s.&15+, tacking )s.&1(+
or postponement )s.&1<+
The order of priority is determined according
to the date of registration unless there is a
mutual agreement as regard to the priority.
THE UNREGI!TERED E,UITAB-E
CHARGE
Maha.eva '/o Mahaligam v Mailal 0
!o' 1M2 !.&Bh..
=alleh 3bbas C> held that the decision in 6?.
3bd. .ahman case does not prevent the
creation of an e$uitable charge.Therefore
e$uitable charge and !ien are permitted
under !C.
WHAT CAN BE CHARGED
'& ()3132 provides that the following can be
charged;
)a+ the whole but not a part only of any
alienated land
)b+ the whole but not part only of any
undivided share in alienated land @ and
)c+ any lease of alienated land.
'& ()31*2 the powers of charging as above is
sub?ect to;
)a+ any prohibition or limitation imposed by
the Code or any written law for time
being in force
)b+ any restriction in interest to which the
land in $uestion is for the time being
sub?ect @ and
)c+ in relation to leases the provisions
thereof, whether e9press or implied.
'& ()31)2 it also provides that no charge may
be effected in favour of two or more persons
or bodies otherwise than as trustees or
representatives.
RIGHT! OF THE 4ARTIE!
The rights of the parties are either
implied by the !C or by e9press
agreement .
'& ()5
7t is implied on the part of chargor;
)a+ to pay the sums due to the
chargee
)b+ to pay rents, rates , ta9es and
other outgoings in respect of the
land to the authorities
)c+ to comply with conditions to
which the land is sub?ect @ and
)d+ in the case of a lease, to observe
and comply with the terms and
conditions of the lease.
'& (6+
7t is also implied in the absence of any
e9press prov to the contrary that the
chargor must keep all the buildings in
good, insure in the ?oint name and
permit chargee or his agent for
inspection
'& (63
it shall be implied in the absence of any
e9press prov to the contrary that the
chargee will not w%out reasonable
cause, withold his consent to the
granting by the chargor of any lease or
tenancy.
'& (371(2
The registered charge can be assigned
by the lender )chargee+ to another
person.
'& (36 0 (38
The chargor may also transfer the land
sub?ect to the charge to another person,
but invariably the consent of the chargee
is re$uired.
'& ())
The first Chargee )in the event of many
charges+ shall ) sub?ect to the contrary
of e9press agreement by the parties+
entitled to the custody of 75T or the
duplicate lease so long as the liability
under the charge still subsist.
'& ())1(2
#hen the 75T %duplicate lease is
re$uested by the chargor by writing, the
chargee must produce it to the .egistry
or !and -ffice.
ORDER OF !A-E
'& (6)
#here the chargor breach any condition and the breach
continues for , month or such other period as may be
specified, the chargee may serve on the chargor a
otice in 2orm ,(5;
)a+ specifying the breach in $uestion
)b+ re$uiring the chargor to remedy it within , month
or such other alternative period as specified @ and
)c+ warning the chargor that if the notice is not
complied with, the chargee will take proceedings
to obtain an order of sale.
Athe notice is also effective on any person on whom the charged
land or lease is vested.
7f on the e9piry of the period specified in the notice, the
breach has not been remedied, the whole sum secured
by the charge shall become due and payable to the
chargee and the chargee may apply for an order of sale.
)a+ 7f the title is .egistry Titles the chargee must
apply to 6C for the order of sale.u%s. &5(. :pon
receiving any such application, the court shall,
where defaul is proven, order the sale of the land
or the lease unless it is satified of the e9istence of
any cause to the contrary.B&5()*+C
)b+ 7f the title is !and -ffice Title, the chargee must
apply to the !3 of the 5istrict u%s. &('. 3fter due
enguiry, if the default is proven, !3 shall order the
sale of the land or thelease unless he is satisfied
of the e9istence of any cause to the contrary.
B&(')*+C
Ta Teg 4a v Wog Foo9 !hag
7t was held that the case of land held under !and -ffice
Title the court has no ?urisdiction to order the sale of
such land in foreclosure proceedings instituted at the
instance of the chargee.
-im Beg v A:A 4alaiappa Chett%
8 was the purchaser at an austion of a land held by the
defendant )chargee+. The Certificate of transfer was
issued by the supreme court on *,%,&%,D,5. 8 later
discovered that on &,%,,%,D,5 the same land had been
sold for arrears of rent by the Collector. The 5 had been
served wita notice of sale dated &1%E%,D,5 but failed to
inform the court of the notice. 6eld that 5 must refund
back the purchase money.
Ragavaia.$ v !$pramaiam Chett%
7t was held that in cases where chargee had made
application for an order of sale to the Collector, it is vital
for the collector to consider the following;
)a+that the amount claim by chFee is properly due to him
)b+ that the chargor has been in default and to what
e9tend he was in default
)c+ whether it is necessary to sell the whole of the land or
only a portion of it.
Nagappa Chett% v -am !eg
7n this case the Collector after ordering for sale alter his
order by ordering pay the instalment.
7t was held that a collector had no right to postpone the
sale e9cept in cases of fraud or mistake.7f he do so , he
is altering the terms of the contract.
>ohn Edgar >ones v 8alaniappa Chetty
#hen an order for sale made by Court, the chargee
bought the land with lessr price. Can he recover the
balance of the debt.6eld, he still can recover.
:&A&M& H$''ai v B4 Mala%'ia
The owner of a piece of land had entered
into an agreement with the . to turn it into
a petrol filling station.0onies were
advanced by the . to the owner.7t was
mutually agreed by the parties that if the
pro?ect could not materialise )not
approved+ the money shall be refunded to
.. #hen it was not approved . served a
otice under 2orm ,(E to recover the
money. 3p ob?ected that the corrrect form
TA;ING 4O!!E!ION OF THE -AND&
The second remedy for the Charge in case of a default by chargor
is taking posssession of the land
'& (<+132
The ChargeeFs right to take possession does not e9tend to land
held under !and -ffice Titles or the corrospeonding form of
$ualified titles, nor is the power e9ercisable in the case of any
charge of an undivided share in alienated land.
#here the right is e9ercisable such as in the case of any town land
or village land not held under !and -ffice title it is only e9ercisable
if the land is not occupied by the chargor.
'& (<+1(2
The right to take possession is given to the first chargee only if
there are & or more charges created in respect of the same land.
Taking possession can be two forms;
)a+ Chargee himself goes into occupation must give a prior notice in
2orm ,(G @
B'& (<(1*2 Cor
)b+ Constructive taking )eg+ collect rent payable by tenant or lessee
to the chargor.0ust give notice in 2orm ,(> to the lesse or tenant
before he do so.Bs. &<&)*+C
:pon receiving the notice , chargor must admit or secure admission
if not then the chargee apply to court for an order of possesion.
'& (<*
The Chargee may remain on the land so long as the land continues
sub?ect to any liability under the charge.
'& (<)
Chargee who has taken possession the land is entitle to manage
the land and also liable to the chargor to for any act wherebythe
capital value of the land is impaired or cost loss.
'& (<)1(2
Chargee accountable for any additional sum he receive in
e9ercising his power of management prudently.
Woo Foo Hoh v M$thiah Chett%
The chargee take possession after notice given to the chargor for
his default.7t was *5 acres of rubber trees.The chargor later claim
that the Chargee had overtapping and for waste of not tapping
more than & months. 7t was held that a chargee taking possession
for a charge has the same responsibility like of a mrtgageee under
E! that is he must reasanobly diligent in getting in the rents and
profit and will be held strictly accuntable to the mortgagor.
'&(<6132
7n the absence of any contrary provision a chargee in possession
of any land may lease the whole or any part of it and he also can
accept the surrender of e9isting lease or tenancy.
'&(<61(2 0 172
Chargee also can grant building lease if he is authorised by the
instrument of charge.The lease must be for * years but sub?ect to
the consent of chargor ,not e9ceed ,1 years.
'&(<<132
#here sums of money received by chargee in possesion these
must be applied;
)a+firstly discharge all rent or other payment due to =3
)b+secondly,in payment of insurance premium for building
)c+thirdly, in carying out any repairs and for preservation any
buildingg in it
)d+fourthly in payment of all sums due to him under the charge.
The balance must return back to chargor.
REMEDIE! OF THE CHARGEE